It’s a buyer’s market for car shoppers in the US, with good deals expected to last at least another month as automakers continue to match Toyota discounts that lured thousands of buyers last month.
Seeking to repair the damage from a series of safety recalls, Toyota Motor Corp offered unprecedented incentives last month, including low-interest financing and free maintenance for returning customers.
The deals worked so well that Toyota’s US sales jumped 41 percent and the automaker sold just 1,683 fewer cars than General Motors Co (GM), the closest it has ever come to overtaking GM in monthly sales, according to auto research site Edmunds.com.
GM and other automakers matched the deals, boosting the industry’s sales by 24 percent compared to the same month a year earlier, according to figures released on Thursday and compiled by AutoData Corp.
Incentives were the main factor for Jason Lopez, 26, a Toys R Us manager from Brooklyn, New York, who bought a 2010 Camry last month after his mother told him about the deals. Lopez spent about an hour researching which cars were affected by the recalls but he trusted Toyota’s reputation.
“I know it’s safe,” he said.
Lopez paid US$20,800 for the car, which was listed at US$23,115.
Industry incentives averaged US$2,742 per vehicle last month, according to Edmunds.com. That was down US$423 from record-high levels a year earlier, when the economy was faltering and automakers saw one of the worst sales months in nearly 30 years. Incentives last month rose US$100 from February.
The big change last month was Toyota, which normally limits sales promotions but resorted to them after recalls of more than 8 million vehicles worldwide for problems involving brakes and accelerator pedals.
Toyota’s incentives hit US$2,256 per vehicle, their highest level ever, up nearly US$700 from the year before. Toyota’s incentives averaged US$1,700 before the crisis began last fall, Jesse Toprak of auto pricing site TrueCar.com said.
Toyota is offering current owners interest-free financing for 60 months on the popular Camry sedan. On a base model with automatic transmission that costs US$21,395, the financing would save a buyer US$3,722 compared with the average new-car interest rate of 6.5 percent.
Leasing may be this month’s incentive battleground. Honda recently added a US$250 per month lease on an Accord with nothing down. Toyota is offering US$169 per month on Camrys for three years with US$1,999 down.
Toprak said the sweet lease deals are likely to continue for many months because automakers have access to inexpensive money. High demand for used cars also has driven up resale values, so automakers can afford better deals.
Toyota’s incentives are scheduled to run through Monday, but Don Esmond, senior vice president of automotive operations at Toyota Motor Sales USA, said that some are likely to extend beyond that date. Toyota executives will evaluate market conditions over the weekend and decide.
“We needed a little bit of a kick-start to get the market in our direction,” he said. “We’re not going to walk away from our customers.”
Toyota also continues to face lingering questions about its safety record. Last week, the federal government announced an investigation to see whether electronics caused sudden acceleration problems in Toyotas and other cars.
Honda Motor Co has already matched Toyota’s incentives through May 3, so automakers will be forced to compete through this month. And new deals are in the works. Ford Motor Co plans to announce a new program next week that will offer cash to switch to a Ford.
Eventually, however, incentives will drop because automakers are limiting production more than they used to so they don’t have large inventories to get rid of, according to Jessica Caldwell, an industry analyst for Edmunds.com. That could lead to lower sales because consumers have been trained to wait for deals.
The flurry of incentives has made it tough for automakers to gauge the strength of the industry’s recovery. Sales rose 15.5 percent in the first three months of this year, but some of that was due to heavy fleet sales, which are less profitable for automakers.
Ford’s chief economist, Ellen Hughes-Cromwick, said the industry is on track for sales of 11.5 million new vehicles this year, 1 million more than last year, but far below the 17 million sold five years ago.
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