How Dealer Incentives Affect Consumers

September 25th, 2012
Insurance Tips

What do you do when you want your sales team to move units? Incentives, commissions and bonuses. The automaker/dealer world is not much different. Often an automaker will offer incentives to dealers to sell a specific model.

The bonus incentives are referred to as stair-step programs. The automaker sets a target for sales goals, each time a dealer achieves that goal they are offered increasing bonuses. GM has offered these bonuses to move the new Chevy Volt. If a dealership can triple its’ targeted sales goal, the dealer will be paid a bonus of $2,500 for each Volt sold.

A dealer in the Washington area brought in $100k in bonus incentives by selling 40 Chevy Volts so far this year. So how did they do it? Well the beauty of the incentive program is that it affords the dealership the ability to run extremely aggressive pricing, in hopes that they will achieve the bonuses for reimbursement.

For the consumer, dealer incentives are a slightly double-edged sword. On the one hand, the prices dealers are willing to offer on models that offer incentives can be beneficial to the consumer. It is a relative trickle down effect.

On the other hand, dealer incentives may cause a salesman to pressure a consumer into purchasing a model that offers bonuses as opposed to a vehicle fits their needs. For example, if you walked on to a Chevy lot to buy a Cobalt, considering the bonuses a salesperson may attempt to sway you to buy a Chevy Volt.

To avoid this issue, make sure you research the vehicle you want. It is best to set up an appointment with a dealer to test drive and be shown the exact model you went to purchase. Looking to buy a new car? You can inquire right here under the New Car Tab and have dealers compete for your business. They will know exactly what it is you want without the thought of pressuring you to purchase a model that offers them a bonus.

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