U.S. carmakers slow rebates, incentives

February 21, 1994|By Orlando Sentinel

For domestic automakers, the rebate bandwagon appears to be shutting down.

The strengthening economy, "value pricing" and a bumper crop of hot new models is giving Ford, General Motors and Chrysler reasons to put the brakes on rebates -- those factory-to-customer cash incentives designed to lure reluctant buyers into showrooms.

During the recession, the factory's cash rebate could make up most, if not all, of a buyer's down payment. That made the car more affordable to those who perhaps would not have been able to make the purchase. Buyers also could choose to receive the rebate in the form of a check from the automaker.

For the past few years, automakers have wanted to move away from rebates because they eat away at their profits.

Indeed, the Big Three lost bil lions of dollars during the recession, and much of the red ink has been attributed to the high cost of marketing their cars. For many car companies, it was cheaper to sell cars at a loss than temporarily close factories because of slack demand.

With the Big Three now recording healthy profits, the days of big rebates are ending for all but the slowest-selling domestic vehicles.

However, buyers can still find rebates. Many expensive Japanese vehicles, a few European luxury cars and several domestic autos involved in sales battles -- such as Chrysler's minivans -- still carry rebates.

"During the recession you actually had cars that came out of the chute with a rebate. You won't see that much anymore. Sales are picking up, and ours is definitely a business of supply and demand," said Ted Orme, a spokesman for the National Automobile Dealers Association in McLean, Va.

"Slow-moving cars, that's where rebates and incentives are now," he added.

If you've been banking on a rebate to help get you into one of Detroit's newest vehicles, you may be out of luck.

You won't find rebates on Chrysler Corp.'s red-hot sedans -- the bTC Eagle Vision, Dodge Intrepid, Chrysler Concorde, New Yorker, LHS, Dodge Ram truck and Jeep Grand Cherokee sport-utility vehicle.

General Motors' Chevrolet Camaro and Pontiac Firebird and Saturn's line of small cars have never carried rebates. Neither have Ford's Lincoln Mark VIII luxury coupe and Mercury Villager minivan.

New products from Ford Motor Co., Chrysler, and General Motors Corp. will probably be rebate-free -- unless buyers give them a lukewarm reception.

Ford, which boasts five of the nation's 10 best-selling vehicles, was one of the first automakers to reduce or eliminate rebates on many of its vehicles.

Two years ago, for instance, Ford offered the Thunderbird sports coupe with a $1,000 rebate. Today there is no rebate. Thanks to a lower-price special edition, the Thunderbird is selling well. Tempos went out the door in 1991 with a $1,000 rebate. Today it's down to $300.

And Ford spokeswoman Linda Lee in Detroit said buyers likely won't see any rebates on Ford's hottest products -- such as the new Mustang or the Explorer -- or on any of Ford's forthcoming vehicles, such as the Ford Contour and Mercury Mystique sports sedans and Ford Windstar minivan.

The swing away from rebates has gone hand-in-hand with the growth of leasing. With rebates, the consumer is given money to put toward the purchase of a car, which can help to lower payments. Special factory-sponsored lease deals also can keep monthly payments down, and the consumer often finds he can afford to lease a more expensive car than he could buy.

The price of the average vehicle has skyrocketed in recent years. The aver age retail price of a 1994 car is close to $19,000, according to Mr. Orme, the NADA spokesman. In 1989, that price was closer to $15,200.

Take the Lexus LS 400 luxury sedan. In 1989, the LS 400 sold for about $38,000 and the average monthly payment was $740 per month on a car that was purchased, not leased.

Today, the LS 400 sells for more than $51,000, but the lease payment is just $760 per month, said George Borst, general manager of Lexus.

Lexus, as with many other imported cars, has been forced to increase prices dramatically because of unfavorable exchange rates and other factors. Leasing gives automakers a way to make their cars affordable, despite the higher prices.

It's a trend that continues to grow. Mr. Orme said 28 percent of all new vehicles that left the dealership in 1993 were leased.

Rebates are being offered on many Japanese vehicles and some leftover 1993 European makes. This is because sales of Japanese vehicles have slowed.

Another way to lower your monthly payment is to choose a manufacturer's "value-priced" car. An automaker builds a car with the most popular options, such as air conditioning and cruise control, and sells it for a reduced price. About the only option left to the buyer is color.

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