Friday, August 10, 2007

Incentives

We wrote a few weeks back about predictions. Our new research department has been looking at manufacturer incentives this week.

Many of you probably understand this trend, but it always feels better to have your ideas validated. So - prediction: new manufacturer incentives are driving down used vehicle prices.

Manufacturer incentives are good, right? The short answer is yes, but the current wave of factory incentives could push down prices on new and used cars alike.

iLUXCARS, through its extensive industry experience and (new!) Analytics Group found that generally, a $1,000 rebate on a new car translates into nearly the same discount amount on the used car value.[1]

With new incentives comes rising supplies of used cars. The time is now to take action ­– Move Your Used Cars!

Here’s Why…

Incentives usually mean that new car prices will go down, but also expect your supply of used cars to rise– squeezing prices and reducing the overall value of your used inventory.

First, incentives on new cars will make new cars cheaper, narrowing the gap between new-car and used-cars prices. This makes buying a used car less attractive to consumers, so dealers will have to discount them. Second, incentives on new cars will encourage consumers to trade-in their current vehicles to buy new ones, increasing the number of used cars on dealers’ lots. Dealers will have no choice but to cut these vehicles’ prices to move them, either directly to other consumers or at wholesale.

[1] Research from Kelley Blue Book and DMV.ORG confirm this trend.

No comments: