Not all used-vehicle buyers are created equal, says Lonnie Miller, director-industry analysis for R.L. Polk & Co.
Nor, considering their differences, should they be marketed to in the same way, he adds.
Their diversity in income levels, tastes and lifestyles reflects how the used-car market has evolved, branching off into various subgroups.
It makes for a vibrant market, prompting franchised dealers to focus on their pre-owned operations in light of strong demand and good profit margins.
“Used cars are gaining more attention in the U.S.,” says Miller at the 2007 National Remarketing Conference in Las Vegas.
About 42.6 million used vehicles were sold in the U.S. in 2006, accounting for 75% of all automotive sales. Franchised dealers sold 14.3 million of those used units.
Today's pre-owned vehicle buyers range from people on a budget to practical-minded folks who spend conservatively to relatively affluent people with a taste for luxury products, but who want a vehicle's first owner to take the depreciation hit.
Used-car buyers are diverse because contemporary product offerings are too. No longer are typical used cars old and unreliable, attracting people who can afford little else.
Today's used vehicles often are a few years old, coming off two to four year leases. Leasing is largely responsible for carving out a “nearly new” segment in between the new and used.
Because of product-quality advances, used vehicles of today also are much more reliable, a trait that attracts a wider demographic audience.
Moreover, the recent popularity of auto makers' certified pre-owned vehicle programs is “blurring the buyer-profile lines between used and new,” Miller says.
That creates marketing challenges, he says “Marketing efficiencies are still elusive as to where to spend advertising dollars and how to reach specific consumers.”
New- and used-car buyers are different but not drastically so, according to a Polk study that looked at shopping and purchase behavior of the two groups as well as what influenced their buying decisions.
“We asked ourselves, ‘What subtle differences exist between new and used buyers?’ and ‘What hidden pockets exist within the used population?’” Miller says.
Survey results show satisfaction levels are slightly higher for new-car buyers compared with used-car buyers (89% vs. 84% with the vehicle; 76% vs. 72% with the buying experience).
More surveyed new-car buyers (70%) used the Internet to aid in their purchase decision than did used-car buyers (60%).
The average monthly payment is $371.16 for the study's new-car buyers and $300.22 for the used-car buyers.
“Used-car buyers were a little less loyal, slightly unhappier with the buying experience and online less, but they showed smart money decisions when buying,” Miller says.
Polk identified four distinct used-vehicle buyer subgroups in its survey of consumers who bought vehicles dating to '02 models:
- Domestic-brand premium aspirers. They prefer to “buy American,” spend an average of $19,370 and purchase vehicles that are on average 2.7 years old. They're price sensitive and their buying decisions are influenced by brochures, auto shows and TV, radio and newspaper advertising.
- Import luxury buyers. Their tastes tend to run towards the likes of BMWs, Mercedes-Benzes and Acuras that are on average 3.6 years old and cost $14,671. They like to drive for pleasure, pay attention to safety ratings and read consumer magazines. They are interested in value pricing.
- Business/Do-It-Yourselfers. Practical-minded, they spend on average $15,702 for three-year-old vehicles used primarily for business and basic transportation. They tend to shop payments.
- Budget Conscious/Entry Level. Still the largest subgroup of used-car buyers, they spend on average $13,927 for vehicles that are three years old. Many of them are young and in school.
Miller says a couple of things stood out among the subgroups.
One is that Polk researchers expected the import luxury buyers would pay more for their vehicles than they actually did.
“The price point had us scratching our heads,” he says. “We expected it to be higher, but they are probably buying it as a second vehicle, a fun vehicle.”
Also standing out was that the budget conscious/entry level set, more so than the other subgroups, is strongly influenced by dealership sales staffers.
“That was the only group where we saw the dealership salesperson having such an influence,” Miller says. “It might be because people in that group are younger and aren't as savvy yet at getting shopping information from various sources.”
Overall, he says, researchers discovered that the way new vehicles are sold today “applies a lot to how used vehicles are sold.”