In today’s new-car sales market, there exist two types of customers, according to Synovate’s research. There are intenders—folks who intend to buy a new car, truck, or SUV relatively soon in the near future—and delayers. As the name implies, delayers have put off purchasing a new car, in many cases because of economic concerns, thanks to the global downturn.

Even in good times, car shoppers sometimes need to be prodded to buy. Car buyers sometimes wait for the right nudge, be it in the form of a good deal or an appealing product. During economic downturns, there are even more reasons for consumers to sit on the sidelines. What will it take to get delayers back into the market?

For starters, the US government’s Cash for Clunkers program has helped, at least in the short term. The program, which allows consumers to earn rebates of up to $4,500 on a new-car purchase if they trade in a fuel-inefficient model, has given ailing automakers a shot in the arm as consumers have flooded showrooms. The showroom traffic has led to new-car purchases even from folks who don’t qualify for the program.

“First of all, we’ve seen a lot of people get back in the market, with the Cash for Clunkers program,” said John McElroy, host of Autolinedaily.com. “Still, a lot of people who did not qualify…ended up buying a new car anyway. First rule of thumb is get them in the showroom.”

Cash for Clunkers has certainly done that, to the point that the federal government approved another $2 billion just to keep the program afloat. Certainly, Cash for Clunkers has gotten some delayers to make trips to the dealership that they might have otherwise been putting off.

“It’s done a couple things—one, it’s motivated some clunker trades,” said Jack Nerad, the Executive Editorial Director at Kelley Blue Book. “It has also, and this is kind of the underreported side of things, it’s got people thinking about buying cars again.”

Nerad said a benefit of the program has been the increase in showroom traffic.

“Once you get the new car buying bug, and you get into a showroom, you buy a new car,” Nerad said. “This shows that a stimulus that puts money in people’s hands is the best kind of stimulus. People are going to buy stuff. This is pretty clear and it’s pretty finite. Both of which motivate people to do something.”

CEO for Motoresearch at Synovate, Scott Miller, said: “Regardless of the long-term impact of Cash for Clunkers, it put newer, more fuel efficient vehicles on the road and it helped dealers get rid of old inventories so manufacturers could start making cars again.  All good things.”

Miller said manufacturers are still in the dark when planning operations. “We still don’t know what the real, natural size of the market is. And regardless of any short-term success for Cash for Clunkers, the program has minimal impact on consumer ‘uncertainty’ or ‘risk’, which are the primary factors influencing the delayers.”

Cash for Clunkers won’t last forever and automakers will need to find ways to keep buyers coming back. Rebates and incentives can serve as effective lures, but they can also backfire in the long term. New product can excite customers, but to what extent? The question is; how can the automakers get delayers back in the game for the long term?

“I think it’s going to take better economic news than we have now, especially on the job front,” Nerad said. “The basic economic news, particularly on employment, is not particularly good. That’s going to leave us in the car buying doldrums for a while.”

“A lot of people have money, but they just are unsure of what the future holds,” McElroy said.

That unease about the future translates into poor consumer confidence. When consumer confidence is low, big-ticket purchases suffer.

“The average consumer has seen a reduction in many of his or her assets,” said Tom Libby, an independent automotive analyst and the president of the Society of Automotive Analysts. “A consumer has to see a positive trend for the value of his or her assets.”

“There is a direct correlation between car sales and consumer confidence ratings,” McElroy said. “A lot of people are saying ‘I don’t want to lay out a big chunk of money right now.’”

Tight credit isn’t helping, either.

“We’re never going to see the cheap credit that we did a year or two ago,” McElroy said.

Of course, economic downturns don’t last forever, and neither do cars. McElroy believes that as consumers’ current cars age, some delayers will re-enter the market, however reluctantly.

“A lot of people don’t feel comfortable with the car they have when they have to start doing maintenance on it,” McElroy said. “Even if the economy does not improve that much, there’s a lot of folks out there that will say, ‘I’ve had this car long enough, time to get a new one.’”

Consumers who do say that will find a lot of appealing products in the marketplace. But it’s tough to gauge how new product might impact delayers. While new models may generate attention and buzz, it’s not a given that they will generate showroom traffic and new-car sales. Still, experts agree that having strong product can’t hurt.

“Well, product drives everything, on a variety of levels,” McElroy said. “They’ve gotta have, or they think they’ve gotta have, that latest style or design that’s out there.”

“New product is a huge factor,” Libby said. “They [new products] are really at the core of the marketplace. Products play a huge part.”

Changes in gasoline prices could also have an impact on whether delayers re-enter the market or not—and how. Several new models under development are compact or subcompact models that promise high levels of fuel economy while also offering features usually found only on larger and more expensive cars.

“They were designed for markets where gas prices are a lot higher,” McElroy said. “These new cars are going to offer all the features that you can find in much more upscale cars. We’re going to see people gravitating to small cars even if gas prices don’t go skyrocketing.”

Nerad disagrees, and he also points out that the fuel-mileage gains generated from Cash for Clunkers may not translate into dollars saved at the pump. Delayers who come to the same conclusion may not use the program as an incentive to get back into the market.

“You’re hard pressed to actually save money by trading in a large product and buying a new small car. It’s more of an excuse [to buy] than a reason,” Nerad said. “Your most often better off to keep the least-fuel efficient car you already have. I don’t know that fuel prices are really a motivating factor.”

Indeed, not is Nerad skeptical of consumers using high gas prices as an excuse to get back in the car-buying game.

“I think some of it is sales pulled forward,” Nerad said of Cash for Clunkers.

Libby is also sceptical of Cash for Clunkers, for slightly different reasons.

“To me, it’s an artificial, outside stimulus,” Libby said. “I don’t know that it’s had any long-term effect on the underlying economic indicators. I don’t take anything from it for the long term.”

Automakers have traditionally turned to rebates and incentives as a way to spur sales, but they have also been burned in the past by those same incentive programs. Sometimes customers get too addicted to the deals, and don’t come back when the programs aren’t being offered.

“When those [incentives] went away, sales fell off,” Nerad said. “People are generally smart enough to stay out of the market until the see a compelling reason to buy. I think the car industry would prefer to have steady demand as opposed to spikes and drops.”

“I just think the public is sort of incentived out,” McElroy said. “So far, nothing has beat Cash for Clunkers.”

If it seems like the discussion keeps coming back to Cash for Clunkers, that’s because it’s been the dominant force in bringing people back into the market—at least for now.

“It wasn’t car ad screaming these deals at you…it was on the nightly news,” McElroy said. “Just that kind of attention really pulled a lot of people out of the woodwork.”

Another factor that may bring buyers back into the market is leasing. Both General Motors and Chrysler canceled their leasing programs due to the recession, which limited options for potential buyers.

“That’s going to be another important factor for car buyers,” McElroy said. “If there’s no leasing available, they’re just not going to buy from that company.”

“I think GM’s return to leasing is a major positive step,” Libby said.

Libby agrees that incentives and rebates can bring folks back into showrooms, but like the others, he cautions that they are often nothing more than short-term sales boosters.

“They can promote easier credit,” Libby said of dealers and automakers. “They can promote various mechanisms. They’re really short term sort of changes in the price.”

No matter what steps automakers and dealers take to get delayers back into a buying mood, it’s clear that the auto industry has been battered hard by the recession, and that in order to recover, those who manufacture and sell cars are going to need to get those delayers to stop putting off purchases. Whether it’s through the use of government-backed stimulus programs like Cash for Clunkers, industry-backed programs like rebates and incentives, the emergence of new product, changes in gas prices, the re-emergence of leasing programs, or other factors, the industry will need these potential buyers to actually spend their money.

As all three experts pointed out, some folks won’t be willing to spend their money until the economy picks up. Jobs are still scarce, and folks are still holding on tight to every dollar. But if automakers are going to survive and even prosper, they can’t wait until then.

There is good news: Both the domestic and import automakers have plenty of buzz-worthy products in the pipeline. Cash for Clunkers has gotten folks into showrooms. And cars will age, meaning that folks will need to buy new at some point. These factors may turn some delayers into intenders, and that could help give the industry a much-needed boost.

See related article: Marketing madness or a new distribution model?

For more information, please contact Varian Igantius.