Tuesday, December 30, 1997

New year, new deals; No letup in incentives seen

By DEE-ANN DURBIN Associated Press Writer

DETROIT (AP) - Responding to tougher competition, the weaker yen and a slowdown in sales, U.S. automakers are ending 1997 with aggressive incentives that are likely to cut the price of buying a car well into 1998.

As part of the new incentive drive, some car makers are trying out a new approach: plain English. Instead of just offering lower financing rates, some are spelling out exactly how much cash buyers can save by using financing options.

For example, a Buick ad Monday offered 0.98 percent financing, adding that the rate could save buyers an average of $2,100 over 24 months.

"Car companies realized that people don't understand what 1.9 percent APR financing is. Now they're saying, 'Here's how much you're going to save,' " said analyst Art Spinella of CNW Marketing Research in Brandon, Ore. "It changes the perception, like you're getting a $2,500 discount on the car."

Spinella said incentives have taken off since October, when General Motors Corp. first began cutting sticker prices and offering refunds to buyers of its 1998 Saturn sedans.

In November, automakers averaged $1,760 in incentives per car, Spinella said.

Those rates increased in December as automakers scrambled to end the year well. As of Dec. 20, car buyers could get an average of $2,000 worth of incentives on a car or truck, Spinella said. That compares to an average of $1,200 on Japanese cars.

Some analysts have pegged the surge of rebates, low-interest loans and other incentives on the weakened Japanese yen, which allows Japanese automakers to keep overseas prices low while still making healthy profits in their own currency.

One U.S. dollar now buys about 130 Japanese yen compared to just 80 yen in April 1995, when the yen was at its strongest against the U.S. currency since the end of World War II.

Earlier this month, officials at GM, Ford Motor Co. and Chrysler Corp. all said they wouldn't rule out incentives in 1998, and analysts say U.S. automakers are likely to continue incentives worth $1,500 per vehicle or more into the new year.

"We're going to feel a lot more pressure in the United States (because of the yen). Whether we respond with incentives or how we respond, we'll have to stay nimble on that and do whatever it takes," Ford Chairman Alex Trotman said two weeks ago.

But some say the weaker Japanese yen is only one factor driving the new wave of incentives being offered by Big Three automakers.

"This is more driven by a competitive market and a slowdown in sales," said Chris Cedergren, managing director of Nextrend in Thousand Oaks, Calif. "We're seeing the end of a boom cycle that's been going on for the last four or five years. Manufacturers are going to have to work harder to sell cars."

Spinella agrees part of the need for incentives rests with the slow market. "Americans are placing a deteriorating importance on buying a new car," he said.