Car Buyers Likelier To Find Deals Later This Year
Visit CBS Detroit's
If you’re holding out for a bargain on a car, you could be rewarded later this year. Automakers are more likely to offer promotions on certain makes and models – particularly luxury cars, SUVs and trucks – to clear out their older models and improve their year-end numbers.
Overall, the auto industry remains cautious about generous rebates and low-cost loans to lure customers. Newly lean and profitable carmakers don’t want to erode the bottom line by offering too many sweet deals that cut into profit margins.
But as the end of the year approaches, some shoppers, including many Toyota buyers, could find bargains. Even a disciplined industry can’t resist end-of-the-year sales.
So far this year, auto sales have held fairly steady, at a level well below what was considered normal before the recession. The automakers held back on rebates in July and August, which are typically big months for promotions, and results were mixed. July sales were slightly better than a year earlier. August sales were the worst since 1983.
Americans are still unsure about the economy, and hesitant to make a large purchase like buying a new car unless they absolutely need to or the deal is too good to pass up, says Jessica Caldwell, senior analyst at consumer web site Edmunds.com.
“People are on the sidelines waiting for that deal message to come,” she says. “When they hear it, generally during the holiday season, they might start buying again.”
In general, automakers offered more incentives this October than last – about $2,800 per car, a 6 percent increase, according to the car price information service TrueCar. Final estimates won’t be available until Wednesday, when carmakers report U.S. auto sales for last month.
Many automakers kept incentives flat, while others, such as Honda and Toyota, piled on the rebates. Honda’s incentives were double last year’s, and Toyota’s were up 50 percent.
October sales are expected to come in slightly below 1 million vehicles, hitting around 12 million on a seasonally adjusted annual sales rate. Sales in October were uneven, coming in strong some days and really weak on others. The last eight days were particularly weak. So far this year, sales have ranged from a low annual rate of 10.53 million in February to a high of 11.76 in September.
“There’s been so much focus on the elections, people are not as confident,” says Bert Boeckmann, owner of Galpin Ford in suburban Los Angeles. “My hope is that after the election, they’ll come back in.”
Customers may come back when they see holiday deals on luxury cars. Those Christmas-themed commercials with the big red bows may start airing well before the holidays – a not-so-subtle attempt by automakers to remind customers that buying cars can be fun.
“This whole idea about giving a car as a gift, it’s one of the long-standing holiday commercial campaigns that has really resonated with the luxury consumer,” says Steve Jett, national marketing communications manager for Lexus.
Lexus and Mercedes-Benz are battling this year for the title of No. 1 luxury carmaker. It’s a title Lexus has held for years, but the carmaker is lagging behind Mercedes by about 3,000 vehicles in 2010. And with newer models rolling out, the carmakers will try to push out the older models.
“It’s such a sensitive segment to old-versus-new,” said Caldwell.
And when it comes to holiday marketing, retailers believe it’s never too soon to haul out the holly. Expect the Mercedes and Lexus Christmas commercials to start soon.
“We’ll start to see those commercials by Thanksgiving, if not earlier,” says Jesse Toprak, vice president of industry trends at TrueCar. “I don’t know anyone who actually gives someone a car for Christmas, but those commercials are incentive to some customers to go out and buy a car.”
Toyota will probably maintain big rebates for the rest of the year, trying to win back customers scared off by the company’s recalls from earlier this year for problems with acceleration and braking.
And Ford, which is offering the biggest rebates on 2010 models in an attempt to grab market share from rivals, will probably keep up the promotions. The company is offering up to 15 percent off the sticker price on some of its 2010 models, such as the Ford Focus.
Truck and SUV buyers will also find deals in the upcoming months, Toprak predicts. Typically, as the weather starts getting colder, it’s easier to convince people they need four-wheel drive and all-wheel-drive vehicles.
George Fowler, general manager of Superior Buick-GMC in Dearborn, Mich., says leasing is loosening up, making it possible to offer some smaller SUVs for around $300 a month. Banks have eased back into the leasing market after abandoning it because of the financial crisis in 2009. Today’s $300 monthly leases are a good deal these days, Fowler says, but that’s nothing compared with the deals he was able to push just three or four years ago.
“I don’t think we’ll ever get back to the days of $200-a-month leases,” he says. “Those days are gone forever.”
(Copyright 2010 by The Associated Press. All Rights Reserved.)