Incentives on new cars reach historic high – The Commercial Appeal
Exciting new cars seen at the Detroit Auto Show this year, a lot of speed, self driving technology, and a visit from Lightning McQueen.
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When folks buy less bread the bakers make fewer loaves. It doesn’t work that way in the car business.
That’s why it’s a good time to shop. Prices are still coming down.
Since the recession faded across the country an unprecedented buying spree has put more than 50 million new cars and trucks on U.S. roads over the last three years.
Never have motorists in America bought this many new automobiles in this span of time.
Rather than lay off workers in the car plants, market strategists from Detroit to Tokyo to Stuttgart are trying to keep the binge alive by cutting prices on new autos.
Incentives set records in early April, reaching $3,814 per vehicle. Showrooms will keep sales incentives high on new cars and trucks into the spring and summer, auto dealers say, a trend that will push down prices on used vehicles made in the last few years.
Not every one of the 125 or so different models on new-dealer car lots comes with a price cut.
But big incentives are commonplace on small cars, mid-size sedans and full-size pickup trucks.
Here’s a look at the auto market:
Pickups were simply sturdy econo-boxes in another era, but people today can’t buy enough trucks.
America’s truck craze once puzzled Detroit auto executives, who hired a consultant in the early 1990s to study the reason big pickups suddenly had flooded suburbia. The answer: This was the new horse of the modern American cowboy.
Today, the horses have become a stampede that cut an unusual swath in retailing. Price cuts are higher than ever. Yet the average price paid for a new auto is at a record level too — $31,380 in early April. That’s because pickups are the best-selling model on the road and the cowboys like to cram high-priced options into the saddlebags.
“Consumers are still buying more content,” said Jeff Schuster senior vice president of forecasting for the market research firm LMC Automotive in Troy, Michigan.
So pickups that carry a Mercedes-Benz level MSRP — the manufacturer’s suggested retail price — of $50,000 are common. And also affordable for legions of people.
“Coming out of the recession you still have pent up demand. Money has loosened up and credit is easy to get. And you have these incredible rebates,” said Jeff Fields, vice president of Landers Nissan and Landers Jeep Ram in Southaven, Mississippi. “It all creates a good market and the factories want to keep the momentum going.”
The top selling truck, the F-150 full-size pickup, comes with as much as a 25 percent discount on some models through Ford rebates and dealer incentives. For example, AutoNation Ford in Memphis offers a $38,315 F-150 XL Crew Cab discounted to $30,185.
Americans a generation ago favored big sedans and station wagons.
Sport-utility vehicles are today’s family haulers.
That means deals aren’t quite as good on many SUVs as they are on cars.
Demand pushed SUV sales up almost 7 percent in March, including 23 percent for the biggest models such as the Toyota Land Cruiser.
When General Motors finally designed a new SUV for Cadillac, the XT5, the Tennessee-made sport-utility designed became the best-selling vehicle in most Cadillac showrooms when it arrived last year. Dealers today hardly will haggle over the MSRP — $40,985 on a slew of XT5s at Cadillac of Knoxville.
Shoppers can take advantage of low interest rates. Dealers offer special leases — $339 per month for 39 months on the XT5, though a $4,800 down payment is required.
Overall, price cuts on new SUVs averaged $3,740 in early April, while incentives on cars averaged $3,938.
Dealers expect incentives could tick higher into the summer.
“I don’t see anyone getting passive,” Fields said about automakers. “Everyone is aggressive right now and it looks like that’ll continue.”
Discounts nationwide on new cars and trucks have climbed 13 percent in a year to reach a record level.
That record level is $3,814 on average off the MSRP, figures market research firm J.D. Power.
When prices on new vehicles come down, prices on used models edge lower too.
“It’s one of those domino effects. Prices on 2014 and 2015 models have to come down if they start to butt up against the price of a new 2016 car,” said David Von Paris, senior automotive analyst at J.D. Power in McLean, Virginia.
Prices on used autos up to eight year old are forecast to call 1 percent in April compared to a year ago, Paris said.
With new prices coming down, and leases expiring each month on tens of thousands of low-mileage cars and trucks, manufacturers are pushing dealers to put more used cars into the category known as certified. This means the vehicles have been checked for problems and come with the original manufacturer’s warranty.