Wednesday, July 14, 2004

Auto incentives may be best ever*


* Subject to credit report. Your savings may vary.

By Mike Boyer
Enquirer staff writer

[photo]
Lester and Joann Schoonover of Lebanon check out a Ford Explorer, Tuesday at Kings Ford. Slow sales and the new-model changeover have pushed rebates up and interest rates down as manufacturers and dealers push to clear full lots.
The Enquirer/MEGGAN BOOKER
They can't help themselves.

Ask a car dealer, and they'll invariably say now's the best time to buy a car - no matter when you ask them.

But with manufacturers' incentives now at record highs and higher interest rates on the horizon, they really mean it.

"I think you can honestly say: It's as good a time to buy a new car now as it has been for years,'' says Robert Reichert, president of the Kenwood Auto Dealer Group, which owns 10 area dealerships including General Motors, Ford and Toyota franchises.

"Incentives are at an all-time high, that tells me they're probably not going higher, especially with interest rates going up," he said.

The incentives, as high as $5,000 on some models, allow dealers "to sell a car at a price that you couldn't have reached any other time this year and maybe even last year," he said.

But the variety of incentives is wide and consumer advocates urge buyers to check the qualification requirements carefully before agreeing to a deal.

INCENTIVES
Here are some examples of current incentives.

• Ford Motor Co. is offering $4,000 cash back or 0 percent financing for up to 60 months on its full-sized Crown Victoria sedan.
• General Motors Corp. is offering up to $5,000 cash back or 0 percent financing for up to 60 months on its full-sized sport utility vehicles such as the Buick Ranier, Chevy Blazer and GMC Yukon.
• Toyota Motor is offering $1,000 cash or 0 percent financing for 36 months on the Camry sedan.

For example, some incentives require buyers to have superior credit ratings, are specifically applied to military personnel or are limited to previous buyers of a specific brand.

Terry Lee, who has a Chevrolet dealership in the Kings Auto Mall in Deerfield Township, said GM has opted to boost its incentives to sell cars rather than cutting production at its assembly plants.

"Drive around town and you'll see most dealers have full lots,'' he says.

Several dealers said their sales this year are about on par with last year.

New car registrations in five southwest Ohio counties totaled 40,923 through May, the most recent data available, according to the Greater Cincinnati Auto Dealers Association.

That's down about 6 percent from the 43,466 in the same period last year.

The association, which represents about 85 percent of the new car dealers in the region, doesn't track data from Northern Kentucky dealerships and sales data for the three-county area from other sources was not available.

Edmunds.com, which provides auto industry information, said overall incentive spending for the Big 3 - General Motors, Ford and Chrysler - reached a record $3,819 per vehicle last month, up from $358 from May.

A number of factors are fueling higher incentives now, dealers say.

• Slower monthly sales in June by some manufacturers. The seasonally adjusted annual sales rate last month was 15.4 million units, the lowest since August 1998. GM's sales fell nearly 16 percent in June while Toyota reported a 5 percent increase.

• The normal end-of-model-year production. Assembly plants typically build out inventory of current models before changing over for the new models due in the fall.

Inventories high

While the incentives are at record levels, summertime sales are nothing new for dealers.

"Inventories are always high at this time of year,'' said Kevin Beyrer, general manager at Kings Ford at the Kings Auto Mall, "because the factories close in summer to prepare for new models. So they'll build all the remaining '04s and some of the '05s are starting to hit."

Although manufacturers say they don't like to offer incentives, they're loath to eliminate them. And dealers say buyers have come to expect them year-round.

"A lot of customers ask our sales people: Do you think (the incentives) are going to get any better? I think the answer today is no. I think we're there,'' said Reichert.

With the Federal Reserve signaling higher interest rates, vehicle-financing costs - including the rates that dealers pay to finance their inventories - will begin creeping up.

"We haven't seen increases yet, but we will," says Reichert.

He views incentives as a two-edged sword.

"It tells you the retail automotive market isn't as strong as you'd like it to be,'' he said. "But, on the other hand, it allows you sell cars at prices that are far lower than they were a year ago."

Multiple options

As the number and types of incentives have multiplied, the dealer's job and the buyer's choices have become more complex.

"Our incentive and rebate sheets are about 10 to 12 pages long,'' said Beyrer.

"It can dependent on where live, what you drive, where you finance it, what model you by, what engine's in the car,'' he said.

Reichert said the new higher incentives could mean the difference between this being an average or a good year for auto sales.

E-mail mboyer@enquirer.com




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