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Auto Incentives Jump To 8% Of Car Value, Highest In Two Years
We showed yesterday the truly dreadful state of this economic recovery had one odd bright (green) spot, US auto production (and sales). While cash-for-clunkers started it, and easy money from the Fed expanded it (via credit for an ever-growing cohort of subprime borrowers), the car companies have now reached back into the bag of old tricks that blew them up before - incentives in May jumped to 8% of market value - or almost $2,500 per vehicle - the highest in over 2 years. If things are going so well in this 'recovery' why are the car makers forced to squeeze margin for volume... The problem, as BusinessWeek reports, is that increasingly rich incentives aren't moving the needle much on sales.
Via BusinessWeek,
The economy may be having a car sales party, but automakers are spiking the punch. U.S. auto incentives in May jumped to 8 percent of market value—or almost $2,500 per vehicle - marking the highest level in about two years, according to data released Tuesday by Edmunds.com.
Car companies are squeezing margin for volume... During the dark days of the recession when consumer confidence was running on fumes, carmakers were offering about 10 percent of vehicle value to get buyers onto lots.
The problem is that increasingly rich incentives aren’t moving the needle much on sales. The pace of car-buying, while brisk, hasn’t changed much since November when the country was on an annual pace of 15.46 million light-vehicle sales. That figure had trickled down to 15.24 million in May, even as incentive deals have been getting sweeter all the while.
...
Detroit’s Big Three have been particularly generous. Chrysler offered incentives worth 10.3 percent of vehicle value last month, second only to Mitsubishi, which has more freedom to squeeze profit margins given the weak yen. General Motors’ (GM) incentive rate was about 10 percent, in part because of cash offers of $500 to $750 per Chevrolet over the Memorial Day period. Ford (F) has been offering almost 9 percent off market value.
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Cars are a bubble. The prices will only deflate.
Buyer loses more than 8% the minute he starts burning gas and drives off the sales lot.
DC Fusor is going to be pissed that he could have gotten his coal burning bic lighter for $3,200 less...
Loans are getting extended to 9-10 years. Anyone with a pulse qualifies, and they still can't move the tin?
I just leased a new car, and the cap cost was $5000 back of invoice. Cost me a little over $400 a month to drive a $60K car. Not sure how they're making any money.
but wont i be protected and have a principal reduction if the value of my car becomes less than my loan amount. or does that just apply if i live in it?
Increasing inventory of scrap metal. :)
The influx of Mexicans will drive second hand.
"8% of car VALUE??"
Don't they mean car PRICE...?
How about $9,250 on the outgoing 13 Chevy p/u! Can't be much margin left no to mention cannibalizing forward sales of redesigned 14.
I wouldn't know...I'm just a financially-repressed credit-averse peasant. Can't afford ANY new vhicle, especially those overpriced new pickups...
I don't even WANT a new vehicle. Too much computer and motor driven crap to go wrong. But worst of all- GPS seems to be in alla 'em. GPS=GovernmentPursuitService. I've got a cheap burner phone, too. So I'm a little paranoid,so what?
O/T Sorry… but for those interested, Gonzalo Lira is back…
http://gonzalolira.blogspot.com/2013/06/this-is-moment.html
It's the squid vs the bernak and there can only be one winner....stawks.
http://www.bloomberg.com/news/2013-06-11/can-bernanke-avoid-a-meltdown-in-the-bond-market-.html
Two major errors in this story.
1. "Incentives" is the wrong word. "Discount" is more appropriate.
2. Weak yen? ? ?
2) yes...... Japan is pooch-screwing a lot of markets.
Mainly, there's simply a limit to how many cars you can stuff the lots of dealers with.
Two major errors?
“An incentive is something that motivates an individual to perform an action. The study of incentive structures is central to the study of all economic activities… Ultimately, incentives aim to provide value for money and contribute to organizational success.”
http://en.wikipedia.org/wiki/Incentive
# 1 "incentives" is perfectly fine in this context.
Buy any Big 3 model and get a free house in Detroit...come to think of it, that's not much of an incentive.
Insurance premium for the car may go up if you intend to drive it back (to your new) home.
Doesn't sound like a discount either....
You'd have to throw in a box of ammo too.
My question is why shouldn't they insentivize the crap out of their cars? The tax payer is always there to bail them out once they get in trouble.
If the car companies hadn't broke open like a shot gun to let the extreme left tell them how to build cars and instead had used the money to send Triad hit squads after the wackos running the EPA, DOT, Unions , and the Tort Lawyers they could be buildihng profitable cars that people could afford. Snark/0ff
I started paying proper attention to what was happening in the world some 15 years or so ago. Knew something was wrong. In recent years, and after looking at various sites for actionable and relevant "truth" I started to get a much clearer picture of what is going on.
And up until fairly recently, I really thought that though the world was heading for a cliff, the USA was one of the best positioned nations to survive and later prosper. (Large rich land mass, strength, grows own food etc etc.....)
I beging to wonder though, if due to reserve currency status (or lack of), and the explosion in "welfare/obamacare/state tyrany" if in fact Americas fall could be the biggest most violent of them all.
I don't know why this particular story has made me blurt my feelings, maybe just a hopeless sense of loss. Its hard watching lemmings destroy themselves. I'd love to "save" some but a great number of people are living totaly fake/false/bullshit lives, and reality WILL strike......and when it does..........oh buda. It really does feel like a Red Pill Blue Pill situation; Some are awake and look on with horror and can see the darkness heading our way....... where others are so blind to reality that they will fight for the system that enslaves them.
Scary times.
Just another way of "pulling demand forward". Future carbuyers will HAVE TO pay more to make up for margin losses today.
State and County govts love new vehicle purchases too, the licensing and registration fees (at least in IA) have ballooned since 2008.
And since you'll be driving a vehicle, you'll likely be caught breaking some law at some point, and in 2008 IA issued three pages of violations where fines were going way way up.
Who in their right mind would saddle themselves with a 72 (or more) month loan just to drive something that costs a lot more to license and will be worthless in nothing flat.
And now that anyone can get a car loan for just about any vehicle, a car is no longer a status symbol of any sort, regardless of make or model unless you're driving something that isn't pedestrian like a Bentley etc.
Too funny to watch this continue.
Real estate agents are offerring massive incentives to find buyers - $10K to $20K on top of commissions.
No one is buying out there.
So when you go to buy a car, here's what you say - MOAR DISCOUNT!!! GIVE ME MOAR!!!!
In times past, some developers would park a new car in your garage if you bought a home.
They are making it up in tire rentals.
So various Fed- and government-sponsored companies from Detroit are "generous", Mitsubishi is going crazy.
Strange, but no word of generous incentives by South Korean and German makers...
all I know is, come end of year there's going to be a LOT of brand new pickup trucks on the road, especially from GM (Chevy/GMC)
this is what happens when you stuff your channels to the breaking point, then tell everyone the stuff on the lots is going to be obsolete in the fall because the new models w/ new tech are coming out
people aren't buying because they know these incentive packages will get much larger come end of september (end of month, end of quarter, inventory needs to be cleared to put the new models on the lot) - those with patience will get even more with the end of year deals
saw the same thing happen when GM went from the GMT800 to GMT900 truck platform... simply history repeating itself, in the end the result will be a lot of perfectly good used trucks sold in Mexico
put it this way, I wouldn't want to be a fleet sales rep for GM right now... the numbers are going to stink to high heaven
Screw the government’s weak ass incentive plans. I’m going with the advertising business model and asking Elon Musk if he will pay me to drive a Tesla around in my state which doesn't permit direct sales of Teslas. I’m retired, so I can probably rack up at least 40k miles per year in between charges. I’ll be happy to post photos of me driving the car on any websites he chooses, since I don’t have a Facebook page of my own.
I swear I read an article by Cramer (I know, I know) that claimed there was all this pent up demand for vechicles because everyone is driving a 10 year old car.
Wouldn't that require people who can actually afford to buy a new car? Or will there be a bunch of sub-prime buyers flush with Fed-induced bank cash?
there is a reason they are driving 10 year old cars- no money
Actually, there's another reason for driving 10+ year old...I will never drive anything a geek a thousand miles away can shut down and lock me into!!!
Edit: (and be more at risk of eben a mild EMP event, whether naturally caused or as act of war)
Auto Overpriced 50% - 8% discount incentive = FAIL.
let's not forget sales tax on cars. I know folks who lease cars for 3 years because they say its less expensive--on the surface yes-but I buy nice and keep them 15 or so years-every few years tires and brakes--keep it clean and fresh oil and lubricants and do not abuse car. And no sales taxes every 3 years
And the point on leases and loans is when you buy a car and there are sales tax, that does noting in adding to the value of the car and usually the loan with nothing down includes the sales tax so there is some bs going on right out of the gate.
Hal n back,
In many states, including CT, you also pay property tax based on the book value of you car. Towns/ cities would die off but for that money.
So, if you have a $ 45k SUV this add up. I don't care much for large boats and their fuel bill.
Uh, I think I have a solution for that problem. Find a new state.
Tesla isn't incentivizing their cars!
I am.
LOL: I had bought into a fisker drive train supplier-actually forgot the name now as it was 4-5 years ago. That was a bust.
RE
You...are....shitting...me
http://blogs.reuters.com/macroscope/2013/06/12/forget-the-wealth-effect-...
Everyone at my work has a new car but me. Only cars in the parking lot are BMWs, Lexus,Mercedes and my dusty beat up Prius with the bumper being held up with baling wire. My car is the on going joke at the lab. When are you going to get a new car? " I don't invest in depreciating assets" has been comment for years. Yesterday the lab asshole came up with a brilliant retort. " Depreciating assets! Wow that's rich coming from some one who has advocated buying gold..Ha Ha" Well, at least know I can agree with my employers policy having no guns at work.
Miffed;-)
the Lab A probably wins this one, when the depreciating asset is priced in debt the cash buyer loses all relative value. there are full page ads in my newspaper for car REFIs. yep your car is now an ATM. (well not your car) i grew up in the debt is bad culture. and still think so. gold is the opposite of credit, and no surprise when the CBs could no longer write derivatives on it through mulitple layers of ownership, the price took a hit, and will probably go lower. that you can fractionally reserve bank reserves but not gold reserves is counter intuitive, since we fr credit.
Great, hyper media can spin it - "best time ever to buy a car".
Its always the best time to buy everything. Don't delay, time is running out.
Everyones saving up for a $85k electric car with a 2 year warranty.
Never owned a new car. Looking to buy a used Accord about 9 yo with low miles. My current ride has almost 285k miles on it and rides like a dream. Bought it with 73k miles for $2,500 - less than the sales tax on a new ride.
Recovery Summer 4 Baby!!!!
You know, Bush screwed things up so badly that the Obowel Movement will probably need at least two more terms to fix everything..........
If I get a new Car it be one manufactured overseas. I will not support the American Unions that supported Obama. Never Again. I vote with my wallet Every Day.
You support Obama or Anti 2nd Amendment Democrats. You do NOT get my $ vote.
Currently driving a Honda Civic with 170,000+ miles with no issues so far.
Wifey has a Hyndai Tuscon with 30,000+ miles with no issues so far.
Try to get those miles with a Bailout Made (Votes for Clunkers) American Car.
I remember my old man buying a packet of 20 Philips head screws..........2 or 3 had no x-slot for the screwdriver, and on several, the heads just twisted right off while tightening.
He said "Amercian Crasftmanship....."
my ass... sounds exactly like Chinese ghetto steel... your old man is an idiot
Honda Civic for the US market is manufactured in Indiana. The Hyundai Tuscon is manufactured in Alabama and was developed in their California design center.
Thanks for Buying American!
Under the "climate change/global warming BS, shouldn't they be disincentivizing the purchase of cars?!
Lies crashing into lies.