Incentives Stable In August, But Automakers Are Getting Good At Hiding Them
People keep their eyes on automaker incentives for various reasons. Customers are hunting deals. Analysts hunt carmakers that are sitting on a glut of cars. Incentive numbers don’t always tell the full story, says Edmunds. In August, incentive spend was subdued and stable. Automakers and dealers have become adept in camouflage though, and the reported stability of incentive spending doesn’t factor in some of the “hidden incentives.”
Says Edmunds Vice Chairman Jeremy Anwyl:
“Automakers and dealers have been very creative this summer with how they’re packaging their deals and boosting sales numbers, whether through controversial stair-step incentive programs or by working with lenders to expand credit. Many of these programs are essentially impossible to quantify, but their cost to the manufacturers is real.”
BMW made headlines it did not want to make with a special offer to dealers on the last day of July. The Wall Street Journal reported that dealers received discounts of as much as $7,000 per 2012-model car, as long as each vehicle was reported as sold on that day only. The cars could then be offered to retail buyers at strong discounts with dealers still turning a good profit.
Average True Cost of Incentives (TCI) by Car ManufacturerManufacturerAugust ’12July ’12August ’11MoMYoYChrysler$2,761$2,777$2,909-0.60%-5.10%Ford$2,844$2,763$2,6802.90%6.10%GM$3,147$3,194$3,096-1.50%1.60%Honda$1,554$1,224$1,66627.00%-6.70%Nissan$2,623$2,869$2,457-8.60%6.80%Toyota$1,676$1,623$2,2063.30%-24.00%Industry$2,274$2,237$2,3851.70%-4.70%Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I have seen more 0% ads than in recent history than I have in a long time. With this type of lending, it will cost the manufacture different amounts to buy down the loan for different buyers with different credit. I bet those type of incentives are hard to quantify.
It must be hard. Truecar.com has very different #'s (although they haven't released their August #'s yet) In July for example: Truecar has Honda at $2346 and Edmunds has them at $1224. A lot of variety in the numbers. http://blog.truecar.com/2012/08/01/honda-and-toyota-have-record-high-average-transaction-prices-for-third-straight-month-industry-incentives-decline-for-three-consecutive-months-according-to-truecar-com/
Is GM's 30-day return guarantee a sneaky incentive?
IIRC the take rate on these refunds is incredibly low, right? I mean like 30 people in six months low. I mean, who gets sick of a new car in 30 days? That's barely enough time to start noticing the bad things about the car, much less get sick of them. I suspect the dealer gets some kind of kickback from the insurance company or something, because $500 to cover a low probability event with minimal losses (maybe 3 thousand bucks in this market, if that) over a very short window--- seems pretty profitable to me.