Incentives made complex

I just read over at GMInsideNews that General Motors has announced two new incentives. With the first, they give you an extra $1,000 if you trade in any 1999 or newer vehicle on a new large truck. In the other, they’ll give you an extra $1,000 if you lease a vehicle for 36 or more months. These incentives are in addition to the regular rebates, the loyalty programs, the competitive vehicle programs, and whatever else they’ve got going on.

Just a few years ago GM claimed to have learned that simple incentives that were readily understood worked best. So they made the same incentives available on just about every model they offered. Yet many of their latest incentives are complicated and apply to a very limited range of vehicles. In addition to those mentioned above, late last year Cadillac offered free navigation systems on “specially-equipped vehicles.” And it’s not just GM. I’ve seen offers for free leather upholstery, free moonroofs, free entertainment systems, and free third-row seats from other manufacturers. What gives? Are incentives most effective when simple, or when complicated?

I suspect it depends on whether you’re trying to maximize sales by pulling people into the showrooms, or you want to maximize profits by narrowly targeting incentives and applying them only when necessary to close a deal. It seems GM’s objectives have shifter from the former to the latter.

Even with the latter objective, I don’t understand the purpose of the “free feature” incentives. If you want the feature, then you’ll readily pay a reasonable price for it. If you don’t want the feature, but it’s being given away for free, you’ll take it, but you won’t be much more likely to buy the vehicle as a result.

In its price comparisons, TrueDelta only includes incentives available to everyone (well, everyone in the Chicago region). So, to be sure you’re getting the best deal, I’d suggest finding a good salesperson and making it clear that you very much want to know every incentives you qualify for.

When I bought my current car, I managed to qualify for a “friends and family” price, a $2,500 regular rebate, a $500 student rebate, and a $250 financing rebate (I refinanced ten days later to get a better rate). The dealer also passed along a $1,000 factory-to-dealer incentive. In the end, I paid about $13,400 for a car with an MSRP of $18,995. When incentives become complicated, it pays to do your homework.