Car Manufacturers Increase Discounts To Beat Blues In Coronavirus Sales

(Reuters) – Amid a raging pandemic, Belal Bilto, 26, a sales manager and Manhattan resident, bought a mid-size Jeep Gladiator pickup this month for just over 48,000 $, attracted by a rebate of approximately $ 5000 on the list price and a seven-year interest-free loan.

For Bilto, who was laid off in March, and his fiancée Sabrina Moller, 28, a private chef, a car seemed a safer option for getting around during the virus epidemic. More importantly, the purchase of the truck is a business expense for the couple to support their new mobile boutique shop business.

“We went specifically for the Gladiator because the model was (offered at) price to employees and we also got free service after 1,000 miles and a free repair offer for a serious accident,” Bilto told Reuters.

US automakers are expected to report car and light truck sales in June and the second quarter on Wednesday. Analysts predict June sales will drop 25% from a year earlier. This is an improvement from the declines in April and May, reflecting a slow recovery in retail demand hit by the coronavirus closings.

The second quarter figures reflect a spike in the US auto industry’s efforts to use consumer discounts, low-interest loans and other incentives to support demand during the pandemic.

Since March, American automakers have been eager to support demand with rich incentives to keep sales moving. Offers have been pretty good and over the next few months, industry officials and analysts say sales may be affected due to tight inventories.

“The speed at which (automakers) have stepped in to support the franchise network and the retail consumer is historically significant,” said general manager of automotive retailer Lithia Motors, Bryan DeBoer.

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Per vehicle, rebate spending hit record levels in June, at around $ 4,441 per unit, a significant 12% increase from $ 3,966 per unit in June 2019, according to automotive consultancy JD Power.

In April, a month after car manufacturers stopped production due to the coronavirus epidemic and a massive 40% drop in sales, spending per vehicle peaked at around $ 5,000 for the year , leaping by around 40% compared to the same period last year.

“The top three automakers have put in place aggressive incentives with extended financing at 0% for 84 months in addition to payment deferrals of up to six months,” said Tyson Jominy, vice president of data and analyzes at JD Power.

“Before COVID, only 7% of all sales represented loan terms for 84 months. This metric rose to 21% during the peak, “said Jominy. “It is unprecedented.”

Lower sales volumes mean that automakers can offer significant discounts per vehicle, while reducing overall expenses.

According to JD Power, total incentives offered by automakers from March to the end of June are down about 12% to $ 18.6 billion from the previous year, as sales volumes fell 28% .

Shares of General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles closed between 1.5% and 2.5% on Monday.

Source: Reuters

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