PRINCETON, N.J.-Look for heavy manufacturer incentives sometime this year, possibly right after tax rebate season, according to one analyst.
Kevin Tynan, senior automotive analyst for Bloomberg Industries, told Credit Union Journal that it will be "interesting to see" what domestic automakers do following the tax rebate season, suggesting CUs' best opportunity to compete for new car loans in 2012 might be now. "You may see manufacturer discounting like crazy after May," said the senior automotive analyst for Bloomberg Industries.
What suggests to Tynan that incentives could rapidly increase is that Detroit automakers currently have 86 days of supply. "Nominal is 55 to 65 days-you want two months of inventory and they have about three. If they can't get their inventory sold down by the time tax rebate checks are spent, that could mean more discounting."
Manufacturer incentives, according to Tynan, are actually down slightly now, giving financial institutions more room to play.
"Automotive industry incentives as a percentage of transaction costs were 7% last month. U.S. automakers from April 2011 through the end of the year did not have to discount heavily because they really were not competing with Asian manufacturers, who had no product on the ground (due to the earthquake and tsunami that wracked Japan last year)."
John Sternal and David Jacobson both believe Toyota, Honda, and Hyundai will apply heavy incentives this year. "[Toyota] just had a tough year and I expect they will do everything they can to get their share back," said Sternal, VP of LeaseTrader.com.
"Toyota is up to full speed on production," added Jacobson, president of the Hauppauge, N.Y.-based GrooveCar. "They will push incentives to become the leader again and as a result Honda will respond to keep stride."
Subcompacts, Not Subvented
But Tynan does not expect to see manufacturer discounts applied heavily, if at all, to sub-compact cars. Tynan said sub-compact sales increased 33% last year while incentives for these vehicles picked up by 42%. "There is strong demand for these cars and the manufacturers are not giving them away. In fact, consumers are paying more for them."
While the trend may leave the door open for credit unions to compete more effectively on rate for small car loans, Tynan said CUs should not lose sight that their loan portfolios may take a hit from car buyers paying more attention to fuel efficiency. "They may see more volume, but the financing amount will be smaller."
For info: www.leasetrader.com, www.groovecar.com
