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Toyota Dealers Dig Deep to Sway New Customers

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On: Wed, Oct 27, 2010 at 1:20PM | By: Sherry Christiansen

Toyota Dealers Dig Deep to Sway New Customers

Although Toyota sales have been affected by recent safety issues and recalls of Toyota vehicles, the Japanese automaker has managed to hold on to a high percentage of its brand loyal customers.  In fact, in recent months, Toyota’s sales records have returned to pre-recall levels.  

But in order for Toyota to promote sales recovery, the company has had to offer much higher incentives and promotions than ever before, causing to dealers to accept lower gross profits. Toyota’s sticker prices on new 2011 models are the lowest of all “mainstream brands,” according to Truecar.com.

Of course some discounts are covered by factory incentives, even so, dealers have had to give up more on bottom line prices.  "We're seeing it; the pressure is definitely on the bottom line, the gross line," said Jack Wilson, president of Toyota of Vallejo, north of San Francisco. "I see no reason other than we're still recovering from the recall situation. It's a factor, and we can't sit and not talk about it."

According to Automotive News; “Toyota's transaction prices traditionally start the model year much stronger. Every Toyota brand model is seeing weak dealer gross margins.
Discounts for Lexus brand have also increased, but not nearly as high as Toyota.

"The most worrying thing is if [Toyota dealers] are already offering the highest discounts in mid-October, where is Toyota going to be in February or the middle of next year?" Toprak said. "The trend trajectory is not looking great for their pricing."

Many other automotive brands are offering deep discounts as well, Ford Motor Company, for example, accounted for 9 of the top 10 most discounted brands for its 2010 models, according to facts from TrueCar.com. Ford’s average discount for 2010 models was 14.7% less than full sticker price, and Mercury was 11.5% less.

According to Toyota executives and dealers, keeping loyal Toyota customers has not proven to be difficult, but convincing new customers to buy Toyota has meant that Toyota has had to “dig deeper into the incentive pot to convert a sale.”


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