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Kicking the Tires: Prices vs. Incentives

October 23, 2002

Shuffle through a mass of car advertising or drive to your local strip of auto showrooms and the pitches glare at you: "0% APR Financing," "$0 Down Payment," "Rebates up to $5,700." A skeptical consumer might ask, "If they raise prices on cars, what good is an incentive?" But there is little evidence that new car prices have risen considerably lately or that they will rise significantly soon, according to the New York Times.

"We don't see much chance we will raise prices until, at least, the economy improves," said

Paul Ballew, the chief industry sales analyst at General Motors Corp. "We've had great competition and, in some cases, overcapacity at factories. And no one is getting rid of incentives. Sure, we'd prefer to not use incentives, but such is life."

Paul Taylor, chief economist for the National Automobile Dealers Association (NADA), said that European cars might increase in price, but only because of dollar fluctuations. "Especially cars coming out of Germany, which have high costs of production there, may go up in price," he said, according to the Times.

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