Consumer Reports Finds Domestic-Car Buyers Still Prefer “Cash On The Hood”

Recent attempts to reduce incentives may not be resonating with consumers

YONKERS, NY - May 9, 2006: Despite a major attempt to break free of costly iincentives, domestic automakers are finding new-car buyers are still hooked on getting cash back, a new analysis by Consumer Reports’ Auto Price Service has determined.

According to Rob Gentile, director of Consumer Reports' Auto Price Service, General Motor's Total Value Promise pricing plan, announced in January at the 2006 North American International Auto Show, dropped by 68% the number of incentives offered, yet the carmaker's overall sales still fell for the first three months of 2006, versus the same period last year. Ford also cut incentives and experienced a slight loss in sales. Chrysler did see small gains, with incentives relatively flat. Sales continued to slide in April, with rising gas prices acting as an additional damper.

Such trends indicate incentives, which affect the Bottom Line Price, are still an important factor to consumers in the market for a new domestic car. And though the number of those incentives has been reduced, Consumer Reports' Auto Price Service research shows overall spending remains high. The average offer from GM is $2,433; from Ford $2,612; and from Chrysler $1,969; all significantly higher than ccompetitors. Consumer Reports' Bottom Line Price is a better guide to what the dealer paid for a new car. It takes into account national and regional customer rebates and incentives as well as unadvertised, "behind the scenes," dealer incentives and holdbacks. Consumer Reports recommends consumers start negotiating using this price.

"Many of last year's domestic models have seen a sales drop after incentives were reduced" said Gentile. "And that's across the board, not just for fuel-thirsty vehicles." He did point out that some new models are selling well without incentives, against previous-year models with big cash-back offers.

For example, Consumer Reports'Auto Price Service determined that for the 2006 Cadillac Escalade AWD, with a $5,500 cash back offer, consumers should be able to negotiate to a Bottom Line Price of $45,848. By comparison, the Bottom Line Price on a 2007 Escalade AWD is $51,358. Still, GM reported first-quarter retail sales of the 2007 Escalade were significant enough to dramatically boost revenues. Similarly, the 2006 Dodge Neon SXT has a Bottom Line Price of $12,132 after $3,000 cash back while its replacement, the 2007 Caliber, has a Bottom Line Price of $14,044 after only $500 cash back. Now in its first full month on the market, Dodge expects Caliber sales to quickly pass those of Neon.

In comparison to the domestic manufacturers Toyota and Honda both saw sales increases during the first quarter of 2006, even though incentive spending dropped. Toyota's average incentive offer dropped 38% to $816, from $1,319. Honda continued to offer no cash incentives. Only Nissan saw a slight sales drop in the first quarter, though its average incentive offer also dropped 28% to $1,461, from $2,033.

Twenty years ago Consumer Reports was the first major information provider to give consumers a glimpse beyond the MSRP, or window sticker price. Today, Consumer Reports’ Auto Price Service provides consumers information on what dealers actually pay for a new car and its options and packages ­ giving consumers the ability to negotiate a fair price.

Consumer Reports recently introduced its Bottom Line Price, a new approach to help car shoppers cut through the confusion of buying a car. The Bottom Line Price takes into consideration what the dealer actually paid for a car, plus all incentives and rebates, to provide consumers with an accurate number at which to start negotiating. Knowing the Bottom Line Price levels the playing field between consumers and dealers, helping car shoppers save hundreds, even thousands, on a new-car purchase. Products include the New Car Buying Kit ($39 for three mos.); Used Car Buying Kit ($24 for three mos.); New Car Price Report ($14); and Used Car Price Report ($12).