General Motors Corp.'s struggling Oldsmobile Div. sets off a round of fall incentives with a startling offer to consumers featuring no down payment, no monthly payment and no interest for one year on all of its '00-'01 vehicles.
The innovative - and some may say desperate - incentive plan is a first for a domestic automaker. It is scheduled to expire Jan. 2, but could be extended and expanded to other GM divisions. Olds decided to go ahead with the plan, not available as a leasing option, after it was highly successful in test markets in Minneapolis, San Antonio, Sacramento and Cincinnati.
One-quarter of sales came from consumers who wouldn't have considered buying an Oldsmobile if it wasn't for the Deferred Payment Purchase Program, Olds says. But its primary purpose is creating showroom traffic; only 19% of consumers actually used the incentive during the test trial. "We're pretty good at getting people to drive away in an Oldsmobile," explains an Olds spokeswoman. "The challenge is getting them to the dealership. It's a lot easier said than done to overcome an image of decades of large cars."
While it may not appear as such, William J. Lovejoy, GM's Vehicle Sales, Service and Marketing chief, argues that the program actually is consistent with the company's desire to grow market share profitably. Leasing leaves GM with residuals and it doesn't get back what it spends on cash incentives. Low annual percentage rates are the best option because they create business for General Motors Acceptance Corp., but they don't demand the publicity of the Deferred Payment Purchase Program.
"It doesn't break the bank in terms of incentive programs. But it's a very good way of managing our position (of de-emphasizing leasing) going into the fourth quarter," says Paul Ballew, general director, Global Market & Industry Analysis.
In another rare incentive move, GM announces a new national program of zero interest rate loans for five years on 15 '00 model vehicles. GM also adds $500 in cash to existing rebates on several of the vehicles. In some cases, cash incentives are hitting $3,000.
Ford Motor Co. adds or increases incentives on several '00-'01 models, including raising the $500 rebate on its '01 Explorer to $1,000. DaimlerChrysler Corp. answers by enhancing financial assistance on several vehicles, such as the '01 Jeep Cherokee and '01 Dodge Ram and Dakota.