Dramatically slow sales usually spark big car-buying deals and incentive programs from manufacturers. New vehicle sales have stalled during the lockdown, and manufacturers have responded. However, there’s a big change in the types of incentives offered. In this new environment, it’s not just about the cash or the lease payment.
Until now, most incentives were product-based and targeted at specific slow-selling models and higher-priced trims. The new emphasis is on deals that build consumer confidence in the purchase process.
"It’s been a long time since the auto world has been this dependent on needs-based incentives," explains Brad Korner, general manager of Rates & Incentives at Cox Automotive, the parent company of Autotrader.
What Are Needs-Based Incentives?
Rather than push rebates or low lease payments, needs-based incentives and deals aim to reassure buyers that if their employment changes or if they get sick, there’s assistance in the form of payment forgiveness or deferral, as well as low-percent or 0% financing available for longer terms. Perhaps the biggest change is the availability of new non-cash incentives, which are designed to provide value by simplifying the buying process.
Korner says that many of these new-age deals and incentives emerged in mid-March. These new incentive strategies look to buoy fragile sales. Learning to recognize these incentives and how they apply to your circumstances will go a long way toward making an informed decision on your next purchase.
Here’s what this new incentive landscape looks like.
These traditional incentives are structured around the deal. Most shoppers recognize car-buying deals, cash-back offers and low monthly payment lease deals. According to recent research by Cox Automotive Industry Insights, buyers are looking more closely at advertising that focuses on pricing and financial offers. Deals that tout specific models or tech features draw less interest.
The big change is the popularity of incentive programs that address affordability and economic security concerns. Topping the list here are payment forgiveness and deferral programs and 0% financing, which can extend up to 84 months. The difference here is that offers are less model-specific and apply to all the vehicles across a brand’s lineup.
Also, you should consider shopping not only the manufacturer’s captive finance arm but other financial institutions to see what sort of payment deferral and low- or no-interest offers they might have. Much of that shopping can be done online.
Data suggests that these offers are helping to increase traffic and close sales. Cox Automotive reports that the percentage of vehicles financed at 0% grew from 2.6% in January to nearly 20% by mid-April. These new offers, combined with traditional incentives, are attractive enough that 69% of consumers would buy a new car sooner, rather than later, if the deal were right.
Motivating buyers is more complex than waving cash or low-payment lease deals in their faces. What manufacturers have discovered is that making the buying process easier is its own incentive. Digital retailing is the newest enticement to turn shoppers into buyers.
Manufacturers have been keen to develop digital retailing tools and have stepped up their efforts in the current environment. GM and Fiat Chrysler, with their Shop-Click-Drive and Automobiles Drive Forward campaigns, respectively, are trying to make shopping from home the new normal.
Third-party shopping portals, such as Autotrader’s Accelerate My Deal, also help shoppers price vehicles online and determine what sort of monthly payments they can expect. Dealers also host pricing and payment features on their websites to empower shoppers to look at cars, engage with internet sales staff and put together a deal without having to set foot in the showroom.
These programs offer price transparency and yield smoother negotiations, eliminating traditional pain points for the customer. Finding and using these tools is an incentive all buyers should seek out.
At the back end of the deal, getting the car to the customer or providing other traditional services at their doorstep is another new incentive. Autotrader’s Dealer Home Services lets consumers do video walkarounds, arrange at-home test drives and complete deals at home and have their vehicles delivered to them. The idea is to bring the dealership experience into the home, allowing buyers to get the new or used vehicle they want while following safe social distancing guidelines. Some dealers are offering concierge services, where they pick up and deliver customer vehicles for service appointments.
This new approach to digital retailing has been in the works for some time. Making it easier for customers to shop and buy online gives brands a competitive advantage. Smart brands are embracing this approach, and you’ll see more offers to bring dealer services to the home or office.
What to Look For in the Future
As the industry slowly gears back up and retail operations swing open their doors, the incentives landscape will shift. Buyers more secure in their jobs will likely be looking for more traditional rebates and lease deals, and low-interest rates and payment deferrals will fade in importance. However, the non-cash incentives that revolve around digital retailing and home delivery will become more important. For the deals, it might be business as usual — but for the process, it will be anything but. Find a vehicle for sale