General Motors Corp. will offer car buyers nervous about rising interest rates a chance to lock-in today's low rates in a bid to boost its sluggish U.S. sales, car dealers briefed about GM's new sales incentive plan said on Tuesday.
Under the program, called "Lock and Roll," GM will give car buyers who purchase a new GM car or truck this month the same low financing rate when they buy another GM vehicle within five years, the dealers said.
The incentive offer is timed to coincide with an expected hike on Wednesday in interest rates by the U.S. Federal Reserve, a GM official told dealers in a briefing on Tuesday afternoon.
"Our strategy is to heavily promote this right out of the box," he said. "Timing is everything, since the Fed meeting will draw a lot of attention we should get a tremendous amount of free media."
A GM spokeswoman declined to comment on the program when asked by Reuters.
The offer also comes as GM's Chevrolet is trying to top the Ford brand as the best-selling U.S. nameplate for the first time in 18 years.
"This is a new twist," said one car dealer who was familiar with the incentive offer. "When you buy your next car, they'll guarantee the rate. You're locking in an interest rate in advance."
GM's U.S. sales have been unusually volatile this year depending on its sales incentives. Last month, GM posted a 5 percent drop in year-over-year sales, following a 20 percent spike in September results when it made a month-end offer of interest-free loans for up to six year terms.
Chevy vs. Ford
Over the course of the year, GM has gradually raised its U.S. incentives, which squeezed profits and contributed to its first net loss for its automotive operations since strikes effectively shut its North American plants in the third quarter of 1998.
Chevrolet sales of 2,316,471 through the first 10 months of this year are also within striking distance of the Ford brand, which leads by 20,751 vehicles with sales of 2,337,222.
Car dealers gave the new incentive program mixed reviews.
"I bet there's a lot of enthusiasm" among dealers, one Michigan car salesman said.
But he went on to question the offer, saying it was too complicated. It took GM officials about 25 minutes to explain it to one group of dealers on Monday, so consumers will have difficulty understanding it in a 60-second television ad, he said.
"If we don't understand the program... how the hell are you going to sell it to the public," he said. "They'd be better off throwing cash out there," he said, referring to cash incentives.
Another Michigan dealer was disappointed that it did not apply to lease offers, which account for the bulk of sales in the Detroit area where GM regularly offers lease discounts to its employees and workers at its many suppliers.
In addition, GM and many other automakers have offered interest-free loans on new cars for over three years, and some consumers might think the deals will continue indefinitely despite rising interest rates, one analyst said.
"Does the consumer or anyone believe that interest rates are going to rise dramatically?," said Jeff Schuster, senior director of global forecasting for J.D. Power and Associates. "And if you take that a step further, would you want to be locked into a GM vehicle? I would be skeptical of this as an approach if (GM is) hoping to get a big boost."