autonetwork

HomecatalogLifeCarsLogin
...

Are New Lease Discounts Bad News for Automakers?


Are New Lease Discounts Bad News for Automakers?:ease offers for a Chevy Mailbu for as low as $179 per month, with $2,000 down, and a Honda Accord for $249 per month and $249 down. Chevy and Buick al
(Photograph by MattHurst) Depending on where you live, you might be seeing lease offers for a Chevy Mailbu for as low as $179 per month, with $2,000 down, and a Honda Accord for $249 per month and $249 down. Chevy and Buick also have zero-percent financing on loans up to 60 months, which saves the buyer over $4000 over the life of the loan. Hang on! Isn’t this the type of cut-rate selling tactics that got automakers in trouble in the first place? Aren’t these rock-bottom offers the kind of profit-killing pricing they swore to get away from? While such deals are cropping up in newspapers and on websites through the holiday hangover month of January, auto executives and industry analysts say that such deals, especially the leasing offers, are the exception now, rather than the rule, on new-car leases. Consumers should not expect a return to massive across-the-board discounting. “The car companies are getting much better at matching their production of new vehicles to actual market demand, so when we see aggressive leasing or big discounting now, it is usually on models that are older, maybe being phased out, or in some limited-time, heated competition with a rival," says Joe Spina, analyst at auto research website Edmunds.com. “It’s the way incentives used to be handled before things got out of hand." That seems to be the case with Chevy Malibu, which is in its third year of production, and is up against a more popular Ford Fusion, which got a substantial upgrade in 2009. “We are being very strategic with how we are moving back into leasing, as opposed to how we used to lease across the board—all nameplates—prior to our exit from leasing in the summer of 2008," says GM spokesman Tom Henderson. It wasn’t long ago that GM and Chrysler, and occasionally Ford and Nissan, would launch company-wide, national discount deals to drive traffic into the showrooms. They had to. They were producing, at times, 30% to 40% more vehicles in their factories than consumers wanted in order to keep the assembly lines running at full capacity. They flooded the market, creating the need for the big rebates customers got used to seeing. The higher their output, the more profitable their factories appeared to be on paper. But that recipe proved a fool’s errand, contributing to the companies’ own bankruptcies and heavy losses. You won’t see lucrative incentive offers from GM on popular models like the all new Chevy Equinox, GMC Traverse and Buick Lacrosse. On those vehicles, there are no lease discounts at all. There is a $500 rebate to buyers trading in a rival brand as GM strives to make conquest sales and shake the effects of last year’s bankruptcy. Also, a $1000 rebate is available to buyers trading in Saturns, Pontiacs and even Oldsmobiles as a carrot to keep them in the GM family. Those rebates are paltry compare to what they were two years ago when GM still had eight U.S. brands working full-throttle. The company was chasing market share at any cost (a strategy that made it ripe to go bust when the economy and credit markets tanked in fall 2008), and as much as 25 percent of GM sales in a given month were through discounted lease deals. Often those sales went to risky, credit-challenged buyers, without so much as a down-payment. Today, says Henderson, the target for leases is more like 7 percent of sales, and all of those customers are intended to be ones who lease either for tax and business reasons or because they just like to flip their vehicles every three years. Across the industry, total incentive spending is down to an average of $2542 per car, versus $2862 a year ago and $2870 last June, according to Edmunds.com. At the same time, new-vehicle buyers are spending more on average transactions now than in 2008, upgrading to higher trim levels and adding high-tech features like Ford’s Sync in-car communications systems, backup cameras and the like. Consumers, though, need more specific information when researching vehicle pricing. It helps to have expectations in line before doing business with a salesperson—knowing which companies are dealing and which are not—to avoid a frustrating buying process. Today, the three brands with the heaviest incentives on them right now are Bmw at $4910 per vehicle, Mercedes at $3815 and GM at $4000. Some of GM’s number reflects the continued sell-off of Saturn, Pontiac, Saab and Hummer inventory as the automaker closes and sells those brands. Be ready to play hardball at those dealerships. The lowest discounters are Subaru, Volkswagen and Mazda. Indeed, VW’s diesel vehicles are so much in demand that the company is getting full-sticker for them, and has created waiting lists at many dealers. Toyota has been able to drop its incentives from $2071 per vehicle a year ago to $1665 now, and Ford has dropped its incentives from nearly $4000 per vehicle to about $3000 today. “Play tough, but it helps to know what kind of lee-way the dealers have in pricing before you go in," says Albert Kelly, an Ann Arbor–based financial advisor who is also a former car dealer. He also advises, “Never do a deal the first visit to a showroom because the offer will only get better when the salesperson calls you on the phone at home to get you to come back." “The market has really changed," says Edmunds.com’s Spina. “Because incentives are now much more targeted on specific models, consumers should be ready to change their choices in the dealerships if they are really buying on price and deals and aren’t locked into a specific car." Someone who is coming off a three-year lease, for example, on a Ford pickup and doesn’t have to replace the truck with another isn’t going to get the same deal he had three years ago. Reduced leasing and higher prices for both new and used pickups this year, says Spina, could well push that buyer to a lower priced car or a model that specifically carries a discounted lease, like the Chevy Malibu. Where are the best deals today? According to Edmunds, the best deals in terms of discounts as a percentage of total price are on compact and subcompact cars, and on minivans. As gas prices have stayed below $3 for most of the last year, sales of vehicles like the Ford Focus, Chevy Cobalt, Toyota Corolla, Honda Civic, Hyundai Elantra and Accent and Nissan Sentra and Versa have all done down, and dealers have funds to cut deals. “If you think oil prices are going back up in the next two to three years, it’s actually a very Smart time to downsize and buy a smaller vehicle this year, because the prices of these vehicles will go back up along with gas prices," said Ford chief marketing officer James Farley at this month’s North American International Auto Show. When a car model is about to replaced, there’s usually good deals on the outgoing model. Toyota is getting ready to launch an all-new Sienna minivan, and has discounted the current model. This in turns forces the competition to up their incentive. A Sienna right now is discounted by about $3000 from MSRP, while a Chrysler Town & Country is carrying discounts of at least $2500. Today, the automakers are acting more responsibly and frugally when it comes to giving money to consumers. There are still discounts to be had, but buyers will have to be savvier about negotiating for them, and be willing to settle for less popular cars than the ones they had their hearts set on.


anonymous, 7 Years ago
Could you please link to my original photo and add the attribution, as CC-liscensed in the original source photo? Thank you.

Feed
Quick Drive: 2013 Mazda CX-5 Prototype
REYKJAVIK, ICELAND -- "Skyactiv" finally makes sense. This October, an updated, 40-mpg (highway) Mazda3 with the brand's new gas direct-injection, 2.0-liter four, and six-speed manual or automatic gets...

read more

0
read comments 
First Look: 2012 Audi S6, S7, and S8
The outgoing S6 was powered by a naturally aspirated, 5.2-liter V-10 engine that produced 435 hp and 398 lb-ft of torque, and needed 5.1 seconds to go from 0-60 mph. The 2012 Audi S6's powertrain promises...

read more

0
read comments 
First Drive: 2012 Volvo S60 R-Design
We really like Volvo's new S60, one of the best cars to ever come from the folks in Gothenburg. It's certainly the best in recent memory. And for 2012, it got even better, thanks to the addition of the...

read more

0
read comments 
First Test: 2012 Ford Explorer EcoBoost
Last time we had our hands on the new Ford Explorer, it finished sixth out of six in our seven-row SUV comparison test. Yes, friends, dead last. But that car was a preproduction vehicle, and quite literally...

read more

0
read comments 
First Drive: 2012 Toyota Camry
Is the 2012 Toyota Camry new and special enough to vanquish the Hyundai Sonata? Is the SE model a poor man's sport sedan? Is Toyota's rebound in J.D. Power & Associates' initial quality rankings, and...

read more

0
read comments 
First Drive: 2012 Kia Rio
During the driving portion of the 2012 Kia Rio press presentation in South Korea, we visited a phallic-themed, public rest area located off National Route 44. Thankfully there weren't any live ones, ...

read more

0
read comments 
Comparison: 2012 Jeep Grand Cherokee SRT8 vs. 2011 BMW X5 M vs. 2011 Porsche Cayenne Turbo
These days, defining a sport/utility vehicle is hard. Just about anything top-heavy that necessitates the slight lifting of a passenger's leg for entry usually qualifies, thanks in part to the introduction...

read more

0
read comments 
First Test: 2012 Land Rover Range Rover Evoque
The rugged Welsh island of Anglesey frequently is wet, cold, and windy; a place where sideways rain can hit you like a spray of icy tacks. It's also a place whose rocky, hilly terrain could keep a mountain...

read more

0
read comments