New Round of New Car Buying Incentives

A few days ago GM announced a new incentive program called their "Red Tag" sale. GM dealers will be posting the selling prices on new cars in the form of a red tag hanging in the window. These incentives are on 2005 and 2006 models with few exceptions.

It appears that these sale prices are about $100 more than the selling prices in the previous "Employee Discount" sale that recently expired. Chrysler has already announced it will be coming out with something in a few days to compete with GM. No doubt Ford will be right behind them.

Car dealers are not happy that the manufactures are forcing these pricing restrictions on them. This kind of program, like the previous "Employee Discount" program, limits the dealers ability to make profit on new vehicle sales.

Car sales people don't like these sales either because in most cases they are limited to a $50 commission on new vehicles. Imagine the frustration a salesman feels when he or she takes 3 or 4 hours to sell a $25,000 - $35,000 vehicle and only makes a $50 commission.

I'm all for the consumer getting the best possible deal, but the sales people who are on the front lines should be compensated fairly at the same time. Most of them work on a straight commission basis with no salary at all.

Some of my contacts in car dealerships have told me that since the factory has tied their hands on pricing they are now trying to take trades below their normal value in order to make up some of the lost potential profit. I've been told by one friend who sells cars in a GM dealership that they are undervaluing trades by at least $1,000 whenever possible to make up some of the profit lost on the new vehicle sale.

They are also trying to make bigger gross profits on used car sales. Normally car dealers will average $1,500 to $1.800 profit on used vehicles, but with the profits down on the new side they are holding out for averages in the $2,500 to $3,000 range. So beware!

Remember, if you are in the market for a new or used vehicle read some of the tips and articles on my website at www.InsiderCarSecrets.com . The information there will help you successfully navigate the mine fields of the car buying process without getting blown out of the water! Pardon the pun!

Until next time...

Tony Iorio
email: tony@insidercarsecrets.com
www.InsiderCarSecrets.com