Don’t be impressed when a car dealership manager offers to throw in a few free oil changes on a new car purchase. General Motors is upping the ante in buyer incentives by including MetLife auto insurance coverage for a full year on new vehicles bought in the Northwest.
Now through September 6, residents of Oregon and Washington who purchase a new Buick, Cadillac, Chevrolet, or GMC will be offered an auto insurance policy that exceeds the states’ minimum coverage requirements—at no cost whatsoever to the buyer. Would-be buyers can check out all the details and fine print at individual web pages set up for Buick, Cadillac, Chevy, and GMC.
Why is GM limiting this promotion only to the Northwest? GM executives told CNNMoney that the company wanted to give the new marketing strategy a test run, and that if it proves successful the program could be rolled out to other parts of the country.
GM also wanted to boost sluggish sales in Oregon and Washington, where American cars aren’t as popular as in other parts of the country. In a recent survey from CarGurus.com that ranked car-buying preferences in 50 U.S. cities, drivers in Oregon and Washington’s two biggest cities (Portland and Seattle) tended to like Asian cars over American-made vehicles. Only 37% of Portland drivers and 34% of drivers in Seattle said they were most interested in American brands, compared to 67% in St. Louis and Detroit.
So GM, or Ford for that matter, has its work cut out for it enticing many American drivers into buying American again. Will the seemingly impressive insurance incentive do the trick? It can’t hurt.
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But how much does the free policy actually save the car buyer? According to CarInsurance.com, the average annual auto insurance premium is $1,352 in Washington and $1,189 in Oregon, both below the national average of $1,440.
So the “free” insurance amounts to an added value of roughly $1,200 to $1,350. Is that enough of a deal to make denizens of the Northwest bite? Well, if they’re being asked to pay sticker price in order to get the insurance policy, it shouldn’t be. Edmunds data shows that in April 2011, incentives totaling over $3,000 accompanied the sale of the average GM vehicle, and that was while incentives were at their lowest levels since 2005.
GM hasn’t stipulated that buyers must pay sticker price in order to get the insurance thrown in, but a spokesperson for the car maker did tell CNNMoney that the price of a car would be the same whether or not the buyer accepts the insurance policy.
Free insurance certainly has the potential to sweeten the deal on a new car purchase. But if that’s the only incentive offered by the car dealer, then it’s not a good deal at all. The promotion also makes no sense if you wind up with a car you really don’t want.
The point is: The freebie, while unprecedented and exciting, shouldn’t have all that much influence on your car-buying decisions. It’s nice, but it doesn’t pack enough value on its own to make snapping up the first Buick you see a good idea. Accept the free insurance in the same way you’d use any cash-back or 0% financing incentive: They’re only parts of what goes into negotiations at the dealership, not the be-all and end-all of wheeling and dealing.