• Mar 16, 2010
When the U.S. auto market crashed in the fall of 2008, automakers bumped up incentives in a big way to clear dealer lots of bloated inventory. But when Cash for Clunkers drained inventory – with industry-wide incentives reaching $3,165 per vehicle – while simultaneously removing nearly 700,000 used vehicles from the market, automakers quickly weened themselves off incentives.

Steering clear of heavy incentives likely wasn't all that difficult for Toyota, as the Japanese automaker has traditionally kept prices near MSRP even in the leanest of times. That changed, though, when Toyota became synonymous with the term "unintended acceleration." Toyota's nightmare public relations scenario came true as the traditionally quality-rich automaker was forced to recall over eight million vehicles. Sales dropped like a stone in the first two months of 2010 while every other automaker outside of Auburn Hills, MI saw substantial gains compared to a rough 2009.

Toyota had to do something to get foot traffic on the showroom floor, so the Japanese automaker took the outrageous step of offering zero-percent financing on its most popular models. Analysts at Edmunds and elsewhere tell us that the early returns from the big discounts are positive, with Toyota sales reportedly up an estimated 47 percent versus March, 2009.

But with Toyota once again rolling, other automakers are looking to turn more sales, and incentives appears to be the best way to do that. Detroit automakers are back on the zero, and even Honda is spending big on incentives. Barclays Capital tells Automotive New that a 60-month, zero-percent loan on a $30,600 vehicle costs an automaker a staggering $4,857. That's a lot of coin, but the early returns of cash on the hood are positive. And Edmunds reports that early March sales are up to 12.5 million on an annualized basis, the highest levels achieved since the Clunkers program.

So it appears as though Toyota started a potentially expensive, drawn-out incentives war. In the short term, customers win regardless of which automaker makes out best with these fresh incentives. Over the long haul, though, automakers need to make a profit so they can make more of the products we love so much.

[Source: Automotive News – Sub. Req. | Image: Ronaldo Schemidt/AFP/Getty Images]


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  • 17 Comments
      • 4 Years Ago
      Toyota stopped selling cars for two weeks and they still sold more cars then anyone else.

      Go Toyota!
      • 4 Years Ago
      No offense but I can't believe anyone is crazy enough to buy a new car from a dealer right now. Considering that a healthy chunk of 2010 Cash 4 Clunkers cars have already been repossessed (i.e. http://repofinder.com) why not just go to local banks and credit unions and buy these repo cars back for half the retail price? If you're going to buy junk at least don't over pay.
        • 4 Years Ago
        Most banks and CUs aren't in the business of selling cars to the public. Have you ever gone to one and seen a used car lot right outside the branch? No, they will auction those cars to dealers who will retail them at market prices, so there goes your idea.

        Besides, buying new right now means typically getting 0%, invoice or below pricing and full warranties which on some cars means a 100,000 mile powertrain multi year deal that doesn't transfer to the second owner. A one year old car would have to be at least 4-6000 cheaper just to overcome the difference between a 0% loan and a, let's say a 5.9% loan on a used car. Then there's the warranty, the fact that its new and not a repo, etc.
      • 4 Years Ago
      blah, blah, Toyota incentives in Feb 2010 - $1.8k, Ford incentives $3.4k.

      Toyota is doing awful... Ford is doing awesome... wait what?
      Let me guess this for incentives in March - Ford will still have significant lead over Toyota in spending per car.

      "Toyota sales dropped like a stone" - 9%. GM raised by 9%, and thats on heavy fleet sales and >$3k on incentives per car sold. Who what?

      Is it really so hard to check the facts from... LAST MONTH?
        • 4 Years Ago
        The bigger issue is that Toyota increasing incentives isn't good news for the industry as a whole. Money talks, and the economy still hasn't recovered yet. Fleet sales are still the big mover. Just as the industry has gotten over this incentive war (primarily domestics), Toyota joining in this cannibalistic game is not preferable.

        What the industry is really scared of is if Toyota is forced to do a Hyundai-style 10-year 100K powertrain warranty. If Toyota does this, then you know the other Japanese brands will follow. Soon it would become an industry standard.

        Profit margins are thin as it is. Even Ford is still tens of billions in debt, a desperate/competitive Toyota is the last thing this industry needs.
      • 4 Years Ago
      i HOPE we get to see more of those "saved by zero" ads. oh boy, those were great!
      • 4 Years Ago
      Honestly this has gone to the point where i actually feel sorry for them, though i initially got on the rage train just like everyone else.

      best of luck to them - but hurry up on those fixes..
      • 4 Years Ago
      There is a shift coming in some major media players focusing more on the fact that the American government owns an extremely large chunk of GM. The National Post has an article detailing the Chevy Cobalts horrible safety record and it's 3000 complaints of a sticky gas pedal. Toyota had less than 5 confirmed pedal issues out of 1000 complaints before the certain large voices in the government were calling for a 'stop sale' and a 'don't drive your Toyota unless you like death" public slander campaign. I'd say that this entire issues is less about safety and more about an economically failing government trying to boost profits of a company they have poured billions of dollars into and are not major stakeholders in.

      Theres a lot of information out there on both sides of this issue, our responsibility as consumers is to think about it and make intelligent decisions. Not to put our hard earned money down on this car or that car based on what the Media says. As we've seen in months past, and in months to come. The medias pretty darn fickle.
      • 4 Years Ago
      Yes, Toyota sales are down and I think it's safe to assume that the whole recall saga is largely responsible for that. However, like Edmonds said, sales will improve significantly. When there's money to be saved people have a tendency to forgive and forget quite easily.

      Also, you've got to remember that their markets outside NA aren't doing too badly at all. Toyota's Australian sales figures for Feb 2010 were around 13% stronger than they were at the same time in 2009 (up almost 7% on the month before) for a market share of 20%.
      • 4 Years Ago
      How the mighty have fallen.
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