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Spokane, Washington  Est. May 19, 1883

Automakers Pitch Rebates, Deals To Stimulate Sales Signs Of Slowdown Force Manufacturers To Offer Financial Incentives

Providence Journal

Rebates have been around for years.

But this spring, rebates and other financial incentives are being offered for the first time in several years to buyers of many popular 1995 models such as minivans and off-road vehicles.

The rebates, low-interest loans and special lease packages are cropping up again because U.S. automakers, responding to signs of a slowdown, are scrambling to sustain a rise in sales that began three years ago.

They’re offering the deals to ease customers’ worries about monthly payments on cars that now cost an average of $20,000 each.

Consider what’s going on in the minivan market.

Next month, Chrysler will start selling the first full redesign of its top-selling minivan in 10 years. The 1996 long-wheelbase version will arrive first, followed by the more popular “shorties” in August.

The coming rollout has set off an explosion of special financing offers and “loyalty” rebates to grab customers.

“The minivan wars have begun,” said Martin Gertsacov, dealer/manager at Puritan Chrysler-Plymouth in Providence, R.I.

Chrysler is offering 1.5 million of its current minivan owners a $500 cash allowance toward the purchase or lease of a 1995 model. That’s in addition to the $1,000 rebate or low-interest financing offered to any buyer.

Ford and Mercury have countered by offering Chrysler minivan owners a $750 rebate if they buy a Ford Windstar or Mercury Villager. The $750 is on top of a $1,000 rebate available to any buyer of a Villager or Windstar.

Also, Ford is offering a $1,000 rebate on its Aerostar, its older, rear-wheel drive minivan.

Chevrolet has a $500 rebate on its Lumina minivan and another $1,500 discount for a package of options with the seven-passenger minivan.

Honda has just entered the minivan wars with its 1995 Odyssey that comes with four swing-out doors and a rear seat that folds down into the floor.

“Honda doesn’t use rebates, either to the customer or the dealer, but Honda does offer a two-year lease at special reduced rates to put buyers into the vans,” said Bob Brown, sales manager at Majestic Honda, in Providence.

Ford is offering leases for a “loyalty” promotion that is similar to Chrysler’s effort for selling 1995 minivans.

Ford is trying to coax owners of its best-selling Taurus to stay with the model until the redesigned 1996 version arrives in August.

The manufacturer is offering a lease that puts a customer in a ‘95 Taurus GL for one year, then behind the wheel of ‘96 Taurus GL for the next two years all at the same $339 monthly payment with $1,500 down payment.

The deal is being offered by about half of Ford’s 4,358 dealers nationwide, said Bill Collins, a Ford spokesman.

Many carmakers are offering financial incentives because of new evidence that the auto sales boom that began in 1992 may end sooner than expected and fall short of the industry’s forecasts.

Nationally, analysts forecast that car and light truck sales may be flat or grow only slightly from the 15.2 million sold in 1994. They are also saying this may be the last year of any upswing.

“I think this year will represent the peak,” said Jack Kirnan, an auto analyst at Salomon Bros., in New York.

The slowdown in sales nationally appears to be the result of higher car prices and higher interest rates that may have pushed the costs above the threshold some families can afford.

For the first time, the average price paid for a new car or truck rose above $20,000 - to $20,045 - in the fourth quarter of 1994, according to Commerce Department statistics.

Higher interest rates on conventional loans, after the Federal Reserve Board raised short-term rates seven times in 13 months, have also increased monthly car payments.

That could hurt sales because only 30 percent of car buyers pay with cash, and the other 70 percent finance in some way, through either installment loans or leases, according to Commerce Department statistics.

Higher interest rates also affect the inventory dealers are willing to carry because they have to borrow money to keep cars on their lots.

The higher borrowing costs also squeeze dealers’ profit margins and give car salesmen less room to haggle with buyers. Some customers walk away.

While leases have been growing dramatically for several years to help buyers afford new cars, rebates and special financing packages on popular models have been scarce because sales of those models have been strong.

But automakers know that the last time a slump occurred in sales of top selling vehicles, financial incentives worked. After racking up record sales in 1986, carmakers saw slumping sales extend into 1988, and they rolled out record rebates.

The incentives boosted sales in 1988 over those of 1987 and kept the industry alive until the slump was over.

Now, carmakers are again trying to sell popular models by offering rebates to customers and other incentives directly to dealers, who can use the money in any way they want to structure deals with buyers.

Bob Dovner, sales manager at Bristol Chevrolet in Providence, offers incentives with the season’s hot models for Chevy: GEO Trackers, S-10 Blazers and Tahoe utility vehicles.

“Those vehicles match our spring market, especially because we are in an area surrounded by the boating and recreational communities,” he said.

Among other financial incentives, Chrysler for the first time is offering $400, $500 or $600 rebates on its Neon, depending on the options purchased. There are also up to $1,500 rebates available on the Dodge Intrepid, Eagle Vision and Chrysler Concorde.

Through March 31, Chrysler also is offering 4.9 percent to 7.9 percent financing in place of the rebates.

Lincoln Mercury has a $1,000 rebate on its 1995 Town Car, $500 rebates on the ‘95 Sable and Grand Marquis, and $300 on a Tracer.

There are $500 rebates on the ‘95 Chevrolet Corsica and Beretta and the ‘95 Pontiac Bonneville, Grand Am, Grand Prix sedan and Trans Sport.