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Cato: The $10,000 new car is back, it's a Hyundai, and if you are looking for a reliable runabout and plan to keep it for seven, eight, nine, even 10 years, Accent's the word.
Vaughan: What we're seeing here, Cato, is the marketplace working things out.
Cato: As with Bear Stearns over the weekend?
Vaughan: Not at all. With Bear Stearns, we're seeing risky investments — investments not even all the experts understand completely -- go bad. The result is an 85-year-old investment bank forced to pay the ultimate price for the gamble. In this case, Bear Stearns is going for pennies on the dollar to another player, in this case JP Morgan Chase.
With the Accent we are looking at something very different, although it, too, is going cheap.
Cato: Okay, cut the economics lecture; it's tedious and we all can see that the competition for new car buyers in Canada is fierce and the high value of the Canadian dollar is playing out in price reductions — price reductions that only last year auto makers collectively said would never, ever happen.
Hey, and if you look below you'll also get a bit of insight into Volkswagen Canada is doing. The Autobahn promotion, right? What's happening with Rabbit sales is also interesting.
Vaughan: There will be fallout from the price cuts, make no mistake. We'll eventually see it in the leasing market.
Cato: Right. This wave of price cuts is good news for new buyers, but in the longer run it will affect residual values and that will have a direct impact on leasing — which makes up about 50 per cent of the overall new vehicle market in Canada.
Vaughan: This, I think, is a better time to buy than lease, for those who can afford to purchase.
Cato: Now we're back to what I want to discuss — the purchase of a very good deal. Hyundai Canada has just announced what it is calling "25th Anniversary Pricing" on the Accent — the $9,995 car.
Vaughan: Not just the Accent, Cato. Hyundai also has just announced cut-rate deals on three other models. The Tiburon starts at $15,995, the Tucson L at $16,995 and the Sonata at $18,995.
Cato: Hyundai Canada says these price cuts amount to savings of $3,600 on an Accent, $3,000 on a Tiburon, $4,200 on the Tucson and $5,150 on the Sonata.
Vaughan: Looks to me as though Hyundai has run up the white flag on its effort to build a brand to rival Toyota. Now it's all about the deal.
Cato: You are so right. This, of course, is the strategy of the new marketing team at Hyundai. The old one tried to build the brand steadily, avoiding as much as possible deep price cutting and promoting awards, quality results and third-party endorsements.
Vaughan: It was a slow and steady marketing plan.
Cato: Exactly. Frankly, I don't have a stake in Hyundai's business one way or the other. And we all like a good deal.
But I have to say, this abrupt about-face in marketing strategy looks bad. On top of that, I don't think it's necessary.
Vaughan: Because Hyundai is starting to get some serious respect, garnering a lot of quality awards.
Cato: Look, if you buy a Hyundai now, the hubcaps aren't going to fall off and it won't rust beneath your feet.
Vaughan: The opposite. In Consumer Reports most recent recommendations, the Sonata and the Santa Fe were both top-rated models in their classes.
Cato: Hyundai's long-term reliability in J.D. Power and Associates' dependability study is well above average.
Vaughan: And overall, Consumer Reports says its research shows Hyundai quality is now well, well above average for quality.
Cato: And the Accent? It's a top-three model in Power's recent Initial Quality Study and get this — in Consumer Reports new list of good bets among used cars, the Accent comes highly recommended among low-cost, late-model used cars. Look, it's a good little car and one not likely to break over the years.
Vaughan: But you do not want to buy an Accent with an eye to selling it in two, three, or four years.
Cato: That's the last point I want to hit on in this week's deal. Vehicles like the Accent perform well and often are purchased at bargain prices, brand new. But three years later — whammo! The value has plummeted.
Vaughan: When an owner is ready to unload, say after the fifth year, when most vehicles have lost 65% of their value, the Accent has lost more.
Cato: That's because the Hyundai brand is weak. Consumer perception plays a big part in that. Pushing cut-rate deals at the expense of brand building I think is a mistake for Hyundai, even as it is good for buyers up front. As a buyer in the short term I applaud what Hyundai is doing. Long-term it is maybe not so good.
Vaughan: Cato, you have a point. If consumers don't believe that a Hyundai is as good as a Honda or Toyota -- whether that perception is justified or not — used values get whacked.
Cato: This, my friend, is the psychological part of economics. Even with evidence of good reliability, Hyundai will continue to have a tough time shaking off its low-rent image.
Vaughan: Consumer perceptions do not change quickly, either. And a $10,000 Accent only reinforces Hyundai as a down market auto maker.
Cato: These Hyundai offers are still good deals, though. Just don't expect these cars to keep up with the Hondas and Toyotas of the residual value world.
2008 VW Rabbit 5-Door
Buyer's Age Range:
- 16-34 years: 46.2%
- 35-54 years: 37.1%
- 55+ years: 16.7%
Gender ratio:
- Female: 51.8%
- Male: 48.2%
Type of sale:
- Cash/non-dealer financing: 15.0%
- Finance: 32.1%
- Lease: 52.9%
Most popular colours
- Black
- White
- Grey
Vehicle price: $25,112 (does not include taxes, license or title fees)
Days to turn: 26
Trade ins: 23.8% (does not include lease returns)
Top three trade ins:
- VW Jetta
- VW Golf
- VW Beetle
Average monthly payments: (includes PST & GST)
- Lease (48 month term): $381
- Finance (36 month term): $533
- Finance (60 month term): $446
Source: Power Information Network
