With auto dealer incentives becoming as liberal as they are, it wouldn't surprise me if some auto manufacturers advertised an incentive program to send buyers' kids to college for free.
Auto dealer Ken Zaraza recalls being amused when a client told him she'd hold off buying a new car because she wanted to see if something better than zero APR financing would be offered.
That is one of the downsides of the auto dealers generous incentives.
Auto incentives attract shoppers into the showrooms. But sometimes the prospect of having better auto incentives puts clients on hold. In between sales surges, auto dealers feel like they are a warehouse for vehicles.
Auto dealers are just warehousing vehicles for the next big auto dealer incentives programs. They are trying to make money in the background with used cars sales.
Yet used car prices are down, largely because auto incentives attract many prospective used car buyers into new cars.
It is hard to sell finance and auto insurance products like extended warranties when newspapers and magazines, in which auto dealers are major advertisers, submit articles notifying readers not to buy them.
Auto dealer incentives move sales, but gross margins are going down.
Expressing mixed opinions on auto dealer incentives, dealers see them as bitter medicine with possible side effects. Most auto dealers agree that clients are addicted to them, and there is no program out there to cure it. It is reaching a point where some auto dealers can not sell a new car without them.
I do not know how car makers are going to change that. I guarantee you if they took off auto incentive programs, business would stop.
Auto dealer incentives have been a huge success. Have they worn out their effectiveness a bit from when 0% came out and sold everything? Sure. But from an auto dealer view, I don't see how they can do better.
If you were to tell me before that they would have zero APR for sixty months, I'd have said you were crazy. Well, now you can get car rebates and zero APR. You don't know where it will end. It will be hard to end. It used to be you sold new cars, now you sell auto incentive programs.
One of the assets of auto incentives, is that they allow you to get people with negative equity in to trade, whereas before you couldn't get them in.
Car rebates have become so large lately that in many cases auto dealers are not using zero APR, they are using the car rebates.
BMW does well without auto incentives because the luxury line pretty much sells itself.
The larger the auto rebates, the greater the consumers' perceptions of greater discounts available.
Auto dealer incentives in one form or another have been around for 15 years. Although consumers are "addicted" to auto incentives, "they expect them after 15 years of pathetic conditioning."
Auto dealers would be in trouble without auto incentives.
But I certainly don't think they are more profitable because of them. It's just factored into the whole equation. When you're negotiating with the customer, that auto dealer incentive is front and center.
GM effectively leverages auto incentives to stay competitive.
But the bitter byproduct is that auto dealer incentives tempt dealership sales personnel to sell price more than product. That can hurt brand image and dilute vehicle value, which is a shame because as an auto division Chevy's vehicle lineup is second to none.
Auto dealers can theorize as to how it can be done better. But I don't know if collectively as a group auto dealers are prepared for what probably ought to be done, which is eliminate auto rebates, rollback prices and put the products at reasonable prices.
It's a tough decision. People are so used to auto dealer incentives that they are like the cost of entry. Manufacturers and dealers together created the monster that got consumers hooked on auto incentives. But the goal is to sell as many vehicles as you can and educate the consumer as to what the cost is.
Most new car shoppers perceive that vehicle prices have increased over the years to fund the auto incentives, making it all the harder to take them away.
They worry that auto incentives are making most vehicles mere commodities and hurting brand images.
Auto incentives along with advertising and dealership sales efforts have kept new car sales strong.
Auto makers will cut back on auto rebates only if the nation's gross domestic product experiences strong growth.
But manufacturers can not reduce auto incentives too much, today's consumer shops carefully.