Deal making is starting to wake up.
By this, I mean the auto dealer's fine art of getting customers into a new ride. It's a tradition that has been in decline the past couple of years.
In the Great Recession, the showroom free-wheeling, “let's make a deal” process has been cramped. No financing for less-than-perfect credit. Few leases. Let's face it, only the highly rational, deal-oriented prospects were shopping. And they waited for the advertised incentive deals before they walked through the doors.
No cash deal offered, no sale.
That started to ease a bit earlier this year, when automakers shifted their emphasis on customer incentives to leasing deals rather than cash.
Now this month, there is evidence that automakers are making another move -- moving more factory incentive money from customers to dealers.
Yes, the shift is normal for this time of year, as everybody starts trying to make a year-end number. But on average, sweetening the dealer-cash pot is hotter than usual.
Consider: Edmunds.com says the industry average per-vehicle incentive in October was about $2,500, down 6 percent from a year ago. TrueCar.com says it's up 6 percent to $2,818.
That's not really a contradiction. Both companies get their data from dealers. Both measure cash incentives, subsidized leases and dealer cash. But TrueCar.com also includes variable dealer cash based on total monthly volume. That is, those who sell 50 cars and get $50 extra per unit or sell 80 and get $100-per-unit deals.
That's what manufacturers are boosting this fall, says analyst Jesse Toprak of TrueCar.com.
“They reason that unadvertised incentives do less damage to the brand, and it lets the dealer figure out the best way to get the vehicles off the lot,” Toprak says.
With U.S. market momentum starting to pick up -- finally -- incentive spending is coming down from the all-time peak in March 2009: about $1,000 a vehicle from $3,500 back then, using Edmunds.com numbers.
But the swing to dealer cash signals another shift in the market.
Manufacturers recognize they still have to bribe customers to buy their vehicles. But now they calculate they don't have to promise as much up front.
Baby steps, I'm afraid. But moving forward.
~Jesse Snyder, senior writer for Automotive News
Read more: http://www.autonews.com/article/20101103/BLOG06/101109918/1448#ixzz14JytQcq4
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