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What Length of Ownership Leads to Brand Loyalty?

A recent analysis released by Experian Automotive this week shines some light on the relationship between a consumer's length of ownership of a vehicle and their likelihood of repurchasing their next vehicle from the same brand, otherwise known as brand loyalty.

The relationship may surprise you.

According to Experian's data, the longer consumers hold onto their vehicles, the less likely they are to remain loyal to the brand. In fact, it appears as though the most significant drop in brand loyalty occurs after 36 months, according to the study, making leases ideal for brands to hold onto their drivers.

"Leases with their fixed length ownership cycle are typically strong contributors to brand loyalty," said Brad Smith, Experian Automotive's director of automotive market statistics.

Over the course of seven years of ownership, a lot of things change, including vehicle product offerings, vehicle budget and credit score," Smith continued. "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 of the first quarter of 2014, the average length of ownership was 93 months - 7.75 years - with an average brand-loyalty rate of 49.5 percent. Consumers who owned a vehicle for 12 months ended up purchasing from the same brand family 57.3 percent of the time, while that rate dropped to 33.8 percent for people who owned their vehicle for 144 months, or 12 years.

The most significant drop - after 36 months, decreased brand loyalty by nearly 10 percentage points.

"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," Smith said.

"On the one hand, increased ownership lengths create greater opportunity for dealer and aftermarket service organizations," he continued. "On the other hand, it underscores the importance for service centers to focus on customer service and retention.

"Dealers and manufacturers should continue to emphasize on keeping customers loyal to the service drive and using these customer interactions to highlight their new and soon to be released product offerings, as these efforts will aid in increasing service revenue and repurchase loyalty," Smith went on to say.

So which manufacturers lead the way in length of ownership and brand loyalty?

Dodge, Buick, Chevrolet, Ford and Mitsubishi, respectively, were the top five brands for length of ownership, ranging from 113 months of ownership for Dodge and Buick to 109 months for Mitsubishi.

On the other end of the spectrum, Ford, Subaru, Toyota, Kia and Lexus showed the highest rates of brand loyalty, respectively, ranging from 61 percent with Ford to 55.8 percent with Lexus. Ford, with 110 months for their average length of ownership, was the only brand to break into the top five in both categories.

Other important findings, provided by Experian Automotive:

  • 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