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New Vehicle Incentives - What’s The Deal?

Discussion in 'Vehicle Merchandising & Inventory Software' started by Brad Korner, Jul 17, 2017.

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  1. Brad Korner

    Brad Korner
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    New vehicle incentives have been an industry staple since Joe Garagiola pitched “Buy A Car – Get A Check,” and have developed into a tool for OEM’s and dealers to leverage their marketing and advertising spend based on consumer needs. The creativeness and use cases for incentives have grown and are an important part of the retail transaction.

    Incentives are structured to support three types of deal scenarios: cash purchase (write a check/direct loan via finance institute), incentivized finance (captive or OEM approved fico) and lease (typically through a captive) all of which are referred to as “guaranteed incentives.” In addition to these types of transactions, all OEM’s utilize “conditional incentives,” those rebates and offers which are contingent on consumers qualifying based on eligibility and the compatibility of the offers. It’s important to note that every deal is unique based on the vehicle and consumer (i.e. – military, college grad, credit score, etc.). The combination of these discounts can be significant if the consumer is educated on availability either directly or by the dealer.

    New vehicle incentives are a complex structure of offerings that are often reported as a percentage of the vehicle MSRP which nets to an Actual Transaction Price (ATP). This is one way of tracking incentives, another way is how much of the total offerings were used and in what context were the incentives applied? For example, out of a total incentive amount of $8,000 ($4,000 guaranteed and $4,000 conditional), how much of that amount was used toward the transaction price compared with allocating to trade over-allowance (compensate for negative equity), decreased incentives for 0% financing, or increasing incentive money for OEM captive standard finance rates?

    From a retail perspective, working OEM incentive (VIN specific, regional/localized & loyalty/conquest offers, stair step and dealer cash) combinations allow for the flexibility needed to structure a deal that fits the consumer’s needs. Digital Retailing (DR) has advanced the use of incentives through on line consumer workflow processes. Whether online or in store, software and DR tools have transitioned the process of qualifying the buyer and structuring the transaction from complicated to simple, easy to understand deal term options. This allows dealers to present multiple price and payment options to the consumer for meeting their budget while competing with other OEM’s and dealers.

    Tracking incentives includes many different perspectives other than looking at a total percentage of MSRP or ATP figures. This can be misleading and create an impression that the industry is unhealthy or in danger. As long as production stays in line with demand, new vehicle incentives serve an important purpose for OEM’s to drive traffic through advertising, lower inventory levels, and win market share battles; all of which are measurements of success for our industry.

    The real industry pulse is whether OEM’s and dealers are making money. The flood of off lease used vehicles, tightening consumer budgets and ride sharing services pose much bigger challenges to the industry. Subscription packaging is, and will become more of an option for buyers. Incentives will continue to play a valuable part in shopper engagement through targeted advertising, marketing messages and financial affordability.
     

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  3. Mike Benavides

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    While OEMs spend millions of dollars creating and promoting incentives, why do they make it almost impossible for Tier 2 & 3 marketing agencies to access this data and incorporate it into their advertising and retailing solutions?

    Most of the reasons I hear are related to competitive intelligence, but I just don't buy it. Every OEM tracks others' I&R programs already -- and most are analyzing this data within hours of its release.

    So is this really the primary reason the data is not shared with the army of companies that can promote these incentives programs more efficiently and effectively than any OEM's existing mechanisms?

    Why else do you think this data is so closely guarded?
     
  4. reverson

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    Why does it take OEM’s 2-4 days to put the incentives up on their own website after they’re released? Chevy is notorious at this, seems like they’re missing out every month on any customer shopping at the beginning of the month.
     
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  5. Alex Snyder

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    :bump: it Tuesday. Even though this thread isn't too old, it hasn't received the engagement it deserves.
     
  6. Brad Korner

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  7. Brad Korner

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    Hi Mike,
    I think the main reason for the delay is that OEM's release their incentives to the dealers and tier 1 partners first. You're correct the trickle down waterfall doesn't normally reach tiers 2 and 3 until 48 to 72 hours after change day. There are sources like our team that have the data for all OEM's available by around 5 PM ET on Change day and mid-month changes and updates are about 4 hours. These are available through a single API for all national, regional and localized incentives.
    If you would like more info let me know.

    Thanks, Brad
     
  8. Brad Korner

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    Thanks Alex! The mystery behind incentives is going main stream in digital retailing tools and advertising - plugging into the tier 1 incentive ads will help many dealers and services providers boost their paid and organic search results of in market shoppers.
     
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