General Motors yesterday weighed back into the US car industry’s incentive war with new offers that extend zero percent financing on some 2003 models from three- to five-year terms and continues or enhances offers on 2002 models that expired on Monday.
GM is also modifying so-called “customer cash” (cashback) offers, including adding the incentives to 2002 and 2003 trucks. Other APR rates of 1.9 and 2.9% are also offered on 48 and 60-month loans for 2002 trucks and term-related 0.0/2.9/3.9% APR financing will continue for some 2003 models.
Group vice president of GM North America Bill Lovejoy said: “This enhancement is consistent with our strategy to offer consumers simple and compelling marketing programmes, and will allow GM to continue to be aggressive in the marketplace.”
However, some commentators said better offers from rivals had forced GM to extend some 0% offers from three to five years as the shorter term was not liked by consumers due to the high monthly payments required.
GM sales dropped 12.8% in September and The New York Times (NYT ) cited the car company’s officials as saying sales were weak because dealers came into the month having cleared out more of the older 2002 models than their competitors, putting them at a temporary disadvantage.
About half of GM’s sales last month were from 2002 models, compared with about 76% for Ford, the NYT said.
Speaking to the NYT, Morgan Stanley analyst Stephen Girsky said he was concerned that Detroit was reaching a wall in an incentive war that had led to big sales but slim profits.
“We had a reasonable slowdown from prior months,” Girsky said in an NYT interview. “Some of it may have been inventory related. Some of it may be consumers getting tired or bored with zero percent financing, or both.”
“What’s interesting to me, and what’s worrisome, is if you’ve got zero percent for 60 months in October, the beginning of the new model year, what are you going to have in April?” he asked, according to the NYT.