Are vehicle buyer incentives losing their effect?

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By: Wise Marketer Staff |

Posted on August 20, 2004

Auto manufacturers may need to reconsider marketing strategies because vehicle-buying incentives and rebates are having a lessening impact on automobile purchase decisions, according to a new study published by Maritz Automotive Research.

The Maritz '2004 New Vehicle Customer Study' (NVCS) reports that while the average size of rebates and incentives has grown by 10% year-on-year since 2002, consumers seem to be less interested in incentive offerings, and manufacturers seem to be getting fewer long term benefits as a result.

Rebate cost growing
According to the study, the average amount of rebates and cash incentives continues to grow, and the cost to manufacturers (as a percentage of the total new vehicle price) also continues to increase. The biggest jump occurred with domestic manufacturers who increased incentives and rebates from around US$2,000 in 2002 to almost US$2,800 in 2004.

"Rebates and incentives are not having the same dramatic impact on purchasing as they once had," said Mike House, vice president and director of the Maritz automotive market analysis group. "There is concern that as interest rates rise, and as manufacturers commit substantial dollars in the form of rebates and cash incentives, there will be minimal long term impact on market share."

Influence declining
Indeed, the influence of rebates and incentives on customers' choice is declining for all but the Korean manufacturers (possibly because the Koreans had a large increase in the percentage of customers receiving rebates and incentives in 2004). According to the report, the decline from 2002 to 2004 is most evident among domestic manufacturers, with only 30% of customers in 2004 citing incentives and rebates as a reason for purchase timing (down from 40% in 2002).

The study also warns that customer perceptions of vehicles are not swayed by a rebate or a cash incentive. In fact, satisfaction scores with new vehicles remained unchanged for the three years examined by the report. "Manufacturers are getting little long-term benefit from the use of incentives," added House. "Although when first offered, rebates and incentives pushed consumers to enter the market sooner but, over time, they have had less impact."

The report
The Maritz Automotive Research Group's NVCS surveys approximately 90,000 new car owners and lessees each year, and has been conducted since 1969. The study examines topics such as vehicle choice, purchase decisions, internet usage, shopping experience, financing and insurance, initial quality, vehicle usage, feature satisfaction, loyalty, and aftermarket accessories. The NVCS and its derivative report, 'The Status of Rebates and Cash Incentives', can be purchased online from Maritz Automotive Research

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