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Analysts: Domestic Car Sales Will be Weak Without Incentives

October 8, 1986

DETROIT (AP) _ American car buyers, spoiled by September’s interest-rate war among major U.S. automakers, will be hard to coax into showrooms without similar goodies through the end of 1986, analysts say.

General Motors Corp., which started the rate war on 1986 models, and Ford Motor Co. will stop offering 2.9 percent annual interest rate financing and cash rebates at close of business today. An incentive plan by American Motors also expires tonight.

Chrysler Corp.’s 2.4 percent, two-year financing and other low-interest and rebate packages, also offered on some 1987 models, ends Sunday night.

″Car sales are going to collapse without incentives,″ said David Healy, an auto industry analyst with Drexel Burnham Lambert Inc. in New York.

GM launched the low rates in late August to clear out an 80-day backlog of 1986 models. Although neither Ford nor Chrysler had similar backlogs, they were forced to cut rates to remain competitive.

American Motors Corp. offered a zero percent financing plan on some purchases and 2.9 percent on others.

The automakers probably will rebuild inventory during the fourth quarter of 1986 and then watch sales in early 1987 before deciding whether to offer new incentives, said Gary Glaser, industry analyst with First Boston Corp. of New York.

The incentive battle spurred September car and truck sales to record one- month levels at GM and set a September sales record for the domestic industry as a whole.

″I think the auto industry has trained the average car buyer not to come into the showroom unless incentives are offered,″ Healy said. ″The industry has made incentive addicts out of consumers.″

Dealers contacted by The Associated Press on Tuesday said customers weren’t breaking down their doors for last-chance purchases.

″There’s no sense of urgency in the consumer’s mind at all. They’re pretty well sure that it’s going to be extended or (the company’s) going to come out with something new,″ said Ronny Vann, sales supervisor at Boswell Chevrolet in Carrollton, Texas. ″We haven’t even seen the usual end-of-month push this month.″

Vann said it would be a ″big mistake″ if GM doesn’t come up with new financial bait for buyers.

GM spokesman Harold Jackson, however, on Tuesday promised that ″we have no intention of announcing any incentives with introduction of our 1987 models.″

Chrysler and Ford representatives on Tuesday also said no new incentives were planned.

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