It's not getting any easier to be a Chrysler-Dodge-Jeep dealer. Last month, when Chrysler Financial asked banks and investors to renew their $30 billion line of credit, they came up about $6 billion short. To make matters worse, the investors forced the automaker to follow much tighter financial guidelines (including a requirement to get out of leasing). Now, the cash shortfall is forcing the financial division to significantly turn up the heat on their retailers. Over the next few months, the financial arm will jack up dealer floorplan interest rates, and levy hefty fees for vehicles that sit unsold on dealer lots. With sales way down (in August, Chrysler's sales fell a sickening 34.5 percent -- the steepest decline of any major manufacturer), cash-strapped dealers are obviously unhappy with the news. Many fear this may signal the start of a new retailer initiative to limit vehicle inventory, hurting sales even further. As expected in this industry, bad news for retailers often means good news for consumers. With the new fees on the horizon, dealers will be offering significant incentives to dump inventory over the next few months.
It looks like car shoppers have been smart enough to see past Chrysler's cheap gas guarantee. Despite Chrysler's extension of the offer for an extra month, a very small percentage of actual consumers have actually chosen the gas guarantee over the old fashioned cash back options. As we've reported in the past, the incentive wasn't really as good as it seemed once the math was done. As was pointed out by the Union of Concerned Scientists, a 3 mpg bump in efficiency would be equal to the savings Chrysler was offering. Additionally, Chrysler not only has the worst fleet in terms of fuel efficiency, but many of its products haven't exactly set the world on fire based solely on their own merit. The performance of the incentive deal suggests that in today's world average consumers may not want to be seen driving gas guzzling vehicles, regardless of what they're paying for fuel. Good products are still the only real way to guarantee sales, though cash back incentives still have an impact. Perhaps Chrysler should have offered firearms.
If you ever wanted to put an Ford F-150 in your driveway, this summer may be the best time to make your move. As the new 2009 F-150 nears production, Ford is increasing its plant's output of the 2008 F-150 to ensure enough supply remains during July and August when plant production will be transitioning to the all-new model. The last time Ford took such measures was back in 2003, when it sold the F-150 "Heritage" alongside its replacement. Things have changed, however, as there are now only two plants producing the F-150 (compared to four in 2003), and the economy isn't nearly as strong.
There is a fair amount of risk involved during a model change-over for a vehicle with such high sales and production numbers (Ford sold about 414,000 F-150s in 2007). On one hand, Ford needs to keep dealers from drying out during the production slow-down. On the other, the last thing dealers need is a surplus of 2008 models just as the 2009 models arrive. It is a delicate balancing game between supply and demand.
With production ramping, supplies are already up. As of March 1st, Ford had an inventory of 200,000 F-series pickups (a 96-day supply). Last year at this time, it had 176,200. Inventory isn't the only thing on the rise. In a move that will benefit consumers, financial incentives are skyrocketing. Compared to this time last year, incentives are up by $733 to a whopping $4,514 per truck. Nothing sounds sweeter to consumers than high inventory levels combined with substantial incentives -- if you are in the market for a new F-150, this is music to your ears.
The Canadian government's new proposed budget includes both a $2,000 incentive for buying fuel efficient vehicles like hybrids and a $4,000 tax for purchasing less efficient models like SUVs. Unfortunately, the Detroit News article doesn't specify how the budget determines what vehicles qualify for the fuel efficiency rebate and which get dinged with the heavy tax.
What affect the Canadian government's new budget will have on car buying habits in the country is unclear, as Canadians don't buy many SUVs to begin with – only around 15,000 in 2006. At the same time, the environmentally-inspired incentive/tax combo may serve to irritate the very automakers that are deciding which plants they can afford to idle or shut down completely, many of which are located in Ontario.
The plan also has plenty of loopholes that can be used to get around the tax. For instance, it doesn't apply to used vehicles, so Canadians can freely buy year-old HUMMERs for significantly less than a new one. There's always the option of driving south to purchase a car in the States, as well, though we're not clear what mess of paperwork that would create to own and operate it back in Canada.
You can read all the details about Canada's new budget and how it affects the auto industry here.
The arrival of the Edge CUV is now complete with word that Ford has just put some cash on the hood of its golden child for the first time. In reality, the incentive is being offered only for base SE models and is paid to the dealer to use how he or she feels fit. So it's not like you'll be seeing this incentive advertised in your Sunday circular.
It turns out that demand for more expensive versions of the Edge has been greater than Ford anticipated, and as a result these base SE models, which so far have comprised only 20% of Edge sales, have been sitting on lots longer than expected. That's the kind of good bad news we'd like to hear if most of our eggs are sitting shotgun in a single model. The base Edge SE starts at $25,995, while the mid-range SEL begins at $27,990 and the top-level SEL Plus at $29,745. Automotive News reports that an Edge optioned to the hilt can even reach $36,000. Ford sold 5,586 units of the Edge in January, its first full month of sales. If most of those were SEL and SEL Plus models, all the better for Ford.
January was a harsh month for the domestics, mainly because reduced sales to fleet and rental companies dragged down the raw number of units sold. Still, General Motors apparently doesn't like the red on the balance sheet and has introduced a new round of incentives to ensure February's numbers are better. Announced today, buyers in the Midwest and Northeast regions are being offered $500 bonus cash and 0% financing for five years, most likely as a bribe to pry them from their sofas and brave the snowy climes to buy a car. As always, most 2006 and 2007 models are included except for the cool stuff, like the Pontiac Solstics, Saturn Sky, Chevy Corvette Z06, Saturn VUE Hybrid, all medium-duty trucks and the Cadillac, HUMMER and Saab brands. Automotive News reports that GM actually kept to its promise last month of reducing incentive spending, shelling out only $2,365 per vehicle. While still far more than some imports spend, it was much less than the $3,853 spend by Ford and $3,502 spent by the Chrysler Group.
Automakers with remaining 2006 inventory are getting desperate in some cases to get rid of their lot. Cars.com has assembled the 10 best incentive offers based on the percentage off of a car's base MSRP, and Kia tops the list by offering 26.32% off the Sorento and 23.87% of off the Sedona minivan. Why so much? Because they're 2005 models! The third vehicle on the list, however, is the most appealing to us. Saab wants to get rid of the last remaining 9-2X models and is offering $5,000 off of the car's base MSRP, which amounts to a substantial 21.75% discount on what is essentially a more luxurious Subaru WRX. The rest of the list is as follows.
Today General Motors announced that it will be offering an extra $500 to $1,500 in bonus cash on most 2007 and 2007 models. The offer is part of GM's Labor Day sale and the company stresses that it's not backing away from its value pricing push. The new rebates are in addition to the current low-interest financing offers and any other cash bonuses currently being offered in one's region.
Of course, the best and newest GM models are not eligible including the Pontiac Solstice; Saturn Sky, Aura and VUE Green Line, Chevy Corvette; 2007 GMC Yukon and Yukon XL Denali; HUMMER H1; and 2007 Cadillac Escalade.
Customers will basically get $500 back for purchasing a car, $1,000 back for a pickup and $1,500 back for a truck-based SUV. The offer expires on September 5th.
Beginning today, Nissan is offering its buyers a creative new incentive that it hopes will spur the company's sagging sales. Any customer who buys a Nissan now through October 2 won't have to make a payment for 130 days. That means if you bought a Versa today, your first payment wouldn't be due until January 2nd. For some reason the offer is not available to residents of Michigan, Maine and Pennsylvania and Nissan has given no explanation for the exclusion of these states.
This is another one of those incentives that could be a double-edged sword for unsavvy consumers. While not making payments seems like fun at first, this type of deal will quickly increase the disparity between what is owed on these vehicles versus what they're worth. A year or two down the line an owner might be caught off guard to find how much negative equity has accumulated in their aging Nissan.
Today General Motors announced a new discount program for Chevrolet, Buick, Pontiac, GMC, Saab and Saturn (not Cadillac and HUMMER) that features a little bit of cash back and a lot of 0% financing. The industry is seeing a larger than normal number of people opt for financing because of rising interest rates, and GM's own 72-Hour Sale over the Fourth of July weekend that offered 0%-financing deals gave the company a boost almost big enough to reach its sales goal for July.
The new incentives will be marketed separately for each of the six brands participating, with Saturn taking the decidedly hassle-free approach of just lopping 10-percent off the sum of the sticker price and destination charges. The other brands will have a menu of financing options and bonus cash that range from 0% financing for 36 months all the way up to 72 months on some SUVs and big pickups. This new incentive drive will also extend financing and bonus cash offers on most 2007 SUVs and big pickups, though won't go so far as to offer 0% financing on any '07 models.
This push will take us all the way through the end of the summer and conclude on September 5th, which means GM will have survived the summer without offering us the enticing yet damaging carrot of employee pricing.
It's not getting any easier to be a Chrysler-Dodge-Jeep dealer. Last month, when Chrysler Financial asked banks and investors to renew their $30 billion line of credit, they came up about $6 billion short. To make matters worse, the investors forced the automaker to follow much tighter financial guidelines (including a requirement to get out of leasing). Now, the cash shortfall is forcing the financial division to significantly turn up the heat on their retailers. Over the next few months, the financial arm will jack up dealer floorplan interest rates, and levy hefty fees for vehicles that sit unsold on dealer lots. With sales way down (in August, Chrysler's sales fell a sickening 34.5 percent -- the steepest decline of any major manufacturer), cash-strapped dealers are obviously unhappy with the news. Many fear this may signal the start of a new retailer initiative to limit vehicle inventory, hurting sales even further. As expected in this industry, bad news for retailers often means good news for consumers. With the new fees on the horizon, dealers will be offering significant incentives to dump inventory over the next few months. 
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