What will those wily car-sellers come up with next? They've offered 0% financing, big rebates, guaranteed hefty trade-in values, and even free gas. (My parents were offered free car washes by a Honda dealer.) Well, here's a sales strategy that's new to me -- free car insurance.
At an Australian auto news site, I read that down under, DaimlerChrysler (NYSE: DCX) is dangling two years' free car insurance to prospective buyers of its new Dodge Nitro SUV. The value of that carrot was calculated to be up to roughly 10% of the value of the vehicle -- no small matter.
When I read this, I imagined that we'd soon see this kind of promotion being offered here in America. But then I learned that Volkswagen has already offered it here in some markets, to try and light a fire under slowing sales. So perhaps a U.S.-based flurry of free insurance offers is about to erupt.
Indeed, the American auto industry is ailing, so there's every reason to look to new kinds of incentive to try to build sales. General Motors (NYSE: GM) recently reported a 24% fall in June sales, while Ford (NYSE: F) sales dropped 11% and Chrysler fell 5%. Meanwhile, Japanese automakers Nissan (Nasdaq: NSANY), Toyota (NYSE: TM), and Honda (NYSE: HMC) all reported rising sales. Lest you think that incentives are only for those desperate for sales, Toyota offered 0% financing and cash rebates on its new Tundra pickups, leading to Tundra sales more than doubling. General Motors, with the worst showing, had actually cut back on its incentives.
What to do
So, should you excitedly wait to buy your next car with free insurance? Not necessarily. Remember that these offers can cost the dealers up to around $3,000 per year per transaction -- with younger drivers standing to gain the most. If a dealer is losing that much on a sale, he or she will likely be aiming to make much or all of that up elsewhere in the deal.
Study up on car-buying before you engage in it. Remember that you probably only buy vehicles once every few years, at most, while dealers are selling many cars per day. Who do you think is more skilled and has the upper hand in such a negotiation? It's often the dealer. If you arm yourself with info, though, you stand a fighting chance of getting a much better deal. Learn much more in our Buying a Car nook and our Buying and Maintaining a Car discussion board.
Keep learning
Learn what you need to know about insurance in our Insurance Center. You may not have thought about some kinds of insurance, such as disability or long-term care insurance, but they're vital for many people. And, of course, properly insuring your property is vital, too.
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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Nissan Motor is a Global Gains recommendation. Try any one of our investing services free for 30 days. The Motley Fool isFools writing for Fools.
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