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Holiday Car Deals? Strong Sales Might Make Automakers Say Bah Humbug

img369340369 1448399857445 jpg 2015 Buick LaCrosse; | photo by Evan Sears; Monkey Business Images

Years ago, savvy shoppers would wait until the day after Christmas to get the best deals. These days, though, the biggest discounts might be on Black Friday, Cyber Monday — or any other day of the week before or after Christmas.

The same is true in the auto industry, where year-end sales often start before the frost is on the pumpkin, and the deals could get better at closing time as brands try to end the calendar year on a high note. But with auto sales strong this year, how good are year-end deals?

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The fiercest competition in the auto industry is in the luxury segment, where three brands are competing to be No. 1. The luxury sales race has been a two-way battle between intramural rivals BMW and Mercedes-Benz in recent years, but this year Lexus is back in the game. Through October, BMW — the defending champ — held a razor-thin lead over Mercedes (not including the Sprinter van). Lexus was lurking in third place.

Year-end sales are already in full swing at all three. BMW has Novemberfest, Mercedes launched its Winter Event before the leaves turned colors in many parts of the country, and Lexus started its December to Remember sales promotion a month early. But current offers on directly competing models show that none of the top three luxury brands appears to be going wild with discounts this year.  
Comparing three-year leases, BMW is offering the 2016 320i xDrive sedan for $349 per month, Mercedes-Benz has the 2016 C300 4Matic for $409 per month, and Lexus is offering the IS 300 AWD for $359. Sound good? The catch is in the upfront costs due at the lease signing: $4,024 at BMW, $4,703 at Mercedes and $2,399 at Lexus. (Offers might differ by region.)

For those who would rather buy than lease, BMW and Lexus have financing as low as 0.9 percent and Mercedes 2.99 percent, but those rates are for loans only up to 36 months. The lease deals and low-interest financing offered by Lexus run through Jan. 4, but the current BMW and Mercedes promotions end Nov. 30. That means their deals could get better after automakers report November sales on Dec. 1. In addition to the advertised discounts from the manufacturers, dealers may add their own price cuts to increase sales in the sprint to the finish.

Buick’s take on holiday incentives is a little different. With the Black Friday Sales Event, Buick is offering up to 20 percent cash back on vehicles in stock the longest. For example, a 2015 Buick LaCrosse with an MSRP of $40,005 could be eligible for an $8,001 cash back incentive, according to the brand’s website. 

Discounts typically increase across the auto industry at the end of the year, but IHS Automotive analyst Chris Hopson said automakers aren’t going crazy with incentives this year to artificially stoke sales like they have in the past. Those attention-grabbing lease offers from luxury brands, for example, are just the cost of doing business, a result of the intense competition for customers, he said.

“There’s nothing jumping out dramatically with incentives. It’s almost like a pay-to-play situation in the luxury space; it’s just part of participating in that area,” Hopson said in a telephone interview. “Everybody wants to maintain their market share and not lose sales. It’s something that is part and parcel of competition in the U.S.”

A decade or so ago, one or two major automakers would launch a big incentive program, such as zero-percent financing on all models, and the rest of the industry would follow suit. Once the incentive programs ended, sales would drop dramatically in what analysts described as a “payback” period. This year, though, sales have continued to exceed expectations without huge incentives.

Incentives are used more strategically now, Hopson said, with automakers targeting specific models instead of discounting all or most vehicles by thousands of dollars. “Nothing is out of whack,” Hopson said. “It’s just a nice environment for high sales.”

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