Driving a Hard Bargain
Stubborn consumers waiting for more deals
There’s no doubt that a sales fall-off was inevitable after the government's incentives. Studies are showing that for any big-ticket purchase –- cars, houses, flat-screen TVs –- most Americans aren’t biting unless they think they’re getting a steal. Now consider the post-Clunkers psychology: Your neighbor just saved $3,500 to $4,500 through a federal rebate. You, on the other hand, missed out. Now you’re going to run to the dealership to pay full price? Not likely.
And that’s why major automakers missed an opportunity to maintain sales momentum by rolling out their own incentives once the government rebates dried up. That doesn’t mean giving away the store, but it does mean coming up with smart, targeted temptations to pull buyers into showrooms. I don’t even need to see final September sales figures to know that GM’s 60-day “money back guarantee” program is a dud, almost an insult to people’s intelligence: The plan offers not a penny of real value to consumers, most of whom would never buy a car that they weren’t already planning on keeping for years. Even if a new owner discovers some defect, most people would rather have the dealer fix it than go through the hassle of returning the car and shopping for a replacement.
Unsurprisingly, early returns indicate that the plan has done little to boost GM sales. Heck, even a lousy $500 rebate would make people feel better than a guarantee they don't want (or expect) to use in the first place.
Ron Pinelli, president of AutoData, says that with profits thin or nonexistent, automakers aren’t eager to pile money on the hood of new cars: “They’re not exactly flush with cash,” Pinelli says, while automakers’ inventories -- especially for the smaller, affordable models that flew out the door during Clunkers -- are depleted and need to be built up.
Yet slumping luxury brands, including Mercedes and Porsche, are clearly feeling the heat and are spending more than $4,000 per car on average in incentives. The posh nameplates Porsche and Bentley have stooped to offer low-interest financing, something you couldn’t have imagined in the go-go bubble years. The Detroit Free Press reported that Porsche’s average incentive is topping $4,400 -- more than six times what it was spending last year.
As with the big incentive wars in the post-9/11 era, my hunch is that Cash for Clunkers may have cracked open a Pandora’s box: Smart consumers may put off buying a car until they think they’re getting a deal on par with what "everybody else" paid. As automakers seek to clear lots of remaining 2009 models, consumers are only right to drive the hardest possible bargain. And if wallets slam shut and dust piles up again in showrooms, it’s only a matter of time before car companies acquiesce and give people what they demand.
EXPLORE NEW CARS
MORE ON MSN AUTOS
ABOUT EXHAUST NOTES
Cars are cool, and here at MSN Autos we love everything about them, but we also know they're more than simply speed and style: a car is an essential tool, a much-needed accessory to help you get through your day-to-day life. What you drive is also one of the most important investments you can make, so we'll help you navigate your way through the car buying and ownership experiences. We strive to be your daily destination for news, notes, tips and tricks from across the automotive world. So whether it's through original content from our world-class journalists or the latest buzz from the far corners of the Web, Exhaust Notes helps you make sense of your automotive world.
Have a story idea? Tip us off at firstname.lastname@example.org.