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Fuel economy, not advertised incentives, is best sales motivator: study

November 18, 2010

The most effective vehicle sales incentives are a vehicle’s economy and reliability, not special financing offers, a recent study found. Further, Consumer Reports said most in-market consumers do not fully understand how incentives work.

 

To understand the role incentives play today, the Consumer Reports National Research Center conducted a random nationwide telephone survey from Aug. 3 to Aug. 7 of adults 18 and older who are considering a new vehicle purchase in the next 24 months. 

When asked to identify the most important considerations, survey respondents were less influenced by incentives than product features, perhaps reflecting a blasé attitude shaped by perpetual promotions. Fuel economy (27 percent) led the list of considerations, followed by reliability (25 percent), purchase price (14 percent), and safety features (12 percent). Only 5 percent of car shoppers said that manufacturer or dealer incentives were the most important factor in their purchase decision.

 

But incentives do play a role, with 69 percent of shoppers reporting that they may time their purchase to coincide with incentives. In addition, 18 percent of shoppers claimed in stronger terms that they definitely will plan their purchase around incentives. This behavior is more prevalent in older, higher-income consumers, according to the survey. 

As the adage goes, everyone has a price. Consumers said that an incentive must be quite large in order to affect their next new vehicle choice. Almost 25 percent of respondents claimed it would take $5,000 or more to turn their head, with $3,000 being the median value. These amounts are greater than most manufacturer offerings.

 

The most compelling incentive proved to be 0 percent, or discount, financing (32 percent of shoppers). Free extended warranty (23 percent), free gas for a year (20 percent), and cash rebates (14 percent) were the other significant influencers. The reduced-rate financing appealed most to men and high-income consumers. 

However, a majority of shoppers have misperceptions about incentives. The marketing messages are compelling, yet the true deal may be different from what the customer expects. Split evenly between men and women, 63 percent believe that every customer is eligible for the same new vehicle incentives, despite the common "for qualified buyers" in small print.

 

A larger 80 percent believe that incentives can be combined, such as zero-percent financing and cash-back rebates. This is quite rarely the case, leaving consumers to calculate at point of purchase if it would be advantageous to reduce the purchase price, and therefore the amount needed to finance, or to take advantage of a low interest rate. 

Shoppers learn about incentives primarily from dealership or manufacturer radio and television advertising, trailed by printed ads, and third-party automotive Web sites.

 

Eighty-five percent of respondents said that they negotiate the purchase price even when using an advertised incentive. The other 15 percent should note that employee pricing-type programs do not always provide a better price than could be otherwise negotiated.

 

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