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What Do the New Car Sales Add Up To?

By Joe Benton
ConsumerAffairs.com

November 28, 2005

• Car Prices: How Low Can They Go? • GM, Ford Look to Congress for Help • What Do the New Car Sales Add Up To? • Ford, Chrysler Jump on Car Sale Bandwagon • After a Horrible October, GM Cars and Trucks Go On Sale Again • Ford Extends Employee Discounts Through Sept. 30 • GM Employee Discount Sputters into September • GM Extends Employee Discount Program into August • Look Out! Not All Cars Are On Sale • Ford, Chrysler Join GM in Offering Employee Discounts • GM Gives Employee Discount to Anyone --- • Consumer Comments

GM is touting a "Red Tag Sale," Chrysler wants to take you for "Miles of Freedom" and Ford promises to "Keep it Simple."

There seems to be nothing simple about it as the three largest US automakers set out to sell you one of their products before the end of the year.

The incentives war that first flared over the summer heated again in early November. But are the deals all they are cracked up to be?

If you don’t need a new car or truck, no deal is going to be good enough. Go away right now. Read something else. You ought not to be in the new car market just because Ford, GM or Chrysler needs to unload a bunch of cars or trucks no one else wants to buy.

If you are able to move beyond the "Do you really need it?" hurdle, read on.

As a rule of thumb, the manufacturer’s suggested retail price, the MSRP, is roughly 20 percent higher than the cost to produce the vehicle. The percentage can move up or down depending on the vehicle but 20 percent remains a fairly solid marker.

For example, if you are looking at a $40,000 SUV, the MSRP is most likely around $32,000. The dealer needs to make 5 percent on each sale to stay in business. The automaker takes the rest of the 20 percent that you the buyer are unable to negotiate away.

GM is touting the "Red Tag" promotion as offering its cars at the same price employees of its auto-parts suppliers pay or two percent over dealer invoice plus $100.

The red tag price reduction is a result a combination of rebates, dealer incentives and in some cases actual vehicle price cuts.

Take a hard look at the deal before you agree to buy and check the price against the 20 percent estimate. In many circumstances your savings will be about the same with the incentive package as they would be through hard negotiating any other time of the year or using a buying club or service.

Over at Chrysler, Dodge and Jeep buyers can receive a Visa debit card with about $2,400 on it. The debit card can be used for any purchases you'd like, but Chrysler advertises the debit card as gas money.

Buyers will also receive two years of free scheduled maintenance and a longer, 5-year, 60,000-mile warranty.

At Ford, "Keep it Simple" just offers reduced prices on most Ford, Lincoln and Mercury cars.

Exclusion

There are exclusions at all three automakers.

The Ford Mustang isn't offered with discounts. Neither are the Ford Fusion, Mercury Milan or Lincoln Zephyr. Those cars just came out and they're getting good reviews. Also, the Ford GT is exempt from the offers.

At GM, the Corvette, Buick Lucerne, Pontiac GTO and Solstice are not on sale.

The Dodge boys are excluding the Viper as well as other high performance vehicles.

The deepest discounts are found on vehicles that are not selling well now and probably have not sold well all year. Following the run-up in gasoline prices those vehicles tend to be large trucks and SUVs with big and powerful engines.

Before you sign the deal, remember, this is not going to be the last time the Big Three Automakers put their cars and trucks on sale.

If the numbers don’t add up, don’t do it. Not now anyway.

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