GM Unveils New Discount Loan Plan for 80% of Line
In an attempt to cushion the blow to its sales following the expiration last Saturday of its 7.7% discount financing program, General Motors announced Monday a new sales campaign featuring 9.9% financing on most of its cars and light trucks.
Analysts said the move should help the auto maker maintain its ambitious auto production schedules through the first quarter. The increase from 7.7% to 9.9% in GM’s loan program also will reduce GM’s costs of continuing its promotional campaign while maintaining some level of consumer interest in its products as the industry moves into the spring selling season.
Waiting for Spring Sales
“It makes sense for GM to offer something that will keep people coming into showrooms until the company sees how sales are in the spring,” said John Hammond, an analyst with Data Resources, an economic forecasting firm. “If sales start off slow in the spring, you can bet they will come back with a more aggressive campaign,” Hammond added.
GM said the 9.9% financing--which is still several percentage points below the current rates of between 12.5% and 14% for new-car loans offered by major California banks--applies to cars and trucks delivered after Feb. 24 and will be available indefinitely. The company also said it is extending 7.7% financing on two slow-selling subcompact models--the Chevrolet Chevette and the Pontiac 1000. Nearly 80% of its cars and trucks will be covered by the new incentives, GM said.
But on some of its mid-size and intermediate car lines, GM will offer the discount financing only on models equipped with fuel-efficient four-cylinder engines. GM said it wants to push the smaller engines in an effort to comply with federal fuel economy standards.
Hasn’t Met Fuel Standards
GM has been unable to meet the federal standards for several years because it has been selling so many big cars and relatively few smaller, fuel-efficient models. Although the Reagan Administration has moved to relax the standards to ease the pressure on GM and Ford, both firms are still in danger of paying huge fines for violating the rules if they don’t start selling more small cars.
Most analysts had been expecting GM to continue its sales incentives and now believe that the entire domestic industry will be forced to run promotional campaigns throughout most of 1986 in order to avoid losing sales to the Japanese as well as the growing number of inexpensive imports entering the market for the first time from South Korea, Yugoslavia and other developing nations.
Although it didn’t announce any new incentives Monday, Ford, which let its earlier incentives expire Saturday, is widely expected to follow GM’s lead, perhaps as early as today.
Chrysler, meanwhile, announced last week that it was extending until Feb. 28 its earlier offer of a wide variety of cash rebates and discounted interest rates on most of its car and truck lines. Chrysler also said it will extend its incentives on its Dodge Omni and Plymouth Horizon subcompacts until May 14, when it plans to introduce 1987 versions of the cars that will carry permanently lower prices.
American Motors, which has seen its passenger car sales plummet over the last year, said Monday that it was extending its earlier offer of 7.5% and 7.9% discount financing, as well as cash rebates, on its Renault Alliance and Encore subcompacts, Renault Sportwagon station wagons and Jeep Comanche pickup trucks. The incentives, which were scheduled to expire this month, will now run until March 9.
Currently, the only major importer offering incentives is Nissan, which announced last week that it would offer 7.7% discount financing on its light trucks until May 2.
