LOS ANGELES -- Although its public display of cash incentives remained modest, Toyota Division increased incentives spending across its model line in 2003. The company shows few signs of slowing down this year, industry trackers say.
Toyota's advertising rarely included a cash-back offer of more than $1,000. But the automaker increased its use of less obvious incentives such as dealer cash and subsidized finance and lease rates.
According to CNW Marketing/Research Inc., in Bandon, Ore., Toyota's incentives spending per vehicle increased throughout 2003, peaking in December at $2,766 per unit. Toyota's average sales-weighted incentives per unit last year were $2,393, up from $2,144 in 2002.
But in January, Toyota surpassed last year's outflow, spending $2,891 per unit.
"Toyota is spending money on everything, whether it's giving cash directly to the customer, giving it to dealers to spend on the customer, or a low APR or special financing deal," says CNW President Art Spinella. "They are very efficient at using the money they spend on the products that need it."
Toyota's incentives spending still trailed the industry average last year by $767 to $1,667, depending on the month. General Motors' incentives were nearly double what Toyota spent in some months, according to CNW data. And the gap between Toyota and the industry average for the year grew to its largest amount ever.
Dealer doled cash
Jim Lentz, Toyota's vice president of marketing, will not confirm CNW's estimates. But he acknowledges that Toyota's incentives budget grew last year, much of it in dealer cash doled out by regional managers.
Lentz calls Toyota's incentives boost last year "commensurate with our sales increase" of 6.3 percent in 2003.
Toyota Financial Services also expects an increase in incentives costs for the year ending March 31, says Dave Nordstrom, the company's corporate manager of product and remarketing. Nordstrom would not give an estimate for the next fiscal year.
|Move the metal|
|Toyota and industry incentives by month|
|Source: CNW/Marketing Research|
Lentz says the sharp upward tick in incentives spending in January reflected Toyota's need to remain competitive.
"The last three years have been a mirror image," Lentz says. "We see fairly aggressive spending during the model year that peaks (at the end of the model year), then slows in the fourth quarter. But then we see another upward spiral in January.
"Detroit says they're working hard to get out of the incentive game, but if January is any indication, that won't be the case for the first quarter."
Spinella applauds Toyota's tactic
of letting dealers decide where to spend incentives money, rather than attaching cash-back offers to every car.
"You can throw a lot of money away on someone who would have bought your car anyway," Spinella says. "So why not give the money to your dealer and let him make up his mind whether he wants to give the customer the money? Toyota isn't using incentives to drive floor traffic like GM. They are using incentives to close deals."
Automakers rarely divulge their incentives spending per unit for competitive reasons. And because analysts use different methods to calculate incentives, getting an exact figure for how much money a company is spending is murky.
The Power Information Network, which tracks retail transactions at the dealer level, shows Toyota's average cash incentives never went above $1,158 or below $850 per unit last year. But that figure does not include dealer cash.
|Here are Toyota's and the industry's average incentives by year.|
|Source: CNW/Marketing Research Inc.|
Spinella says his calculations include "anything that takes profit out of the bottom line," which includes dealer reward trips, regional incentives, "special edition" options, and savings and commissions paid to F&I departments by the captive finance company. As a result, his figures are higher.
Lentz says it is hard for third parties to get a full picture of Toyota incentives spending because much of that spending occurs regionally.
"Rarely," Lentz says, "do we come up with a national incentive program that applies to all regions the same."