With the economy gaining momentum, automobile dealers are easing up on the
zero percent interest rates and no-money-down incentives they’ve been offering
consumers the last few years, industry analysts report.
“Consumers aren’t moved by zero-percent and cash-back deals anymore, so dealers have to come up with something else,” said National Automobile Dealers Association industry analyst John Thomas. “Automakers have started pulling away from incentives and it’s a trend we’ll see in 2004.”
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Now companies are coming up with other offers to entice consumers onto dealership lots – like General Motors Corp.’s new “free car giveaway,” Thomas said.
General Motors announced it is giving away 1,000 new vehicles in January and February to consumers who visit a Chevrolet, Pontiac, Cadillac, Buick, Oldsmobile, Saturn, Saab or Hummer GM dealerships. The world’s biggest automaker reports the offer should bring about 5.5 million prospective customers to more than 7,000 dealer showrooms, which is 40 percent to 50 percent more than usual for the slow sales months.
Consumers need only sit in a car and push the “OnStar” button in the vehicle to find out if they win.
The chances of winning a new vehicle in its “Hot Button” promotion are about one in 5,500, GM said.
“GM’s hoping to get more consumers onto dealership lots during January and February with the giveaway because those are normally the slowest months,” said Rhode Island Automobile Dealer’s Association Executive Vice President Jack Perkins.
Besides grasping consumers’ interest during a slow sales period, GM officials are trying to create awareness of 2004 models, according to National Automobile Dealers Association information.
Rebates and loan discounts automakers were using to try to stem market-share losses resulted in the best deals in close to 30 years, Perkins said.
“These automakers want to scale back on the incentives they offer because it’s cost them a great deal over the years,” Perkins said. “For them to sell vehicles (when the economy was worse), they had to offer incentives, but now that it’s getting better, they can scale back on them.”
The industry’s incentive spending fell 5 percent to an average $3,751 per vehicle in December from $3,941 in November, according to Bandon, Ore.-based CNW Marketing Research Inc., which collects the information for automakers and analysts.
General Motors reduced incentives in December to $4,328 from $4,406 in November, as Ford Motor Co. cut its to $4,271 from $4,396, according to CNW Marketing. Chrysler’s incentives rose to $4,394 from $4,351, and Toyota’s increased to $2,766, its highest of the year, from $2,717 in November, CNW said.
U.S. auto sales fell in December compared to the same month of 2002, as GM and Ford cut incentive spending from November. Despite the fall, the December sales pace was the second highest in 2003, analysts and economists estimated.
Perkins said there are 100 automobile franchises selling new vehicles at 70 locations in the state, with hundreds more used-car dealerships throughout the area. Automobile dealerships make up only 2 percent of retail in the state but 20 percent of all retail sales – in excess of $2 billion a year – according to Perkins.
“Automobile dealerships generate a great deal of tax revenue, they generate spending in communities and employ many people,” Perkins said.
General Motors, Ford and Chrysler had 61.8 percent of the U.S. market through November, down 1.2 points from a year earlier, as Toyota and other Asia-based makers rose 1.2 points to 32.8 percent, according to Autodata Corp.
