By Dan Monheit, originally shared on Carsales.com.au 6.8.21
Utes, utes utes. It seems that we just can’t get enough of them. Aussies used the last month of the 2020/21 financial year to snap up almost 15,000 of them between the top three models alone (well done Ford Ranger, Toyota HiLux, and Isuzu D-MAX). Beyond this, utes filled five of the top 10 spots for new car searches and helped to drive record levels of onsite content engagement.
One could easily make a rational case for our love affair with the humble ute. What’s not to love about their unbridled versatility? Who among us doesn’t want to be able to work hard all week then load up the back with surfboards and dirt bikes on the weekend (or at least look like this is what we intend to do)? They’re big and comfy, ready to ‘adventure’ at the drop of a hat, are perfect for lugging around other people’s furniture, and are super easy to clean.
So why now? I mean these benefits all exist and are just as compelling in the other 11 months of the year. In fact, there’s a good argument that they’re even more compelling in summer when camping and beach visits don’t involve a legitimate risk of hypothermia.
Perhaps the surge in ute popularity has much less to do with features and benefits, and much more to do with a behavioural bias known as Temporal Discounting. Temporal Discounting (also known as Hyperbolic Discounting) refers to our tendency to assign less value to things that are off into the future while overvaluing things in the here and now. Simply put, our brains have a preference for short-term gains over long-term ones, which is why many of us would choose to receive $10 today instead of $20 in a year’s time, even though economically it makes no sense to do so.
The extension of the government’s instant asset write off program means that many ute buyers can write off the full value of the vehicle immediately, rather than spreading it out over a number of years as was previously required. This means that utes bought in June can trigger immediate (accelerated) cash incentives for applicable businesses or ABN holders, which is about as good a short term incentive as one can ask for.
A short term cash bump (and the accompanying dopamine hit) can be more than enough to short circuit the rational, pragmatic decision making that a purchase of this magnitude should merit. After all, what’s a five year commitment to tricky parking, cramped teenaged legs and wet groceries got to do with getting four grand in my pocket next week instead of next year?
For the auto industry, this is a timely reminder of the power of short term incentives, even if rationally, they don’t seem to stack up at all. From optional extras and gift cards to cash back offers and trade in bonuses, customers are wired to want wins in an instant. If the government has worked out how to use Temporal Discounting as a force for good, then surely you can too.