Car Discount's No Gimmick

General Motors is extending to Aug. 1 the sales promotion that is offering vehicles for the same price that GM employees pay. Now Ford and Chrysler want to do it, too. Why? Financial adviser Ray Martin explains as part of his regular appearance on The Early Show.
General Motors found great success when it began offering customers its employee discount, and now the other two big American automakers (Ford and Chrysler) are following suit. GM reported that its sales increased by 41 percent in June '05 versus June '04, thanks to the program.

There are no gimmicks here, no hidden costs or inflated prices. GM is, indeed, offering consumers exactly what it says: the same prices on 2005 vehicles that employees pay. Not only are customers getting a good deal, many say they believe the program takes away one of the most distasteful parts of buying a new car: negotiating the price and being left with the nagging feeling that you're getting ripped off.

The program includes most GM vehicles, and Ford and Chrysler are both saying that most of their vehicles will also be made available at employee discount prices. Each automaker has a handful of vehicles that are not included, including the Chevy Corvette, Ford Mustang and Dodge Charger sedan.

To clarify: the employee discount is the bottom-line price. You cannot talk dealers down below this price. But that's OK, because, in general, these employee discounts are about 4 to 6 percent below dealer costs. That's a great price.

Typically, even after buyers negotiate a car price, experts say they are lucky if they wind up paying hundreds of dollars above dealer costs. So GM's employee discount program really is a great deal for consumers, and it sounds as though Ford's and Chrysler's will be equally good deals.

Here's even better news for buyers: In addition to the employee discount, some models continue to carry cash rebates or other incentives. You don't have to ask for these or haggle for them. They will simply be rolled into your final purchase price automatically.

For example, Ford is offering the Explorer XLT SUV for $24,739. That's about $8100 below the sticker price - you get the employee discount and a $4000 cash rebate.

Of course, the automakers are not doing this out of the kindness of their hearts. GM kicked off the promotion in June in hopes of clearing lots for new 2006 vehicles. GM had simply not been selling enough cars, and inventory was too high. They had the option of shutting down their plants for the summer and not making more cars, but they would have had to continue paying employees. So, it wound up being cheaper to sell discounted vehicles instead of paying employees to sit idle.