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 | | From: | Edmund Fitzgerald | | Subject: | Volkswagen tries luring buyers with free insurance offer | | Date: | Fri, 21 Jan 2005 22:13:37 -0500 |
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 | From:
http://news.xinhuanet.com/english/2005-01/03/content_2410499.htm
Volkswagen tries luring buyers with free insurance offer
www.chinaview.cn
2005-01-03 14:34:27
BEIJING, Jan. 3 -- Volkswagen AG, after its third straight year of
falling US sales, will offer free auto insurance for a year in Illinois and
Wisconsin to win buyers, dealers said.
The German automaker from January 4 through March 31 will test the
programme by offering 12 months of free insurance to people with valid
driver's licenses who buy or lease new Golfs, Beetle coupes and Beetle
convertibles, according to Illinois and Wisconsin dealers. Volkswagen
spokesman Tony Fouladpour would not comment on the programme.
"It's definitely original and unique, and I think it will be a lure for
college graduates and first-time buyers," said Harry Nesbitt, sales manager
at D'Arcy Volkswagen in Joliet, Illinois. "It's a way to get people in the
dealership without sounding like everyone else."
Automakers in the United States have boosted incentive spending 7.2 per
cent this year, with rebates as high as US$8,000 on some models, to lure
shoppers conditioned to expect deals.
Volkswagen turned to low-interest loans and reduced-priced leases in
March for the first time in several years to boost demand as its models
aged.
Sales of the Volkswagen brand fell 17.6 per cent in the US through
November. Bayerische Motoren Werke AG, based in Munich, this year may
outsell Volkswagen, of Wolfsburg, Germany, for only the second time since
Volkswagen entered the United States in 1949.
Zimbrick Volkswagen in Middleton, Wisconsin, has ordered more Beetle and
Golf models in expectations that the offer will increase sales, said sales
manager Amy Wach. The programme, open only to residents of states where it's
offered, won't hurt the resale value of the models as higher rebates do, she
said.
Every US$1 worth of incentives on a new vehicle takes away about US$1.05
from the value of the car if the customer tries to sell it three years
later, said Art Spinella, whose CNW Marketing Research in Bandon, Oregon,
tracks auto-top incentive programs. Rebates cut the value of used models
because buyers are paying less for the new car or truck, he said.
General Motors Corp, the world's largest automaker, has also been
varying its ways of luring buyers this year. Its offers have included
overnight test drives, 72-hour sales and a programme tied to the US federal
interest rate increase that allowed buyers to lock in an interest rate this
year on a car or truck purchase five years in the future.
"People just aren't motivated by incentives anymore," said Spinella.
"People expect to get a US$4,000 rebate no matter what."
The Volkswagen programme would be the first insurance giveaway by an
automaker, he said. If the programme is successful "other automakers will
follow, no question. This could be a new trend for the industry," Spinella
said.
Only about 7 per cent of customers this month said they buy sooner or
decide to purchase a new car instead of used because of increased rebates,
compared with 20 per cent in 1990, he said. In addition, 23 per cent of
buyers say they don't buy new because of the high price of insurance,
Spinella said, citing CNW consumer surveys.
"It's a great deal, and we certainly need it," said Bill Hunt, sales
manager at Hall Imports in Racine, Wisconsin, where sales have increased
more than 25 per cent since the automaker returned to incentives. "We need
something different to stay ahead because incentives keep getting more
competitive."
Among people likely to buy a Volkswagen Beetle or Golf, the average
insurance premium is US$846 a year, according to insurance data compiled by
CNW. Dealers said the programme won't be restricted based on driving
records.
Volkswagen, Europe's largest automaker, expects US sales to begin rising
toward the end of next year as it introduces several new models, Len Hunt,
the head of Volkswagen's US brand, said in August. The automaker will
replace the Jetta in March 2005 and the Passat in the fourth quarter and
introduce the new Golf GTI at the end of 2005, Hunt said at the time.
Automakers' US incentive spending rose to US$4,320 a vehicle through
December 29 from US$4,249 in November, according to CNW. Volkswagen
incentives rose to US$2,996 in December from US$2,791 the previous month,
CNW said.
Incentive spending by all automakers in the US is expected to rise 20
per cent to a record US$60 billion this year from US$50 billion last year,
according to CNW. The totals exclude money spent by dealers. Incentives were
offered on 90 per cent of all models sold this year, compared with 43 per
cent in August 2001, prior to the 9/11 terrorist attacks in the United
States.
(Source:China Daily/Jeff Green)
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