Toyota's aggressive new-car incentives have spurred sales this month but also have eroded prices for the brand's late-model used cars and threaten to undercut one of the company's greatest assets: pricing power.
The low-rate lease deals and 0 percent loans are working, with some Toyota dealers reporting sales up as much as 50 percent compared with February. And there are no plans to let up.
"We have every intention to offer the most aggressive incentives we possibly can for our customers for the entire year," said Ed Sheehy, president of Southeast Toyota LLC, Toyota's largest distributor.
But although dealer traffic is up, analysts say the spiffs could damage a brand that traditionally got by with low incentives in part because its resale values were the envy of the industry.
"Incentives fuel sales from bargain shoppers," said James Bell, an analyst at Kelley Blue Book. "But once that audience is satisfied, it remains to be seen how much buyer interest they will see -- no matter how much cash they put on the hood."
On March 1, Toyota Motor Sales U.S.A. Inc. introduced free-maintenance incentives, subsidized leases and 0 percent financing over five years. Over the life of the loan, 0 percent saves the borrower about $5,000 compared to an industry-average 6.6 percent loan.
Long-term high incentives could damage the brand's image, render Toyota's new-car sticker prices meaningless and change the way the company goes to market.