GM Piles More Rebates

[nsap]

GM Increases Rebates

DETROIT -- The 2005 model year began Friday, Oct. 1, and General Motors already is offering rebates as high as $4,000 on its new cars and light trucks.

If the buyer will settle for a leftover 2004, the giveback goes as high as $7,000.

And that doesn't include a pile of bonus cash for buyers of 2004 and 2005 pickups and SUVs who finance their new wheels through General Motors Acceptance Corp. They get as much as $1,500 more in a promotion called TruckFest.

GM announced its October incentive programs Friday and gave Ford Motor Co. and the Chrysler group a hard target to reach.

Ford and the Chrysler group had extended their September incentives until today, Oct. 4, to find out what GM was going to do before they made their own moves. And GM did plenty.

The automaker reached into its bottomless pockets and withdrew an extra $500 to $1,500 to place on the hoods of leftover 2004s and new 2005s. GM's rebates already were the highest in the industry.

Ford and the Chrysler group will find that the new GM programs are difficult to match.

One late-September gimmick is out. GM and Ford were offering 0 percent loans for 72 months. No more. Here are some examples of the increases in GM rebates on 2005 models:

Buick Rendezvous, $3,500 (up $500); Buick LeSabre, $3,000 (up $500); Chevrolet Malibu, $3,000 (up $1,000); Chevrolet Silverado, $3,000 (up $1,500); Hummer H2, $1,000 (formerly zero); Pontiac Grand Prix, $3,500 (up $1,500).

Increases on 2004 models: GMC Envoy XUV, $7,000 (up $1,000 to $2,500); Buick Rainier, $6,500 (up $1,000); Chevrolet Blazer, $5,500 (up $1,000).


From>Automotive News

[mjd1001]

GM must really REALLY want to sell cars. I guess profit per vehicle is no where near as close to important to them as selling the vehicles so they can make money on financing them. $3500 on an 05 Grand Prix, and if you have a GM Card you can use another $1500....I am thinking about taking a look at them again.

[gmsickofan]

This is very sad.

What this means is:

1. GM can't afford its costly Union labor that forces it to build when it shouldn't.

2. People aren't excited about GM product in general.

[gmsickofan]

Chevrolet Blazer, $5,500 (up $1,000).

WOW. With a GM card, you can get one for 7,000 off!

[VivienM]

Originally posted by gmsickofan@Oct 4 2004, 10:44 AM
Chevrolet Blazer, $5,500 (up $1,000)

That's the old-style Blazer, though... I'm surprised they manage to sell those still even with the heavy incentiving.

[dlr]

Originally posted by laserwizard@Oct 4 2004, 03:21 PM
What a pathetic testimony to how poor most GM vehicles are these days: They cannot be sold without a rebate! GM should bite the bullet and accept one model year as the sacrificial lamb and go through the season without any rebates whatsoever so that the customer could get out of the expectation of bigger and bigger rebates. If these GM cars are all so great now, the risk is worth stopping rebates completely now and working toward 2006 for rebounding sales.

GM couldn't do that because the other manufacturers are also giving big rebates.

Another poster touch on the fact that if GM slows building and lay off UAW employees, they pay them 95% of their salary sitting home. You might as well keep them working and make a small profit per vehicle than loose money. Besides more GM cars on the road means more parts sales in the future. People don't realize how much money GM makes on part sales.

[W.A.F.U.]

Originally posted by laserwizard@Oct 4 2004, 03:21 PM
What a pathetic testimony to how poor most GM vehicles are these days:  They cannot be sold without a rebate!   

Far more often than not price is what sells an automobile. Most people do not care about how fancy the interior is or how much body cladding is on the outside. If they did, nobody would buy a Sunfire/Cavalier. But yet, GM sells these things in the hundreds of thousands even with the outdated design because they can be had for thousands and thousands less than a comparably equipped Civic.

Quality has nothing to do with the rebates on redesigned GM models. If they hadn't spoiled the customer with incentives in the first place then they wouldn't be in this predicament now.

GM is on the road to bankruptcy though. The profits from each vehicle are getting smaller every year and they are selling less vehicles every year. The rising cost of labor and health care brought on by the UAW will be GM's eventual downfall.

[BRMike]

I have learned a hard lesson with regard to rebates. I was so close to buying a 2004 GTO, I could smell it. But I would've been insanely upside down on trading in my 2003 S10. Why? Rebates. They absolutely kill resale value and killed my chances of owning a GTO.

[VivienM]

Originally posted by BRMike@Oct 4 2004, 12:21 PM
I have learned a hard lesson with regard to rebates. I was so close to buying a 2004 GTO, I could smell it. But I would've been insanely upside down on trading in my 2003 S10. Why? Rebates. They absolutely kill resale value and killed my chances of owning a GTO.

Actually, rebates aren't the problem, 0% financing offers are.

Let's say you have a GM vehicle sold for 30K (ignore taxes and other such unfortunate realities for now). If GM slaps on a 5K rebate, you pay 25K and finance that however you want. Sure, your resale value will be about 5K lower, but that's not really a loss for you, and if you want to trade in after say two years, you're upside down on the prevent value of your remaining monthly payments minus the resale price of the car. And the amount you owe on the loan is LESS than the sum of your remaining monthly payments.

Now, let's say that instead of giving you a 5K rebate, they give you 0% financing, which happens to save you 5K in interest. Now you have a loan for 30K, and not only that, but since it's 0%, there are no savings to be had from paying it off early. Hence, if you want to trade in after 2 years of a 5 year loan, you are still owing 18K. Since the vehicle can be bought new for effectively 25K, no one will pay anywhere near to close to 18K for your two year old vehicle, and you're screwed. And worse than that... the sum of your monthly payments is equal to the amount you owe on the loan, which is a further incentive to keep the loan and the car rather than pay it off using another loan.

The net effect of those cheap financing offers is to encourage people to keep their GM cars for the full term of the loan, which given they keep increasing those terms, is probably a very bad idea.

[polarisSKS]

"Actually, rebates aren't the problem, 0% financing offers are. "


The problem is neither. The problem is that the North American consumer who chooses to finance is buying more then he can reasonably afford.
Financing is extrememly lucrative because people will invariably bite off more than they can chew.

Just becuase GMAC, or any other captive finance company for that matter, offers you $X dollars @ 0% for 72 months, does not imply you can afford it.

The informed consumer can fully take advanatage of 0% financing, and turn it into his advantage, provide you are aware of what you are getting into.

[dlr]

Originally posted by VivienM+Oct 4 2004, 04:39 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (VivienM @ Oct 4 2004, 04:39 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-BRMike@Oct 4 2004, 12:21 PM
I have learned a hard lesson with regard to rebates. I was so close to buying a 2004 GTO, I could smell it. But I would've been insanely upside down on trading in my 2003 S10. Why? Rebates. They absolutely kill resale value and killed my chances of owning a GTO.

Actually, rebates aren't the problem, 0% financing offers are.

Let's say you have a GM vehicle sold for 30K (ignore taxes and other such unfortunate realities for now). If GM slaps on a 5K rebate, you pay 25K and finance that however you want. Sure, your resale value will be about 5K lower, but that's not really a loss for you, and if you want to trade in after say two years, you're upside down on the prevent value of your remaining monthly payments minus the resale price of the car. And the amount you owe on the loan is LESS than the sum of your remaining monthly payments.

Now, let's say that instead of giving you a 5K rebate, they give you 0% financing, which happens to save you 5K in interest. Now you have a loan for 30K, and not only that, but since it's 0%, there are no savings to be had from paying it off early. Hence, if you want to trade in after 2 years of a 5 year loan, you are still owing 18K. Since the vehicle can be bought new for effectively 25K, no one will pay anywhere near to close to 18K for your two year old vehicle, and you're screwed. And worse than that... the sum of your monthly payments is equal to the amount you owe on the loan, which is a further incentive to keep the loan and the car rather than pay it off using another loan.

The net effect of those cheap financing offers is to encourage people to keep their GM cars for the full term of the loan, which given they keep increasing those terms, is probably a very bad idea. [/b][/quote]
Actually the rebate is a direct reduction in the value more so than the 0%.

The 0% financing is strictly a financing option. It really has nothing to do with the value of the vehicle. Here is an example. Say you have a new 2004 car that sells for $20,000 and there is no rebate. You can pay cash for the car or finance it. If you finance it you pay interest. Let's say for example sake that a 2003 version of that car retails for $17,000. Now let's say that same 2004 car has a $4,000 rebate. Now the car costs you $16,000 whether you pay cash or finance. Why would you pay $17,000 for a 2003 when you can now get a new 2004 for $1,00 less? That rebate will push the value of the 2003 down accordingly.


The issue with the 0% for 72 months is 2 fold. First people want out after 2 or 3 years and still have 3 or 4 years to pay on it. That plus the rebates on new kill the value of their trade. If you finance a car 72 months, you better plan on keeping it at least 5 years.

[motorman]

Originally posted by nsap@Oct 4 2004, 07:55 AM
GM Increases Rebates

DETROIT -- The 2005 model year began Friday, Oct. 1, and General Motors already is offering rebates as high as $4,000 on its new cars and light trucks.

If the buyer will settle for a leftover 2004, the giveback goes as high as $7,000.

And that doesn't include a pile of bonus cash for buyers of 2004 and 2005 pickups and SUVs who finance their new wheels through General Motors Acceptance Corp. They get as much as $1,500 more in a promotion called TruckFest.

GM announced its October incentive programs Friday and gave Ford Motor Co. and the Chrysler group a hard target to reach.

Ford and the Chrysler group had extended their September incentives until today, Oct. 4, to find out what GM was going to do before they made their own moves. And GM did plenty.

The automaker reached into its bottomless pockets and withdrew an extra $500 to $1,500 to place on the hoods of leftover 2004s and new 2005s. GM's rebates already were the highest in the industry.

Ford and the Chrysler group will find that the new GM programs are difficult to match.

One late-September gimmick is out. GM and Ford were offering 0 percent loans for 72 months. No more. Here are some examples of the increases in GM rebates on 2005 models:

Buick Rendezvous, $3,500 (up $500); Buick LeSabre, $3,000 (up $500); Chevrolet Malibu, $3,000 (up $1,000); Chevrolet Silverado, $3,000 (up $1,500); Hummer H2, $1,000 (formerly zero); Pontiac Grand Prix, $3,500 (up $1,500).

Increases on 2004 models: GMC Envoy XUV, $7,000 (up $1,000 to $2,500); Buick Rainier, $6,500 (up $1,000); Chevrolet Blazer, $5,500 (up $1,000).


From>Automotive News

with my GM credit card and all the discounts i bought a 04 impala $8500 off of sticker. trading my 00 impala it cost me less than $9000 to move up 4 model years and my 00 was 5 years old in july of 04. bring on the incentives. i had to pay full sticker for my 05 C-6 corvette so i guess the dealer did OK but both of us :lol: are happy.

[VivienM]

Originally posted by dlr@Oct 4 2004, 04:10 PM
Actually the rebate is a direct reduction in the value more so than the 0%.

The 0% financing is strictly a financing option. It really has nothing to do with the value of the vehicle. Here is an example. Say you have a new 2004 car that sells for $20,000 and there is no rebate. You can pay cash for the car or finance it. If you finance it you pay interest. Let's say for example sake that a 2003 version of that car retails for $17,000. Now let's say that same 2004 car has a $4,000 rebate. Now the car costs you $16,000 whether you pay cash or finance. Why would you pay $17,000 for a 2003 when you can now get a new 2004 for $1,00 less? That rebate will push the value of the 2003 down accordingly.

But you're forgetting one little detail that I will demonstrate. The Canadian case is far more interesting than the American, because GM incentives are packaged up slightly differently (but they're really the same thing you get in the US - just worded different)

See, here in the lovely province of Ontario, we have these lovely financial disclosure laws that require that the "cost of borrowing" be written in the fine print. This makes it very easy to see how 0% financing actually works.

Unfortunately, gmcanada.com doesn't seem to want to give me any offer details right now, so I'll go based on memory. Numbers may be slightly sketchy.

Let's say you have a $27K MSRP base Impala with cruise control (that's the model they always advertise). GM Canada will advertise a lease deal (which we'll forget about), 0% financing on that 27K MSRP minus a $1000 rebate, and a cash price of roughly $22000 (so, in US terminology, a $5K rebate). Those discounts assume you pay MSRP; for this academic exercise, we'll assume you do too, as it doesn't change anything and takes a variable out.

So, you have three choices:
a) the lease deal, which we forget about
B) financing $26K at 0%
c) giving the dealer a $22K cheque

Now, the beauty of the law I alluded to earlier is that, in the fine print, GM has to put a "Cost of borrowing: 6.1%" thing. (it's usually 6.1% in most of the GM offers I've seen) What THAT is telling you is that their 0% financing is equivalent to a loan at 6.1% on the cash price.

So, your dealer could sell you the car for 22K and set you up with a GMAC loan at 6.1%, or sell the car to you for 26K and set you up with a 0% GMAC loan. BOTH of those alternatives cost you, the buyer, the exact same thing over your 5 year loan period. (That's what that legal disclosure says.)

Now, you get screwed over in three ways:
a) Firstly, if you want to make a down payment on the 0% loan, it's pointless (might as well put your money in a savings account). A down payment on the 6.1% loan would save you money over the 5 year loan period.
B) Secondly, since a trade-in counts as a down payment, they screw you over on your trade-in for the rationale explained above.
c) Thirdly, if you want to trade in the car after three years, you will be owing more with the 0% loan than with the 6.1% loan. How that works is simple: with the 6.1% loan, you'd pay off the sum of your remaining payments MINUS the 6.1% interest, but with the 0% loan, you'd pay off the sum of your remaining payments.

[ponchoman49]

Originally posted by laserwizard@Oct 4 2004, 10:21 AM
What a pathetic testimony to how poor most GM vehicles are these days: They cannot be sold without a rebate! GM should bite the bullet and accept one model year as the sacrificial lamb and go through the season without any rebates whatsoever so that the customer could get out of the expectation of bigger and bigger rebates. If these GM cars are all so great now, the risk is worth stopping rebates completely now and working toward 2006 for rebounding sales.

With the current crop of vehicles that are re-runs of the already lackluster 04 models GM is forced to repeat the rebates just to get peoples attention. And except for the Vette which sells in small quantities and the G6 I don't see much hope for some the recent new models. The LaCrosse with it's Hyundai styling, same old base engine and an optional "higher performance" Dohc wonder that puts out less torque than the antique base 3800, the CSV's, the STS that looks like a CTS dumbed down and the rather homely Cobalt sedan! This so called comeback is far off and a pipe dream in my eyes.

[dlr]

Originally posted by VivienM+Oct 4 2004, 10:14 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (VivienM @ Oct 4 2004, 10:14 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-dlr@Oct 4 2004, 04:10 PM
Actually the rebate is a direct reduction in the value more so than the 0%.

The 0% financing is strictly a financing option. It really has nothing to do with the value of the vehicle.&nbsp; Here is an example. Say you have a new 2004 car that sells for $20,000 and there is no rebate. You can pay cash for the car or finance it. If you finance it you pay interest. Let's say for example sake that a 2003 version of that car retails for $17,000. Now let's say that same 2004 car has a $4,000 rebate. Now the car costs you $16,000 whether you pay cash or finance. Why would you pay $17,000 for a 2003 when you can now get a new 2004 for $1,00 less? That rebate will push the value of the 2003 down accordingly.

But you're forgetting one little detail that I will demonstrate. The Canadian case is far more interesting than the American, because GM incentives are packaged up slightly differently (but they're really the same thing you get in the US - just worded different)

See, here in the lovely province of Ontario, we have these lovely financial disclosure laws that require that the "cost of borrowing" be written in the fine print. This makes it very easy to see how 0% financing actually works.

Unfortunately, gmcanada.com doesn't seem to want to give me any offer details right now, so I'll go based on memory. Numbers may be slightly sketchy.

Let's say you have a $27K MSRP base Impala with cruise control (that's the model they always advertise). GM Canada will advertise a lease deal (which we'll forget about), 0% financing on that 27K MSRP minus a $1000 rebate, and a cash price of roughly $22000 (so, in US terminology, a $5K rebate). Those discounts assume you pay MSRP; for this academic exercise, we'll assume you do too, as it doesn't change anything and takes a variable out.

So, you have three choices:
a) the lease deal, which we forget about
B) financing $26K at 0%
c) giving the dealer a $22K cheque

Now, the beauty of the law I alluded to earlier is that, in the fine print, GM has to put a "Cost of borrowing: 6.1%" thing. (it's usually 6.1% in most of the GM offers I've seen) What THAT is telling you is that their 0% financing is equivalent to a loan at 6.1% on the cash price.

So, your dealer could sell you the car for 22K and set you up with a GMAC loan at 6.1%, or sell the car to you for 26K and set you up with a 0% GMAC loan. BOTH of those alternatives cost you, the buyer, the exact same thing over your 5 year loan period. (That's what that legal disclosure says.)

Now, you get screwed over in three ways:
a) Firstly, if you want to make a down payment on the 0% loan, it's pointless (might as well put your money in a savings account). A down payment on the 6.1% loan would save you money over the 5 year loan period.
B) Secondly, since a trade-in counts as a down payment, they screw you over on your trade-in for the rationale explained above.
c) Thirdly, if you want to trade in the car after three years, you will be owing more with the 0% loan than with the 6.1% loan. How that works is simple: with the 6.1% loan, you'd pay off the sum of your remaining payments MINUS the 6.1% interest, but with the 0% loan, you'd pay off the sum of your remaining payments. [/b][/quote]
I'm not sure how Canada does it. When I figure a deal and am financing $26,000 U.S. dollars and am doing 0% financing, I divide the $26,000 by the term. The only cost of doing that is giving up the rebate. If you factory that as a "rate" then there is a cost. Quite often the rebate would exceed finance charges. In that case you are better off taking the rebate.

Again the key is to make sure you figure it both ways.