With the 1999 models set to roll out in October, auto makers have launched rebates and discount financing offers on 1998 models. Manufacturer financing is so low that banks won’t even try to compete.

Leading the pack is post-strike
General Motors, which has an estimated 300,000 1998-model year cars and trucks still in the chute. They have to be assembled and then cleared off the lots quickly.

Less than 1 percent interest
The world’s largest auto manufacturer is offering 0.9 percent financing for 36 months on a wide range of models including Chevrolet Blazer, Astro and Lumina, the GMC Jimmy and the Pontiac Firebird. Cash rebates ranging from $750 to $2,000 are also available. The discounts are available through Sept. 30.

Ford Motor Company has been offering incentives on its 1998 models since July 8. A 48-month financing rate of 0.9 percent is available on the Ford Escort, Contour, Taurus, Ranger and Windstar. Rebates, which end Oct. 2, range from $750 to $2,000.

Chrysler, rebates on 1998 models range from $500 on a Dodge Ram Van to $2,000 on an Eagle Talon. Financing on most models dips to 1.9 percent when a customer pays off the car in 24 months. The discounts last until Oct. 5.

Banks will wait

Such super-low financing deals are tough to beat. And banks know it.

Tom McKee, a senior vice president at NationsBank, said the bank’s auto loan rates are priced to fare well against other financial institutions in each of its local markets. But NationsBank does not try to compete with 0.9 percent and 1.9 percent rates offered by auto manufacturers’ captive finance companies.

“That’s a totally different game,” McKee said.

A game that wise consumers will cash in on. A detailed listing of auto manufacturers’ rebates and incentives can be found on Edmund’s
Web site.

“It’s absolutely a buyer’s market,” said Jack Nerad, former editor of
Motor Trend and co-host of the radio show
America on the Road.

He said incentives such as rebates and discounted financing have become a necessity in the auto business — and have intensified in the past year.

“It’s pretty cutthroat,” Nerad said.

World events play only minor role

And believe it or not these incentive wars can’t be pinned on the Asian financial crisis or the GM strike.

“Most of the rebates in the U.S. markets are driven by simple overcapacity,” said Al Warner, director of the Motor Vehicle Division at the U.S. Department of Commerce. “All products are about equal. In order to sell them, they’re offering rebates.”

It’s a classic case of too much product and not enough buyers. There are simply too many auto companies producing too many cars.

In addition, the growing popularity of sport utility vehicles and minivans has prompted many manufacturers to mark up discounts on slower-selling passenger cars.

Surprisingly, the Asian financial crisis has had little impact on auto prices and financing in America. Smaller companies such as
Mitsubishi are rolling out discounts and rebates, but such programs have little effect on the overall market..

“No one at GM says ‘Geez, I wonder what Mitsubishi is doing today,’ ” said Art Spinella, vice president of CNW Marketing Research in Bandon, Ore. “No one else is going to react to them, because they’re too small.”

Japanese remain competitive

Japanese heavyweights such as
Toyota and
Honda seem content to offer just enough incentives to remain competitive with Ford, GM and Chrysler. The Commerce Department’s Warner said he believes the reasons are mostly political. Upping exports and slashing prices on Japanese cars sent to America, would not sit well with the U.S. government.

“Eventually we will see an increase in exports — probably not as much they could,” Warner said. “And it will be done slowly.”

And as for the GM strike …

As for the GM strike, Ford and Chrysler, if anything, could afford to ease off discounts, because of increased customer traffic in their showrooms.

Since the strike’s end, GM has focused on finishing the production of its 1998 models and clearing them out with big discounts. There has been no word on when GM plans to roll out its 1999 models or if the new cars will come with big incentives to spur sales.

Regardless of GM’s moves in the coming months, many economists say they believe the strike will not have a lasting impact on auto prices and financing.

“The GM strike effect on prices is a temporary blip,” said William Wilson, an economist and vice president at Comerica Bank in Detroit. The blip may last six to nine months, he said, but the effects of excess production worldwide will last much longer.

Said Wilson: “Translated that means: Consumers who are buying cars should be seeing bargains for years to come.”