Breaking News—Automotive sales “employee discount programs”

Automotive sales “employee discount programs”—good deal or not?

Remar Sutton, DCU StreetWise Spokesperson

In June GM introduced its “You pay what we pay” marketing campaign which touted that consumers could buy their cars for what their employees pay. The simple approach appealed to consumers, GMs sales rose 41% in June, the highest in 19 years. Now Ford and Chrysler are offering similar programs. GM has extended its program until September 30th. As of September 5th, Ford has made no announcement about extending the program but was said to be considering its options. Chrysler's plan is open-ended. Most vehicles covered by the plans are 2005 models; selected 2006 models from some manufacturers are also included.

The question for new car buyers: “Is the deal as good as it sounds.” The answer is perhaps. But you won't know unless you still do your homework. There are several things you need to know.

All models aren't in the program—most 2005 models but not all. A few selected 2006 models are also included. Those models excluded from the programs are typically among the manufacturers' best sellers. For instance, GM's program doesn't include Chevrolet Corvette, Pontiac GTO, or medium duty trucks. Ford excludes popular Mustang models or its hybrid Explorer SUV. Chryslers also has exclusions.

“Employee discount” doesn't mean “dealer cost.” The prices advertised certainly represent discounts from Manufacturer's Suggested Retail Price. But you won't know whether that discount is a “deal” unless you find out what the vehicle cost the dealer using the steps in our Car Buying Guide.

Stay alert for “dealer stickers” and “add-ons.” Dealers may post their sticker with charges for “add-on” products, services, and fees. If you don't want these add-ons, reject them. If you do want them, negotiate the cost.

Remember that the cost of the new car is just one area in which the dealership is seeking to make a profit on you. Other areas where the dealership looks to profit include the value of your trade in (if any), aftermarket sales of services such as “protection packages” and “extended warranties,” and, of course, financing.

THE BOTTOMLINE: Don't automatically fall for what sounds like a deal. Do your homework. Always find out what the new car cost the dealer. Set the bargaining in your favor by bargaining from cost—you won't know if you can do better than the “employee discount” price unless you try. Be aware of the other profit centers and negotiate all costs.

And for your financing, check out the rates at DCU and get a pre-approval before shopping. Comparison shopping has proved for hundreds of members that credit union financing could save them big bucks over other financing sources.

Breaking news analysis prepared for DCU by Remar Sutton & Associates, July 2005 updated August 2005.