Car Sales Are Good, But Incentives Are Going Down
|   Wednesday, January 09, 2013
It seems that analysts were not so successful with their sale forecasts recently. They thought that car sales will continue to be low, but the recently released sale figures from carmakers has shown that people have been buying more cars. Naturally, the auto industry is feeling good, but there is one aspect that buyers will not like about this. High demand means high prices. Dealerships will no longer be interested in cutting down prices if they see their cars are selling with the current price tags.


According to TrueCar, prices went up for several important brands in the month of September 2012 compared to September 2011. The Koreans from Hyundai saw the most increase with 5.8 percent above the 2011 level. Chrysler, Toyota, as well as Nissan rode the same wave, each seeing a price increase of 2.4, 1.9, and 1.5 percent respectively. Only General Motors cut down the prices a bit, but not by much, only a mere 0.7 percent.
In real terms, that means the average transaction price in September was 30,282 dollars, up by 0.9 percent from the same month last year.

There are a number of reasons why this phenomenon is happening. If we are to look at what analysts say, times aren't as hard as they were 4 years ago, the credit restrictions have loosened up a bit, the self-imposed restriction of having to cope with the same car for longer has reached its limit and the overall feeling is that better times are looming over the horizon. Reality may not be like that for long, but that is how it is perceived for now, and car makers are happy.

The downside to all the above is that automakers do not see the need to offer incentives anymore, or to keep them at low levels. From an economic point of view, they are correct to proceed thusly, but who knows how many people will feel the same. The incentive part brought many would-be drivers and drivers who were looking to change cars to the showrooms, but due to their diminishing it can be expected to see their numbers dwindle.

But not all carmakers are cutting down on incentives. Chrysler is one example of a company keeping its level of incentives more or less unchanged. Part of the reason for that is that customers have become used to seeing cars under this brand being accompanied by substantial stimulants; if they were suddenly removed, many would back away. The company spends 11 percent of the average sale price in consumer incentives, or about 3,250 dollars, while its sale figure went up 12 percent compared to last year.

But they also launched a number or new models, like the Dodge Dart and variants of the Fiat 500, and they aren't exactly the cheapest of the lot, so incentives play a large role in making them appealing to the public; in the first phases at least. Once sales stabilize, it is likely incentive levels will go down.

The bottom line is that buyers should prepare themselves for slightly more expensive cars, and if the economic consolidation continues, prices will continue going up.
PHOTO GALLERY
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