Call it a paradox or irony or just the human condition, but it seems that the longer you hold on to your car, the less likely you’ll remain loyal to that car brand.
And this likelihood could be a problem for car dealerships hoping to expand brand loyalty because the average new-car loan keeps getting longer — now at about 67 months (5 years, 7 months) in October, according to Edmunds.com. Many people are looking into other options, such as title loans near me, because of this.
An analysis by Experian, one of the three major credit reporting bureaus, reviewed the impact of the length of ownership on the likelihood of a consumer returning to purchase their next vehicle in the same brand family.
To clarify, Experian did not connect length of new-car loans to brand loyalty. But the two trends are obviously connected because consumers are committing themselves to longer repayment periods. And even though a car can be traded in before the loan’s term of repayment is completed, the average length of car ownership is 7.75 years, Experian said, which is even higher than the average new-car loan at more than 5.5 years.
Average Length of Ownership: 93 Months
In the first quarter of 2014, Experian said that the average length of ownership was 93 months, or 7.75 years, and the average brand-loyalty rate was 49.5 percent.
Conclusion: “The analysis shows that as the number of months that a consumer owns a vehicle increases, they are less likely to return to market to purchase a vehicle of the same make,” Experian said.
For example, consumers who owned their vehicle for 12 months would purchase their next vehicle in the same brand family 57.3 percent of the time, compared to 33.8 percent of consumers who owned a vehicle for 144 months (12 years).
Here’s another big benchmark: The most significant drop in brand loyalty occurred after 36 months, decreasing by nearly 10 percentage points. That happens to be the average length of new-car leases.
“Leases with their fixed-length ownership cycle are typically strong contributors to brand loyalty,” said Brad Smith, director of automotive market statistics for Experian Automotive. “Over the course of seven years of ownership, a lot of things change, including vehicle product offerings, vehicle budget and credit score.
“Additionally, the increase in time between dealer interactions, whether they are for sales or service, increases the probability of a customer defecting to the competition.”
As part of the analysis, Experian Automotive also looked at which vehicle brands had the longest length of ownership.
Dodge, Buick Lead in ‘Length of Ownership’
In the first quarter of 2014, Dodge and Buick led the industry in length of ownership with an average of 113 months. Despite similar ownership lengths, each manufacturer had different loyalty rates at 22.6 percent and 38.4 percent, respectively.
“Understanding how long consumers hang onto vehicles, or how often they return to market and purchase the same brand, are critical pieces of information for automotive dealers, retailers and manufacturers,” said Smith.
This also emphasizes the importance for service centers to focus on customer service and retention, Experian said.
Other findings by Experian include:
• In Q1 2014, the average length of ownership increased by three months from Q1 2012
• Brand loyalty in the first quarter of 2014 improved by 3.9 percent from two years ago
• Acura and Volvo led the luxury-vehicle segment with the longest length of ownership in Q1 2014 at 99 months and 92 months, respectively
• Lexus and Mercedes-Benz led the luxury-vehicle segment with the highest brand loyalty in Q1 2012 at 55.8 percent and 52.7 percent, respectively