Automakers using rebates and discounts
to sell oversupply of vehicles
By Lucy Lazarony • Bankrate.com

Will discount financing and rebates on new cars stay strong in 2000? The experts say yes.

A huge surplus of vehicles and lagging sales in other parts of the world have auto manufacturers keen to sell, sell, sell in America, and that means good deals for consumers.

"Depending on who you believe, there's anywhere from 15 to 25 percent over-capacity worldwide," says Paul A. Eisenstein, publisher of the automotive Web site TheCarConnection.com. "Because of the strength of the U.S. market, a significant portion of the over-capacity is aimed right here."

Times are good in America and lots of people are buying cars. That's not the case in other parts of the world, such as Asia, where several countries continue to struggle economically.

"Every automaker wants a slice of this pie because in many cases profits made here offset losses in other parts of the world," says Mary Ann Keller, president of Priceline.com Automotive Services Group and a longtime auto analyst.

Highest affordability level since 1980
With so many autos aimed this way, it's a great time to shop for cars in America. Fierce competition among automakers means lower prices and bigger discounts for consumers.

In 1999, cars and light trucks were at their most affordable levels since 1980, according to the Auto Affordability Index by Detroit-based Comerica Bank.

The average discount off sticker price on new vehicles grew to 11.3 percent in 1999 from 5.1 percent in 1995, according to CNW Marketing/Research in Bandon, Ore. In March 2000, the average discount off sticker price was 13.8 percent, or $3,158.

Forecasts are for incentives to remain in the 13 to 14 percent range for the rest of 2000. So auto shoppers can expect to save a couple of thousand dollars on that shiny new car or SUV.

Domestic automakers such as Ford and General Motors, who lost market share in 1999 to European manufacturers such as Volkswagen and BMW, are leading the charge.

"There's so many interlopers from abroad. In order to stave off that competitive threat, domestic automakers are going to have to up the ante on rebates," says David Littman, chief economist of Comerica Bank.

The battle of the rebates
General Motors, in particular, is rolling out rebate after rebate. Deals include $1,500 cash back or 2.9 percent financing on a Chevrolet Tracker and $1,500 cash back or .9 percent financing on an Oldsmobile Silhouette. Cash back rebates ranging from $1,000 to $2,000 are available on several GM passenger cars, including the Buick Century, Buick Park Avenue and Buick Regal.

"They're the biggest and they're being the most aggressive," Eisenstein says.

Among foreign manufacturers, Mazda, Nissan and Mitsubishi continue to launch some hefty rebates and incentives. It's the only way to make themselves heard in a market dominated by Toyota and Honda. Mazda, for example, is promoting its Millenia with a $2,250 rebate or discount financing ranging from .9 percent to 4.9 percent.

"If you're not hot you've got to find a way to move models through the marketplace. A lot of manufacturers do it on price," says Robert Ellis, director of CarBargains.com, which is part of the Center for the Study of Services, a nonprofit consumer research group in Washington, D.C.

Keep in mind that not all rebates and discount financing deals are available nationwide. Offers vary depending on the region of the country where you live. Be sure to check out deals in your area.

No breaks on hot-selling vehicles
Of course, not every model from every manufacturer comes with a nifty incentive.

Hot-selling cars aren't likely to have discounts. When plenty of folks are willing to pay full price for a vehicle, manufacturers let them. Just look at the Honda Odyssey.

"You can barely get it. It's selling at sticker or over sticker," Ellis says.

There are, however, plenty of incentives and rebates on minivans from other manufacturers. Whenever one vehicle makes a big splash, competitors fight back with price cuts and discounts.

"The model of the moment tends not to have a lot of rebates, but all the other players in that category tend to have more," Ellis says.

How to stay current
Staying on top of what's hot, what's not in the auto business can help you nab a good deal. Automobile Magazine Online, Motor Trend Online, TheCarConnection.com and Automotive News are among the sites covering the twists and turns of the auto industry.

The other thing to remember about auto rebates and discount financing is this: the deals are always changing.

Manufacturers like to spread discounts around. They may stick a $1,500 rebate on a passenger car and then yank it after two months and plop that discount onto a minivan. It pays to stay on top of things.

Autoweb.com, Edmund's Automobile Buyers Guide, AutoSite, Autopedia, Kelley Blue Book and CarPrice.com are among the sites offering timely pricing information. Make note of the dates when each rebate is set to expire.

Everything may vary
Be sure to visit several Web sites when researching pricing information. Everything from sticker price to customer rebate information may vary.

"Understand there will be different numbers. Don't take what's on the Internet to be the law or the truth," says Art Spinella, vice president of CNW Marketing/Research.

It's wise to cover all the bases. When in doubt, contact an auto manufacturer directly. Having a handle on pricing information is essential when shopping for a car.

As Spinella points out:

"Without the right data you can't bargain because you've given up the one chip that you've got -- which is knowledge."

-- Posted: April 12, 2000