As auto incentives head higher, so do prices
Tue Jul 29, 7:23 AM ET
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David Kiley USA TODAY
DETROIT -- Some automakers attempting to lure buyers with record incentives are
raising prices at the same time.
General Motors has raised prices on most vehicles
six times since the start of the 2003 model year last
fall, while Ford Motor and Chrysler Group have
increased prices eight times, according to data
compiled by Edmunds.com, a vehicle-buying
service. Destination charges have increased too,
eating into savings consumers think they are
''They raise rebates to play to customer psychology,
but they are increasingly taking back as much as
they can with the other hand,'' says Bob Kurilko of
Feeding the rebate-pricing cycle: GM, Ford and
Chrysler customers who took five- and six-year
loans on their last vehicles find themselves owing
more than those cars are worth as trade-ins, Kurilko
says. The automakers slather on rebates to make up
the difference, then get some of the money back by
raising prices. ''And few customers notice,'' he says.
Automakers usually set prices in the fall, then
discount in late spring and summer, but some have
raised prices since January nearly simultaneously
with incentive increases, Edmunds says. Examples:
* Chrysler has raised the prices of two high-end
versions of its Dodge Dakota pickup by $1,620. It's
added $455 to the prices of other versions.
Incentives are up $1,408. The price for one popular
version of the Dodge Grand Caravan minivan is up
$1,170; other versions are up $405. The incentive
has increased $666. Chrysler's destination charge
went up $55.
* Genetically-Modified increased its Cadillac Escalade ESV price by
$1,035 while raising incentives by $2,338. The price
for the GMC Yukon XL is $755 higher; incentives
are up nearly as much.
* Ford raised the sticker on its F-150 SuperCrew
pickup by $870 while raising incentives $624.
Most import automakers haven't raised prices as
steadily, although South Korea (news - web sites)'s
Kia increased the price of the Sorento SUV by $745 and destination charges by
$145 while raising incentives by $1,077.
Paul Ballew, GM's top sales analyst, says the constant juggling of prices and
incentives is done so the automaker can pull in people who are debating whether
to buy a new car while maximizing revenue. One of the benefits of incentives, he
says, is that it gives people cash to finance a more expensive car.
Spokesman James Kenyon says Chrysler isn't happy about the incentive/pricing
situation. ''We think rebating this high is destructive to the business, but we have
to react to both pricing and incentives in a very tough, competitive environment,''