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Incentives on new vehicles zoom higher
Rising gasoline prices and a sagging economy are likely to force automakers to continue bumping up lures.
By Terry Box
The Dallas Morning News
4/5/2008
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Big incentives are edging back into new-car dealerships.
With the economy slumping and gas prices spiraling, incentives that began creeping up in January gathered steam last month, increasing to an average of $2,435 per vehicle sold in February, according to Edmunds.com.
The 8.4 percent increase from February 2007 is significant because it suggests that automakers — particularly the Detroit Three — are being forced to return to the high, profit-sapping incentives they have all renounced.
Two years ago, for example, General Motors Corp. said it was adopting "value pricing," in which it lowered retail prices to reflect actual transaction prices at dealerships and reduced incentives.
In recent months, though, "incentives have been boosted to the levels we saw regularly before automakers instituted the 'value-pricing' strategy that aimed to reduce sticker prices and minimize the need for incentives," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "It's a car buyers' market, and that will likely be true for months to come."
Most big incentives are on full-size pickups and SUVs. But the amounts on some sedans are also growing.
In a recent list in Automotive News, the Chrysler Group had incentives on 24 cars and trucks, Ford Motor Co. offered them on 25 vehicles, and General Motors had 34 with cash on the hood.
Many offers were generous. Dodge had a $5,000 incentive on 2008 models of the Ram pickup, and Chrysler had $3,000 on its well-regarded 300C sedan.
Tim Jackson, president of the Colorado Auto Dealers Association, said the slowing economy is motivating manufacturers to offer a slew of incentives, from rebates to zero percent interest.
"Incentives are deeper than they were in 2001. I have got dealers who say they never had cuts this deep," Jackson said.
Compared with past incentive spurts where domestic carmakers dominated, more foreign brands such as Toyota are throwing out lures to draw buyers in. Edmunds.com., in a recent assessment, found that the average incentive in February for the Detroit Three was $3,393 per vehicle, while European brands spent an average of $1,945 per vehicle sold, Japanese brands averaged $1,313 per vehicle sold and Korean brands spent $1,807.
"Almost everything across the board has an incentive," said Brian Tyson, sales manager at Stevinson Toyota East and Scion in Aurora.
The Toyota Tundra is carrying zero percent financing for 60 months, and even the Toyota Camry hybrid still carries a $2,000 discount from last year.
"We are wanting to move the cars," he said.
Leo Griggs, who owns Park Cities Dodge in Dallas, said one of his challenges is selling the Dodge Ram in a tight market where gas prices are rising. The Ram is an older-design truck that's scheduled for replacement this fall.
Between dealer and customer incentives, "I can go $8,000 to $10,000 off the price of a Ram, and I can still make a good profit," he said.
Source: http://www.denverpost.com/business/ci_8818165
Rising gasoline prices and a sagging economy are likely to force automakers to continue bumping up lures.
By Terry Box
The Dallas Morning News
4/5/2008
Big incentives are edging back into new-car dealerships.
With the economy slumping and gas prices spiraling, incentives that began creeping up in January gathered steam last month, increasing to an average of $2,435 per vehicle sold in February, according to Edmunds.com.
The 8.4 percent increase from February 2007 is significant because it suggests that automakers — particularly the Detroit Three — are being forced to return to the high, profit-sapping incentives they have all renounced.
Two years ago, for example, General Motors Corp. said it was adopting "value pricing," in which it lowered retail prices to reflect actual transaction prices at dealerships and reduced incentives.
In recent months, though, "incentives have been boosted to the levels we saw regularly before automakers instituted the 'value-pricing' strategy that aimed to reduce sticker prices and minimize the need for incentives," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "It's a car buyers' market, and that will likely be true for months to come."
Most big incentives are on full-size pickups and SUVs. But the amounts on some sedans are also growing.
In a recent list in Automotive News, the Chrysler Group had incentives on 24 cars and trucks, Ford Motor Co. offered them on 25 vehicles, and General Motors had 34 with cash on the hood.
Many offers were generous. Dodge had a $5,000 incentive on 2008 models of the Ram pickup, and Chrysler had $3,000 on its well-regarded 300C sedan.
Tim Jackson, president of the Colorado Auto Dealers Association, said the slowing economy is motivating manufacturers to offer a slew of incentives, from rebates to zero percent interest.
"Incentives are deeper than they were in 2001. I have got dealers who say they never had cuts this deep," Jackson said.
Compared with past incentive spurts where domestic carmakers dominated, more foreign brands such as Toyota are throwing out lures to draw buyers in. Edmunds.com., in a recent assessment, found that the average incentive in February for the Detroit Three was $3,393 per vehicle, while European brands spent an average of $1,945 per vehicle sold, Japanese brands averaged $1,313 per vehicle sold and Korean brands spent $1,807.
"Almost everything across the board has an incentive," said Brian Tyson, sales manager at Stevinson Toyota East and Scion in Aurora.
The Toyota Tundra is carrying zero percent financing for 60 months, and even the Toyota Camry hybrid still carries a $2,000 discount from last year.
"We are wanting to move the cars," he said.
Leo Griggs, who owns Park Cities Dodge in Dallas, said one of his challenges is selling the Dodge Ram in a tight market where gas prices are rising. The Ram is an older-design truck that's scheduled for replacement this fall.
Between dealer and customer incentives, "I can go $8,000 to $10,000 off the price of a Ram, and I can still make a good profit," he said.
Source: http://www.denverpost.com/business/ci_8818165
(Haven't even checked how pitiful the allowance is)
