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AMR Project Report On

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FACTORS AFFECTING CAR
BUYING BEHAVIOUR OF
CUSTOMERS
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10/21/2010

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Akash Gyanchandani-91063

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Introduction
This survey tries to explore new and evolving trends within the retail side of the automotive
industry, with a particular focus on consumer buying. The detailed analysis of the changing
patterns of consumer demand, shopping trends, web usage and customer loyalty is covered
here. There is more scope these days to explore in greater detail environmental issues,
including fuel-efficient and alternative-fuel vehicles, as well as consumer use of new online
tools, such as web logs, discussion forums and search engines. These additional areas of
focus reflect changes in today’s automotive landscape. The industry is clearly in transition,
with static sales in almost all developed markets; growing pressure from Asian
manufacturers; eroding customer loyalty; and increased emphasis on environmental and
regulatory compliance. Consumer behavior will be a primary force in determining how this
transition will evolve. Getting closer to the customer in today’s highly competitive landscape
is essential for the entire industry and is no longer just a retail issue. It requires all
organizations across the supply chain to work as a single enterprise, sensing and responding
rapidly to consumer demand in a co-ordinate manner.

Executive Summary
Competitive pressures and increasing complexity have led automotive companies to look for
an edge wherever they can find it. Improved consumer insight into vehicle shopping and
buying behavior can provide that valuable advantage. This report contains insight that can
help vehicle manufacturers and dealers develop and execute more effective strategies in areas
such as sales, marketing and advertising, after sales service, Customer Relationship
Management (CRM) and manufacturer/dealer collaboration.

Key Factors in Vehicle Choice

When it comes to making their final decision about which vehicle to buy, consumers focus on
factors such as reliability, safety, price and fuel economy. At the bottom of the list are cash-
back incentives, named by fewer than half of consumers. The importance of incentives as a
deciding factor has declined for the past several years, indicating that consumers today seem
less interested in gimmicks when it comes to their car purchases. Where consumers are in the
buying cycle can make a difference in how they rank the factors that influence their vehicle
choice. For example, additional warranty coverage is important to consumers who are
furthest away from the purchase. However point of purchase; it was named by 69% of
respondents who were 13 to 18 months from, the number declines as consumers get closer to
actually buying the car: 55% of respondents who were within three months of purchase said
extra warranty coverage was important. This reflects the fact that consumers will narrow
down the factors that really matter to them as they get closer to the point of purchase.
Demographic factors such as age and gender accounted for some variances. For example,
older consumers tend to put more emphasis on reliability and safety than do younger
respondents. Those in the 50-plus age group were also more concerned with environmental
issues and fuel economy. The youngest respondents were most likely to rate the ability to
research information on the Internet as an important factor in their vehicle decision. Women
tend to rate most of the factors as more important than do men. The difference was most
pronounced for cash-back incentives, low financing, safety, environmental issues, fuel
economy and additional warranty coverage.
Going ‘Green’: Fuel Efficiency Takes Centre Stage
Fuel efficiency and environmental issues have moved to the forefront in consumers’ minds
and in automotive industry forums thanks to factors including global warming, fluctuating
gasoline prices, and proposed legislation to increase fuel efficiency and reduce CO2
emissions. This growing interest in so-called green vehicles was evident in this year’s Cars
Online research.
More than one-quarter of respondents said they currently own or lease a fuel-efficient
vehicle while almost half said they are planning to buy or thinking seriously about buying a
fuel- efficient vehicle. Not surprisingly, the numbers for alternative-fuel vehicles were lower.
Just 2% of respondents currently own an alternative-fuel vehicle and 11% are planning to buy
or thinking seriously about buying one. The most common type of alternative-fuel vehicle
represented in the survey were gas/ electric hybrids, named by about half of current
alternative- fuel car owners.
Biodiesel vehicles were the second most common, named by 15%. The alternative-fuel
market remains in transition and it’s still too early to tell how it will ultimately shake out,
although sales are expected to continue to grow.
Methodology
The study is based on primary data collection with a sample size of 100 respondents residing
in National Capital Region of New Delhi, India. The questionnaire used for the sample
survey is a structured and non-disguised questionnaire and consisted of two major sections.
The first section intended to collect the various demographic factors; the second section
intended to collect the various opinions containing questions about the various factors
affecting the car purchasing decision. A five point Likert scale was used to capture the
consumers responses ranging from strongly agree to strongly disagree. The different
statements regarding the various factors affecting the car buying behavior of customers were
generated based on literature review as well as expert opinion in an iterative manner. It could
be therefore said that the itemized scale in this case actually asks the respondents to rank their
opinions in a decreasing order of importance. Data analysis was done using SPSS software.
The statistical analysis methods employed was factor analysis. To study the impact most
frequently indulged in weighted average method was used.
Data collection

The study entailed data collection with the help of a questionnaire from the residents of
National Capital Region of New Delhi, India. Data was collected by personally contacting the
respondents and explaining in detail about the survey. A total of 120 customers from different
areas were contacted and 100 correctly completed questionnaires were obtained from all the
customers, the break-up of which is given in Figure 1,2 and 3

Descriptive profile of respondents (n=100)

Gender

Fig 1

Age

Occupation

Fig 3
Findings and Analysis

Factor Analysis for factors affecting car purchasing decision

Factor analysis was performed to identify the key dimensions affecting purchase of cars provided by
different car manufacturing companies. The respondent ratings were subject to principal axis factoring
with varimax rotation to reduce potential multicollinearity among the items and to improve reliability
on the data (see Table 6: Rotated Factor Matrix). Varimax rotation (with Kaiser Normalization was
converged in thirty-one iterations. Thirty items were reduced to nine orthogonal factor dimensions
which explained 73.555% of the overall variance (Table 4) indicating that the variance of original
values was well captured by these nine factors. The nine factors and their components is given in
table 7.

Reliability of Data

Table 1: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling

Adequacy. .769

Bartlett's Test of Approx. Chi-Square 1650.000

Sphericity
df 435

Sig. .000

Kaiser-Meyer-Olkin

[Index for comparing the magnitudes of the observed co-relation coefficient to the magnitude
of the partial correlation coefficients]

From the above table, we can interpret that there is no error in 76.9% of the sample and in the
remaining 23.1%, there may occur some sort of error.

“Bartlett’s Test of Sphericity”

[Strength of relationship among variables is strong. It presents good idea to proceed to

factor analysis for the data.]
 Ho : There is significant indifference of all the factors affecting car purchase
decision

H1 : There is significant difference of all the factors affecting car purchase

decision

The observe significance level is 0.0000 which is less than .05, which is small enough to
reject the hypothesis. It means there is a significant difference between the factors affecting
car purchasing decisions.

Communality”- Common Factor Variance

Communality of each statement refers to the variance being shared or common by other
statements. With reference to the first statement, the extraction is .833 which indicates that
83.3% of the variance is being shared or common to other statements. Refer Table 2.

“Eigen Value”: Indicates the amount of variance in the original variables accounted or by
each component. The total initial variance in the new components will be 30.

Table 2: Communalities

Initial Extraction

S1 1.000 .833

S2 1.000 .692

S3 1.000 .760

S4 1.000 .800

S5 1.000 .695

S6 1.000 .795

S7 1.000 .746

S8 1.000 .731

S9 1.000 .783

S10 1.000 .875

S11 1.000 .851

S12 1.000 .782

 S13 1.000 .642

S14 1.000 .628

S15 1.000 .674

S16 1.000 .715

S17 1.000 .662

S18 1.000 .707

S19 1.000 .653

S20 1.000 .728

S21 1.000 .762

S22 1.000 .710

S23 1.000 .642

S24 1.000 .687

S25 1.000 .835

S26 1.000 .684

S27 1.000 .803

S28 1.000 .683

S29 1.000 .857

S30 1.000 .650

Extraction Method: Principal Component Analysis.

Table 3: Total Variance Explained

 Extraction Sums of Squared
Component Initial Eigenvalues Loadings Rotation Sums of Squared Loadings

% of Cumulative % of Cumulative Cumulative

Total Variance % Total Variance % Total % of Variance %

1 7.102 23.672 23.672 7.102 23.672 23.672 3.398 11.327 11.327

2 3.539 11.798 35.470 3.539 11.798 35.470 3.227 10.756 22.083

3 2.543 8.477 43.947 2.543 8.477 43.947 3.080 10.268 32.350

4 2.188 7.292 51.239 2.188 7.292 51.239 2.556 8.520 40.870

5 1.716 5.721 56.960 1.716 5.721 56.960 2.543 8.476 49.345

6 1.631 5.435 62.396 1.631 5.435 62.396 2.356 7.855 57.200

7 1.218 4.059 66.455 1.218 4.059 66.455 1.909 6.364 63.564

8 1.112 3.706 70.161 1.112 3.706 70.161 1.718 5.725 69.289

9 1.018 3.394 73.555 1.018 3.394 73.555 1.280 4.266 73.555

10 .948 3.160 76.715

11 .815 2.717 79.432

12 .683 2.278 81.710

13 .634 2.113 83.823

14 .567 1.889 85.712

15 .500 1.667 87.379

16 .489 1.631 89.010

17 .439 1.464 90.475

18 .421 1.403 91.878

19 .330 1.099 92.976

20 .297 .991 93.967

21 .277 .924 94.891

22 .271 .905 95.796

23 .226 .752 96.547

24 .209 .697 97.245

25 .194 .647 97.892

26 .183 .608 98.501

27 .161 .537 99.038

28 .129 .431 99.468

29 .089 .297 99.766

30 .070 .234 100.000

Extraction Method: Principal Component Analysis.

Table 4:

Cumulative Frequency

Component 1 Explain a variance of 3.398, which 11.327%

is 11.327 % of the total variance of
30

Component 2 Explain a variance of 3.327, which 22.083%

is 10.756 % of the total variance of
30

Component 3 Explain a variance of 3.080, which 32.350%

is 10.268 % of the total variance of
30

Component 4 Explain a variance of 2.556, which 40.870%

is 8.520 % of the total variance of 30

Component 5 Explain a variance of 2.543, which 49.345%

is 8.476 % of the total variance of 30
 Component 6 Explain a variance of 2.356, which 57.200%
is 7.855 % of the total variance of 30

Component 7 Explain a variance of 1.909, which 63.564%

is 6.364 % of the total variance of 30

Component 8 Explain a variance of 1.718, which 69.289%

is 5.725 % of the total variance of 30

Component 9 Explain a variance of 1.280, which 73.555%

is 4.266 % of the total variance of 30

Scree Plot

7.1

6
Eigenvalue

4
3.54

2.54
2.19

2 1.63

1.72 1.11
0.95
1.22 0.68 0.49
1.02 0.57 0.3
0.44
0.82 0.28 0.23
0.63 0.19 0.16 0.13
0.5 0.07
0.42
0 0.33 0.27 0.21 0.18 0.09

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Component Number

Fig 4

With the help of table 3 and 4, we can interpret that 30 statements are now reduced to 9
components contributing 73.555% of the total variance. With the help of Fig1. Scree plot, we
can just visualize that nine factors are reduced with eigen value greater than 1.0000
Table 5. Component Matrix:

This table reports the factor loadings for each variable on the unrotated components or
factors.

Component Matrix
 Component

1 2 3 4 5 6 7 8 9

S1 .377 .267 .541 -.333 .217 .171 -.327 .176

S2 -.166 -.163 -.228 .665 -.119 .180 .303

S3 .649 -.382 .347 .119 .188 .121

S4 -.551 -.191 .503 .338 -.271 -.106

S5 .599 -.244 .388 .141 .102 .115 .108 -.166 .210

S6 .751 -.265 -.164 -.156 .291 .131

S7 .223 .232 -.138 .223 -.344 .390 -.237 .498

S8 .430 .124 .128 .249 .581 .125 .306

S9 -.104 -.267 .229 .699 -.224 -.271 -.147

S10 -.170 .698 -.418 .363 .129 .178

S11 .232 .808 -.272 .132 -.161 .157

S12 -.542 -.211 .628 .144 .135

S13 .177 .528 .462 -.216 -.103 .205 -.100

S14 .627 -.139 -.171 -.220 .279 -.227

S15 .689 .337 .100 -.197

S16 .569 .357 .170 .273 -.119 -.346 -.154

S17 -.312 .398 .592 .161 -.109

S18 .481 .343 .427 .117 -.343 -.183

S19 .718 -.106 -.196 -.273

S20 -.395 -.122 .254 .107 .667 .163

S21 .730 -.205 -.139 .116 -.367 .114

S22 .537 -.294 .154 -.108 .245 .470

S23 .484 -.354 .115 .311 .395

S24 .368 .168 .226 -.252 .527 .104 -.341

S25 -.499 .207 .617 -.288 -.106 -.145 .191

S26 .621 .112 .187 .256 .323 .186 -.195

S27 -.503 .430 .516 .251 -.138

S28 .652 .247 .227 -.278 -.236

S29 -.535 .186 .663 .112 .158 -.225

S30 .459 .422 .117 -.300 -.123 -.153 .335

Extraction Method: Principal Component Analysis.

.

Each number represents the correlation between the item and the unrotated factor. This
correlation helps to formulate an interpretation of the factors or components. This is done by
looking for a common thread among the variables that have large loadings for a particular
factor or component. It is possible to see items with large loadings on several of the unrotated
factors, which makes interpretation difficult. In these cases, it can be helpful to examine a
rotated solution.

Table 6: Rotated Component Matrix

 Component

1 2 3 4 5 6 7 8 9

S1 .447 .753 .205

S2 .191 -.765 -.115 .201

S3 -.122 -.414 .591 .282 .153 .194 .284

S4 .189 -.123 -.799 -.232 -.134 -.175

S5 -.374 .570 .295 .158 .158 .120 .256

S6 .755 -.192 .102 .304 .114 .265

S7 .219 .191 .111 .799

S8 .150 .821 .131

S9 .308 -.308 .193 .388 -.466 -.213 -.344 .135

S10 .826 -.152 -.253 -.293

S11 .872 .134 .117 .225

S12 .210 -.138 -.329 .177 -.570 -.208 -.404 .108 .190

S13 .319 .221 .122 .109 .224 .643

S14 -.337 .481 .152 -.114 .371 .272 .180

S15 -.174 .271 .385 .215 .156 .379 .302 .332

S16 -.213 .438 .566 .235 -.267 .172

S17 .113 .429 .161 -.165 -.591 -.139 -.195

S18 .311 .513 .233 .426 .136 -.238 -.190

S19 -.499 .225 .152 .482 .269 .124

S20 -.182 -.821

S21 -.422 .323 .280 .148 -.112 .543 .217 -.140

S22 -.151 -.205 .226 .413 .263 -.129 .551 -.178

S23 -.187 .212 .178 .187 .670 .175

S24 .809 .143

S25 .885 -.160 -.120

S26 -.179 .105 .537 .391 .167 .246 -.135 .207 -.222

S27 .851 .195 -.103 -.151

S28 -.289 .250 .636 .215 .121 .148 -.157 .152

S29 .860 -.290 -.107

S30 .141 .413 .107 .274 .461 .276 .281

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a Rotation converged in 31 iterations.

With the help of table 6, we can categorize each statements depending upon the factor loadings and
shown in table7.

Table 7: Factors

Factor 1:

• S19 : Information Provided By Salesperson

• S25 :Safety
• S27 : Easy Availability Of Spare Parts
• S29 : Technology

Factor 2:

• S10 : Government Policies And Regulations

• S11 : Import Duties Imposed By Government

Factor 3:

• S3 : Family Needs
• S5 : Brand Image
• S6 : Income Level
• S8 : Special Family Programs/Events Like Anniversary, Birthday
• S15 : Insurance Facility
• S18 : Credit Card Acceptance
• S26 : Car Accessories

Factor 4:
 • S14 : Installment Payment Facility
• S16 : Location Of The Car Dealer Shop
• S24 : Looks
• S28 : Availability Of Service Station

Factor 5:

• S4 : Status Symbol
• S12 : Advertisements And Promotions
• S17 : Home Delivery Facility
• S30 : Overall, I Am Satisfied With My Car I Own

Factor 6:

• S1 : Price Of The Car

• S2 : You Take Suggestions Of Your Family Members
• S9 : Family Members & Friend Circle
• S13 : After Sales Service

Factor 7:

• S20 : Availability Of Variety Of Cars Under One Roof

• S21 : Information Provided By Various Car Related Magazines

Factor 8:

• S22 : Mileage
• S23 : Power

Factor 9:

• S7 : Festival Season/Offers
 Table 8: Component Score Coefficient Matrix

Component

1 2 3 4 5 6 7 8 9

S1 .019 -.096 .179 -.106 -.051 .347 -.042 -.094 .209

S2 .062 .064 .164 -.069 -.018 -.386 -.001 .100 .174

S3 .051 -.113 .193 .009 -.025 -.058 .034 .119 -.033

S4 .026 -.010 .082 .079 -.386 -.084 .132 -.020 -.120

S5 .022 -.144 .202 -.001 -.010 .062 -.054 -.017 .226

S6 -.031 .226 -.105 .060 -.035 .102 -.080 .101 .149

S7 .010 .031 .009 -.035 .016 -.053 .008 .035 .627

S8 .011 .064 .400 -.185 -.120 -.091 -.054 .111 .065

S9 .119 -.112 .105 .005 .244 -.177 -.097 -.193 .122

S10 -.055 .261 .081 -.028 .029 -.074 -.163 -.101 .035

S11 .040 .282 .025 -.007 .003 -.087 .116 .059 -.023

S12 .030 -.011 -.075 .212 -.240 -.050 -.187 .164 .124

S13 .099 .022 .000 .047 .097 .282 -.100 -.043 -.010

S14 -.022 .010 -.099 .169 -.035 -.110 .175 .103 .078

S15 .007 .080 .084 -.017 -.037 .084 .068 .150 .041

S16 -.048 -.037 .092 .240 -.129 .031 .099 -.311 .084

S17 -.013 .149 .148 -.012 -.305 .020 .046 -.028 -.147

S18 .048 .087 .145 .057 .150 -.049 .019 -.200 -.191

S19 -.111 -.007 -.011 -.033 .164 -.004 .054 -.026 -.087

S20 -.080 .034 .081 .039 .056 -.001 -.563 .075 -.067

S21 -.040 .001 .028 .042 -.054 -.130 .289 .050 -.139

S22 .037 -.002 .006 .158 .071 -.077 -.219 .358 -.196

S23 .021 .001 .076 -.179 -.028 -.022 .021 .444 .171

S24 .073 .026 -.146 .470 -.076 .010 -.068 .035 -.079

S25 .329 -.023 -.029 -.008 .116 -.040 .076 .130 -.021

S26 -.027 .055 .148 .147 -.006 .085 -.248 .079 -.225

S27 .291 .047 .067 .001 .027 -.041 .061 .013 .003

S28 -.071 -.018 -.032 .289 .000 .079 -.004 -.250 .039

S29 .295 -.042 .018 .112 -.102 .018 .125 .001 -.044

S30 .150 .153 -.061 .078 .170 -.117 .109 .201 -.132
 Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

From the table 8 of component score coefficient matrix, we can obtain the quantifiable data of each factor. The
coefficients between the statements and the factors are taken according to the statement affecting the factor ( on
the basis of Table 7)

Conclusions and Recommendations

Since Indian Automobile market is continuously in the prowl of surging as a major car
manufacturer, people are purchasing car as there is increase of income of common people as
well as change in tastes and preferences of consumers. It is important for the car
manufacturers and car dealers to be able to understand the different factors affecting the
extent in car purchasing behaviour. The factor analysis results indicate that factor 1 (table 7)
which consists of Information provided by salesperson; safety; easy availability of spare
parts; technology are affecting the car purchasing behavior. People are more conscious about
the on spot information provided about various cars who serves according to the needs and
wants of the customer. The type of technology used and the wider reach of the service
stations also affect the most on car purchasing decision. While government obligations and
various policies like import duties, custom exemptions is seen as second most affecting driver
(factor 2, table 7) of purchase of cars. Factor 3 includes family needs; brand image; income
level; special family programs/events like Anniversary, Birthday; insurance facility; credit
card acceptance; car accessories affects customers car purchase decision causing a variance
of 3.080.This shows that importance of family decisions, special occasions in family and the
various services provided by car dealers. Factor 4, Table 7 includes installment payment
facility; location of the car dealer shop; looks; availability of service station showing
customers accessibility to the service provided. Factor 5 shows the impact of various
promotional activities and extra care taken by car dealers. Factors 6 shows the impact of
suggestion provided by family members and peers as well as price and after sales service
provided. Factor 7 includes the infrastructural benefits of the shop and the variety of cars it
stores .The last but not the least ones shows the impact of factors of technical specifications
of the car and the festive season offers

Overall, various internal and external factors like extra care facilities, location of the shops,
various information provided by car dealers, advertisement and print media promotions,
features of the car in all are contributing in making car purchasing behaviour of customers.

ANNEXURE
Opinion Survey
Section I

Demographic Factors

Name……………………………………………………………Gender…………..

Age

Below18 18-25 26-35 36-50 51 and above

Occupation

Service Business Student Housewife

Section II

According to you which of these Factors are Affecting Car Purchasing Decision in India. Please
fill according to instruction in bracket given below

(SA-Strongly Agree; A-Agree; N-Neutral; DA-Disagree; SDA-Strongly Disagree)

Sl.No Statements Strongly Agree Neutral Disagree Strongly

Agree Disagree

1. Price Of The Car

2. You Take Suggestions From Your

Family Members

3. Family Needs

4. Status Symbol

5. Brand Name

6. Income Level

7. Festival Season/Offers

8. Special Family Programs/Events

Like Anniversary, Birthday

9. Family Members & Friend Circle

10. Government Policies And

Regulations

11. Import Duties Imposed By

Government

12. Advertisements And Promotions

13. After Sales Service

14. Installment Payment Facility

15. Insurance Facility

16. Location Of The Car Dealer Shop

17. Home Delivery Facility

18. Credit Card Acceptance

19. Information Provided By
Salesperson

20. Availability Of Variety Of Cars

Under One Roof

21. Information Provided By Various

Car Related Magazines

22. Mileage

23. Power

24. Looks

25. Safety

26. Car Accessories

27. Easy Availability Of Spare Parts

28. Availability Of Service Station

29. Technology

30. Overall, I Am Satisfied With My

Car I Own