Auto Dealers Want Simpler Incentives

DETROIT January 30,2003; John Porretto filed this report for the AP.

"So you've finally decided to take the automakers' bait, get rid of your leased car and buy a new sport utility vehicle. After all, the dealer will knock off the final few lease payments for the purchase.

You can get zero-percent financing if you choose the three-year option, but maybe 2.9 percent for a longer term makes more sense. But wait, the four-door model with the 6-liter engine is excluded. Or isn't it?

Heck, maybe the cash rebate is the way to go. And make sure you know how those canceled lease payments factor in.

Confused?

So are some auto dealers, and it's something they plan to take up with automakers beginning Saturday at the National Automobile Dealers Association convention in San Francisco. Some 25,000 dealers, staff and other industry professionals will attend the conference and exposition.

It's an opportunity for dealers to have direct give-and-take with executives who run the companies that make the vehicles they sell.

Glenn Ritchey, who owns Jon Hall Automotive Group in Daytona Beach, Fla., and co-chaired General Motors Corp.'s National Dealer Council last year, said he'll raise the incentives issue with GM executives.

"We're sort of always after them not to make our incentives too complex -- to make it a simple message for the consumer and the dealers," said Ritchey, whose brands include Chevrolet, Pontiac, GMC and Saturn.

"I think sometimes the tendency is to try to address issues on the run, which necessitates a change here or there," Ritchey said. "The thing we've found that works best has been the simple message the consumer can identify with, such as zero (percent financing) for 60 months."

These days, the deals can be cumbersome, though extremely lucrative for consumers. Automotive News, the tabloid-size trade publication, uses more than half a page to list incentives offered by domestic and foreign automakers.

Those taking part include GM, Ford, Chrysler, Toyota, Nissan, Volkswagen and Porsche.

Some industry observers say the plan that best suits a consumer depends on a number of factors, particularly age and income.

For example, someone with excellent credit might be inclined to take advantage of zero-percent financing, while a younger buyer with little credit history might take the cash, apply it to the purchase and use the transaction to establish credit.

GM, the world's largest automaker, typically is regarded as the kingpin of incentives, primarily because it started the battle in September 2001 with its "Keep America Rolling" no-interest financing promotion.

Despite concerns among investors and analysts over how much incentives are diminishing profits, there's no indication they'll end anytime soon.

In one of the latest rounds among Detroit's Big Three, GM last week added $500 to existing $2,000 rebates on its full-size pickup trucks. Ford quickly followed and began offering the same deal on most of its F-150 models.

And on Thursday, Ford said it was beefing up incentives on two of its top sport utility vehicles, countering a similar move by GM a day earlier. Ford is increasing cash rebates by $500 on the four-door Explorer and the Expedition, as well as the Econoline and Club Wagon full-size vans.

On Wednesday, GM raised cash incentives by $500 to $2,500 on the Chevrolet Tahoe, TrailBlazer, Suburban and Express van; Oldsmobile Bravada; and GMC Yukon, Yukon XL, Envoy and Savana van.

Zero percent interest also is available on 36-month financing for those vehicles.

Jim O'Connor, Ford's group vice president for North American marketing, sales and service, said the objective isn't to confuse -- it's simply to remain competitive.

O'Connor said Ford tries to "steer its own ship" by devising a quarterly incentives schedule based on market conditions, production schedules and the number of cars in the supply line.

However, when GM rushes out with a new program, "you've got to respond or you're going to lose business," said O'Connor, whose company's U.S. market share declined 1.7 percent last year while foreign competitors gained ground.

"We're sort of caught between the devil and the deep blue sea," he said. "Every time we respond, we're reducing our own margins. You wouldn't get up every morning and say, `Let's sell the stuff at lower margins.' We're trying to do it to keep our dealers competitive, and obviously the beneficiary is the customer."

O'Connor said he'll listen intently to any dealer concerns, though he says Ford has developed a computerized system to try to simplify matters. A dealer can plug a vehicle identification number into the system and it will detail any eligible incentives.

Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, one of the nation's largest Chrysler dealers, said confusion over incentives has cost him thousands of dollars at times because he's had to rectify errors out of his own pocket.

"You've got to have a lawyer and an accountant to understand the programs," Helfman said. "And if it's complicated for us, it's got to be for the customer."

H. Carter Myers III, outgoing chairman of the dealers' association, said he'd like to see incentive programs patterned after those that came out after Sept. 11, when they were "broadly available to everybody without lots of asterisks and small-print exceptions."

"This is an important issue among dealers," said Myers, president of Carter Myers Automotive in Charlottesville, Va. "Everybody should understand what they're buying and how they have to pay for it."