Wednesday

Mazda To Kill Its Rebates & Sales Incentives

Mazda has just announced that it is going to kill off US rebates and sales incentives in order to stabilize its prices and profits, according to Automotive News magazine. Frankly, it's an approach Detroit might want to consider.

Mazda says it will gradually reduce and then eliminate its incentive programs, including its reduced lease program, on its new models. Its profits had been improving in the face of reduced incentives ($1,800 per vehicle in 2nd quarter this year) from a year ago ($2,000).

Meanwhile, the Big 3 have taken the opposite approach. They've been offering discounts and incentives for the last 5 years under the theory that selling more vehicles would increase profitability. The first half of this year saw incentives averaging $3,400 per US-built new car. To stay competitive with Detroit's incentive advertising, Honda and Toyota offered something too but it was less than $900 in sales incentive money.

So, who's right? Depends on how you look at it, I suppose. One thing seems obvious though: it's probably all smoke and mirrors anyway.

Anyone who thinks that the incentives aren't being paid for by the customer in one way or another is probably ripe for PT Barnum's pickings. Personally, I think we'd all be better off if Detroit just priced their vehicles at the lowest price point that would allow for a reasonable profit and then forget about the rebate and incentive shell game. At least then, we'd all the numbers are "real."

After all, if Detroit can afford to cut $3,400 out of its profit on a new car, then they must be priced too high in the first place. Kind of makes you wonder if they haven't been gouging us all along, doesn't it? Come to think of it, they could just keep the prices where they are and put that rebate money into building higher quality and reliability into the product in the first place. Or, they could answer industry critics, and let their dealers make a little bit more of the profit and still keep the prices the same or lower.

I think most people would rather pay more and know they aren't buying a lemon, than to pay less and then find out that their new car fails The Lemon Test.