Fear is a strong motivator in the current economy, especially when it comes to making a major purchase such as an automobile. In fact, even qualified buyers who can easily afford a new car payment are hesitant to commit to doling out cash on a monthly basis for a period 3 to 5 years, simply because they may not be confident in the stability of their employment situation. This has wreaked havoc on the standard distribution model of the automotive business, with unsold cars stacking up not only at dealerships but also at ports and staging facilities across North America, Europe and Japan.
The consumer fear of adding a new monthly financial obligation is one that has generated some rather clever responses from the major car companies. In January, announced that those who purchased a brand new vehicle from one of their dealerships and who subsequently lost their jobs in the first year of ownership would be able to return the car. After Hyundai's sales rose 14% by the end of the month compared to January 2008, soon announced that they were considering implementing a similar program.
Beating them to the punch, however, is AutoNation Inc, a conglomerate which owns 313 dealerships across the United States. They have decided to offer the same protection plan to all customers: in the event of job loss, AutoNation Inc will make payments on any vehicle for as long as 6 months. While the program does include a 90 day waiting period, it comes at no extra cost to the buyer, which is sure to make the idea of purchasing from this chain of dealers quite appealing to buyers jittery about the future. AutoNation Inc have decided to first implement the plan in southern Florida, where it will be available at 33 of its dealerships.
The decision by the dealership group to offer its own form of financial incentive or guarantee to buyers on the fence indicates just how frustrated some of those on the front lines of auto sales have become with manufacturers. While most of the current media focus is on the struggle faced by the car companies themselves, dealerships are also facing bankruptcy and hardship due to a lack of consumer confidence. There are many dealers who feel as though they are not being given enough support from the head office, which leads to extreme measures such as those taken by AutoNation Inc.
From a buyer's perspective, increased competition between dealerships only sweetens a market which is already heavily tilted in favor of shoppers. Combined with the deep rebates being offered on both 2008 and 2009 models, these new dealership schemes mean there has never been a better time to haggle on a new vehicle. In the coming months, it is almost certain that more car sellers will follow suit with their own plans to entice reluctant drivers to part with their cash and clunkers and drive home in something new, shiny - and cheap.