Automakers roll out incentives to woo uncertain consumers
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This year was forecast to be a pretty good one for carmakers. Then came COVID-19.
Eric Lyman, analyst at TrueCar, had estimated new vehicles sales would total 17 million in 2020. But he’s adjusted that down — hard.
“We’re expecting to land somewhere around 13.2 million, in the most likely outcome,” Lyman said.
Automakers need to keep sales up to keep cash flowing, so they’re offering big incentives. Not just cheap deals and low or zero interest financing, but flexibility. Like Ford, which is offering deferred car payments for up to six months for “peace of mind.”
Most mid-market automakers are making offers like Fords.
“They’re very similar to what we saw back in 2009 and 2010, as the market crashed,” said Jim Houston, who monitors Consumer Lending and Auto Finance at JD Power. He said there’s a big difference this time. Back then, some finance companies were folding. For now, at least, lenders have plenty of available credit.
Auto analyst Rebecca Lindland said carmakers are also making these finance offers, in part to support their local dealerships.
“If a dealer goes out of business, it really negatively affects the community in which that dealer usually worked,” Lindland said.
While these incentives could lead to great deals on new cars for some shoppers, Lindland also warns that buyers should tread carefully. Six months may not turn out to be much of a buffer for people who lose their jobs.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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