Costly Incentives Spoil Consumers but Yield Little Return
Data from CNW Marketing/Research shows that automakers are now giving customers an average of $4,000 in incentives per vehicle. But customers have come to expect these deals and they aren´t leading to huge spikes in sales.
Data from CNW Marketing/Research shows that automakers are now giving customers an average of $4,000 in incentives per vehicle. But customers have come to expect these deals and they aren´t leading to huge spikes in sales.
Sales of new vehicles are up only 0.8 percent this year, and GM and Ford are struggling to make money selling cars in North America, according to The Detroit News. But CNW Marketing/Research estimated that GM spent $4,973 in incentives per vehicle in November and Ford spent $4,861.
"Rebates have become so common, consumers are starting to do other things with their money," said Art Spinella, CNW´s president. "They know the incentives will be there when they want them. That´s clearly a problem."
CNW said the percentage of new vehicles sold with incentives has grown from 8.5 percent in 1994 to 89.7 percent this year. The number jumped in the late 1990s when automakers expanded leasing programs, according to Spinella. Consumer started expecting even more in the months after September 11, as GM started its zero-percent financing programs. Now consumers are accustomed to such deals.
"It makes for a tough situation for pricing for the automakers," said Paul Taylor, the National Automobile Dealers Association´s chief economist. "Nobody likes the profit picture this process has resulted in. Every manufacturer is looking for a vehicle to sell without incentives. They tend to have one. They need a lot more."
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