Volt Incentives Climb to $10K in August

[JasonM]

http://www.detroitnews.com/article/20120922/AUTO0103/209220373/1148/auto01/GM-offers-big-discounts-boost-Volt-sales

 

"Sales rose mostly because of discounts of almost $10,000, or 25 percent of the Volt's sticker price, according to figures from TrueCar.com, an auto pricing website. Other pricing services gave similar numbers, and dealers confirmed that steeply discounted Volts are selling better than a few months ago."

 

" It costs $60,000 to $75,000 to build a Volt, including development, manufacturing and raw materials, estimates Sandy Munro, president of Munro & Associates, a Troy, Mich., a company that analyzes vehicle production expenses for automakers. Much of the cost comes from an expensive combination of two power systems — electric and gasoline. With a sticker price of $40,000, minus the $10,000 the company pays in incentives, GM gets roughly $30,000 for every Volt. So it could be losing at least $30,000 per car."

[jpd80]

http://www.detroitne...oost-Volt-sales

 

"Sales rose mostly because of discounts of almost $10,000, or 25 percent of the Volt's sticker price, according to figures from TrueCar.com, an auto pricing website.

That basically covers: 1) the Federal government tax credit of $7,500, 2) a state government allowance of $1500 and 3) a $1,000 incentive from GM

Those allowance have been available for quite a few months but possibly, the GM $1,000 incentive is relatively recent...

Edited September 23, 2012 by jpd80

[jpd80]

Let's not forget that C-Max Energi and Fusion Energi plug in hybrids will also qualify for similar tax credits and state incentives.

Given the MSRPs of those two Fords, they should be considerably cheaper than Volt which should add devilish spice to the mix...

Edited September 23, 2012 by jpd80

[JasonM]

The Federal tax credits have always been available. The article addresses the tax credits, and states they're not included in the figure.

 

"GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers"

Edited September 23, 2012 by JasonM

[jpd80]

The Federal tax credits have always been available. The article addresses the tax credits, and states they're not included in the figure.

 

"GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers"

This is a trail of innuendo,

Please re read the whole article as this author is playing games with figures to make the Volt look really bad.

Anyone who goes to the length of amortizing a cars development costs over to date sales is not being impartial.

 

GM does offer its own incentives on top of the tax Credit and State incentives but no way is it $10,000 a car.

 

Volt MSRP = $40,000 - goes to GM

Federal Tax credit = $7,500 - goes to buyer

State Incentive = $1,500 - goes to buyer

 

So GM basically receives $40,000 for Volts from buyers (who get $9,000 from governments)

before it offers anything in the form of cash incentives back to buyers...

 

And be very careful about seemingly low cost leases of $199/mth, we're not privy to the conditions like

lease sign up costs and any penalties for exceeding certain mileage in the two year lease agreement.

 

Now consider the cost of Ford's C-Max and Fusion Energi hybrids at around $32,000 to $33,000

before any of the above incentives apply - I personally think GM is foxing on development costs.

it's one area where a lot of self charge costs can be attached

 

 

but Ford's energi hybrids will kick GM's but big time.

Edited September 24, 2012 by jpd80

[jpd80]

And were those incentives and lease deals merely to clear a handful 2012 Volts?

As I see the 2013 Volt is now on sale...

Edited September 24, 2012 by jpd80

[JasonM]

The incentives don't come in the form of a cash rebate. They come in two forms, $2500 to the dealer and subvented leases.

 

"GM spokesman Jim Cain says most of the Volt discounts come in the form of lease deals, which account for about two-thirds of sales. In some markets, Volts can be leased for $249 per month with $2,400 down."

 

The $249, $2400 down lease is a standard 24 month lease subvented by GM. The Volt has a 53% residual after 24 months.

[jpd80]

Basically that adds up to the buyer getting interest free loan for 24 months provided he pays full MSRP - $2500 incentive FOR 2012 Volt, not 2013 Volt ($1,500)

On top of that the the buyer gets $9,000 in Federal tax credit and State Incentive but, the kicker is that the residual after two years is 53% of MSRP or approx $20,700

 

Let me recap:

GM receives $39,100 for sale of each 2012 Volt and then GM gives back $2,500 in incentives and offers buyers 24 months finance

at $249/mth with $2400 down at signing. The buyer then ends up with a two year old Volt that has around $20,700 still owing on it...

 

I'm no expert on financing but subveening the cost of a car on a lease means that the buyer is getting screwed on the residual,

I doubt you could sell a two year old volt for over $20,000 especially when people know what you paid for it new ($31,000)

 

At the moment, Chevrolet dealers have around 5,300 Volts in inventory, 3,723 that are 2013 models and just over 1500 that are 2012 models.

GM is still making way too many Volts for the size of the market...a nd that's the real reason they stopped making Volt not the other poppycock.

Edited September 25, 2012 by jpd80

[JasonM]

Basically that adds up to the buyer getting interest free loan for 24 months provided he pays full MSRP - $2500 incentive FOR 2012 Volt, not 2013 Volt ($1,500)

On top of that the the buyer gets $9,000 in Federal tax credit and State Incentive but, the kicker is that the residual after two years is 53% of MSRP or approx $20,700

 

 

This is an example of another Volt lease, notice the large cash incentive off MSRP.

 

Program #13-40B 24 months 24,000 miles

 

Selling price:

$39,995.00

 

Selling price after cash incentive program:

$34,295.00

 

Down payment:

$2,400.00

 

1st month payment:

$584.23

 

Estimated monthly payment: $584.23

 

 

The GM lease is the same term and same down payment, but only $249 a month, not $584. That difference between the GM lease and the above lease is what's being subvented by GM. GM is paying to get an artifically low monthly payment.

 

The bottom line is GM is throwing sugnificant sums at this car to force it off the lots.

Edited September 26, 2012 by JasonM

[jpd80]

The GM lease is the same term and same down payment, but only $249 a month, not $584. That difference between the GM lease and the above lease is what's being subvented by GM. GM is paying to get an artifically low monthly payment.

 

The bottom line is GM is throwing sugnificant sums at this car to force it off the lots.

It's not subvention, it's subduction, low lease payments almost guarantee tha their buyers are getting skinned by high residual value.

Even with a GM deduction of $5,000, those $580 a month repayments are not gonna fly, people know it's too much.

 

The difference between our opinions is that you believe GM is throwing away money on Incentives while I believe

that GM is being sneaky by offering "attractive leasing" plans that bite buyers in the ass at time of return..

 

The devil is in the detail, look closely at the figures and you'll see what I mean..buyer agony at lease pay out or refinance.

Edited September 26, 2012 by jpd80

[FordBuyer]

This is an example of another Volt lease, notice the large cash incentive off MSRP.

 

Program #13-40B 24 months 24,000 miles

 

Selling price:

$39,995.00

 

Selling price after cash incentive program:

$34,295.00

 

Down payment:

$2,400.00

 

1st month payment:

$584.23

 

Estimated monthly payment: $584.23

 

 

The GM lease is the same term and same down payment, but only $249 a month, not $584. That difference between the GM lease and the above lease is what's being subvented by GM. GM is paying to get an artifically low monthly payment.

 

The bottom line is GM is throwing sugnificant sums at this car to force it off the lots.

 

One could also say that GM is trying to get a lot of EV's out onto streets so that they are seen more and become more accepted and push infrastructure projects for their needs. There are two new Volts for sale on Chevy lot by me...one stickers for $42,000 and dealer is offering it for $41,000 and other is about $40,000 and being offered for $39,000. No big incentives here for buying outright anyway. With Tesla not being able to meet production goals on its new Model S, it will be interesting to see Volt sales over coming months. With the Leaf dead in water, and Ford's Energi models not in sight yet, Volt is really only game in town.

[akirby]

It's not subvention, it's subduction, low lease payments almost guarantee tha their buyers are getting skinned by high residual value.

Even with a GM deduction of $5,000, those $580 a month repayments are not gonna fly, people know it's too much.

 

The difference between our opinions is that you believe GM is throwing away money on Incentives while I believe

that GM is being sneaky by offering "attractive leasing" plans that bite buyers in the ass at time of return..

 

The devil is in the detail, look closely at the figures and you'll see what I mean..buyer agony at lease pay out or refinance.

 

This only hurts the buyer if they want to actually keep the vehicle and even then it only hurts them if they raised the residual value higher than market making it hard to get a loan.

 

I would assume most people taking this kind of lease would simply walk away and in that case it's a great deal.

[RichardJensen]

It's not subvention, it's subduction, low lease payments almost guarantee tha their buyers are getting skinned by high residual value.

That's not quite how it works. Consider:

 

- If the company sets an artificially high residual, then it's no real loss to the buyer, because the buyer just walks at the end of the lease. The mfr. takes the hit when they subsequently auction the vehicle for much less than its residual.

 

Look at the lease and auction as being the process by which the vehicle repays the finance arm:

 

(1) Finance arm 'buys' the vehicle from the dealership for some discount off the total cash flows of the lease.

 

(2) Finance arm recoups that 'purchase' through cash flows from the customer, in the total lease payments over the course of the lease, plus either the purchase of the vehicle at lease end OR

 

(3) Finance arm recoups final piece of cash flow through the auction of the vehicle at the end of the lease.

 

Now, if the residual is unreasonably high, the finance company takes a hit when the total amount of cash received from the vehicle is tallied:

 

Imagine a $30k car with 60% residual after 2 years and monthly payments of $500.

 

Okay, finance company is going to get $12k over the course of the lease from the customer.

 

Now they turn around and auction the car, and because they set the residual too high, they only get $15k for the car.

 

Now, if you assume that they paid the dealership $29k for the car, they only received $27k from the auction and payments, and they've just lost $2k on that car.

 

That loss is reflected on the bottom line of their parent company--or, in the case of something like Ally & GM, GM probably guarantees to make Ally *whole* in such an event.

 

-----

 

Thus, if you look at that $249 lease payment, compared with the rate at a zero money factor ($584.23) and a 53% residual off the customer price ($34k), you're looking at roughly $8k in assistance that GM is providing to the finance company, in order to make the lease payment attractive.

 

-----

 

And that doesn't get into the question of interest on the money.

 

Consider our hypothetical instance above.

 

The finance company purchases the vehicle from the dealer.

 

Where does the money to purchase that vehicle come from?

 

Either cash from the sale of other loans, packaged as securities, or loans that are secured by the finance company's portfolio of loans (loans being assets for the finance company).

 

In either case, the finance company has to pay interest on the money it uses to purchase these vehicles.

 

So, in addition to any costs that may go into making the leases attractive (the $8k that GM appears to be providing to get the lease payment to $249), the lease company needs to be reimbursed for the interest income that it is foregoing by offering zero interest loans.

 

Calculation of that is rather complex and I won't go into it, but suffice to say, these lease deals can be quite expensive--and the shorter the lease term and the smaller the lease payment, likely the more expensive the lease to the manufacturer.

Edited September 26, 2012 by RichardJensen

[FordBuyer]

Lutz quote yesterday on Volt:

 

In the meantime, says Lutz, GM "is satisfied" with the progress of the Volt. Its sales are increasing, although the company is not yet making money on the vehicle. He says reports of huge factory discounts on the Volt are wrong but the company is offering "very good lease rates" on the vehicle. And the Volt , which gets "well over 250 miles per gallon" has already saved several supertankers worth of fuel in a year.

[RichardJensen]

Lutz is not definitive. The guy insisted that UAW labor doesn't even cost GM $50/hour.

[jpd80]

OK everyone, maybeI haven't looked far enough downstream with residuals as to where the money trail goes with Volt incentives.

I guess the giveaway is GM offering 0% finance for 60 or 72 months, that's the equivalent of a $4,000 to $5,000 cash incentive,

if they do that for some, then surely the other packages would have similar benefit to buyers.

 

As a comparator, Volt has gone on sale in Australia at $60,000 - no incentives and almost three times the price of 1.8 Cruze..

 

I wonder if C-Max energi and Fusion Energi at around $32,000 RRP will put even more pressure on the arguably smaller Volt...

Edited September 27, 2012 by jpd80