One year after declaring bankruptcy, General Motors is proud to announce that they've netted a profit. According to the company, sales were up in May 2010 by 16.6 percent over May 2009. Ford is also posting a $2.1 billion profit for the first quarter of 2010. Even Toyota, despite their major problems regarding the unintended acceleration issue, has posted a $2.3 billion profit for its fiscal year (ending on March 31, 2010). How this happening considering the American economy has still not fully recovered?
One word: incentives. Just to get customers interested in walking into a dealership, the auto companies have been pushing huge financial incentives to buyers. Take this for example: Ford offered $1,000 rebates to Toyota and Honda customers just to encourage them switch to Ford models. For its part, GM offered no-interest loans for up to 60 months of purchase of one of its new models with a Toyota trade-in. Not to be undone, Toyota was offering incentives averaging to about $2,650 per vehicle.
The bottom line is that this is good for everyone. Auto companies are making a profit, thus keeping factories open and continuing with new product development. Dealerships are moving cars out of showroom floors and lots, and consumers are finding amazing incentives. The question is how long will this last? For automakers, they simply need to keep those incentives alive. As long as consumers continue to feel a good sense of personal job security, they'll continue spending. Now is the best time to buy a new car in a long time.
Join The Discussion