(September 9, 2010) George Jefferson (of the TV Jeffersons) used to pride himself about “movin’ on up,” and the Reagan administration praised the Trickle Down theory of economics. Today the world is moving in different directions – at least the automobile buying world according to analysts at Edmunds.com the Santa Monica, California based automotive information, research and marketing company.

“The recession may not have changed everything about the auto business — but it's changed just about everything,” notes Edmunds.com Senior Analyst Karl Brauer.

Brauer says the one thing that currently is hurting automakers at the most fundamental level are buyers who in normal times would have been considering new vehicles now are shopping the used-car market. And shoppers who had previously sought premium models are moving on down to mass market brands like Ford and Hyundai. Brauer calls it the "substitution effect" a result of unemployment, under-employment and a declining of household consumption. “What largely wasn't expected is how extensively the substitution effect is manifesting across multiple metrics,” he says.

Before the recession took hold, it was rare according to Edmunds.com for site visitors to view more information on used cars than new cars — and when it did happen, the average difference was just over seven percent. However, in August of 2008 used car “page views” outpaced new car “page views” by 40 percent and have outpaced them ever since by an average of 36 percent. 
From 2006 to 2009, luxury brands represented 4.6 percent of the vehicles traded in for a Ford Taurus. The redesigned 2010 Ford Taurus nearly tripled the penetration of luxury trade-ins to 12.6 percent.

“Ford’s effort to move the Taurus upmarket with the 2010 redesign was clearly successful, and in part the company must attribute that to the timing of the launch,” commented Brauer in his full report. “It’s obvious that many luxury buyers found the new model a suitable substitute for their premium vehicles at a much more recession-friendly price.”

Similarly, luxury brands represented 3.5 percent of the vehicles traded in for new Hyundai and Kia models in the 2006 model year. Today, those luxury brands represent 6.2 percent of trade-ins for 2011 model year Hyundai and Kia vehicles.

“Ford, Hyundai and Kia have made a concerted effort to upgrade their vehicles, and it’s working well for them as today’s car-shoppers appreciate the opportunity to have a near-luxury experience at a lower price,” reports Brauer.

So while George and the economy have both taken a turn, it isn’t all bad, just different.

— Ted Biederman