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Rising Rebates Risk Disrupting Customer Buying Cycle, ThunderRoad CEO Says

  • Natalie Mattila
  • November 27, 2017
  • 0

LAS VEGAS — Manufacturer rebates may create sales problems and disrupt the customer buying cycle if rebate amounts continue to increase, Donal Hummer Jr., president and chief executive at ThunderRoad Financial, said during a fireside chat at PowerSports Finance 2017.

“In the last three-and-a-half years, I think I’ve seen the rebates that are offered on powersports vehicles go from $300 to $400, now they are $3,000 to $5,000 — almost 25%, sometimes 30% of the value of product,” Hummer said. “That genie is never going back in the bottle. It is concerning from our standpoint as we see these [rebates] because of how people are going to look at this industry and performance of the portfolio of the products.”

More specifically, if a $20,000 vehicle has a $5,000 rebate, the recovery rate upon repossession is unfavorable, he said.

Arctic Cat Inc., as one example, is offering rebates as high as $4,000 plus 0% financing for 60 months on select, new 2013 through 2017 snowmobile models, according to the OEM’s website.

Additionally, high rebates can hurt customers. If a customer who purchases a vehicle without a rebate decides a couple years later to trade up, but sees the vehicle is worth half of what he thought it was, then he might be dissuaded from purchasing another one, Hummer said.

The fix is for manufacturers to offer rate subvention — rather than rebates — in partnership with financial institutions, Hummer added. Rate subvention doesn’t change the price of the vehicle, therefore, it limits severity.

“At the end of the day, the goal is to manufacture more bikes and to make it easier for dealers to sell more bikes,” he said. “You should be able to offer those types of [subvention] programs to anyone who wants to finance those products.”

For more coverage on PowerSports Finance 2017click here.

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