That Car With Bow Is a Gift for Automakers

DETROIT ( MainStreet) -- Every holiday season, Toyota trots out its Lexus commercials featuring well-off couples and families waking up on Christmas morn to a bow-topped car sitting in the driveway. Does this happen anywhere besides commercial breaks in holiday specials and bowl games?

Yes, but perhaps not as often as automakers would like.

Even during years when sales are dismal, automakers often get some nice gift-wrapped year-end holiday sales once December rolls around. Last December, auto pricing Web site TrueCar noted that vehicle prices dropped between half a percent and 2.1% from the year before, depending on the automaker, while falling 0.1% to nearly 1% from a month earlier.

Vehicle incentives, meanwhile, jumped 6.7% from November and nearly 1% since December 2009. Toyota ( TM) alone increased incentives 36.5% from the previous holiday season, while Honda ( HMC) beefed up its holiday giveaways by 66%. Even as vehicle sales last year sputtered to 11.6 million during the second-slowest sales year since 2008, sales jumped from 873,000 vehicles in November to 1.1 million in December.

That holiday sales total was also 11% in December 2009, which wasn't such a shabby month for car sales itself considering the circumstances. During a 2009 selling year when the industry moved a paltry 10.4 million cars off the lot and saw post-crash sales tank by 21.4%, December sales actually managed 15% improvement from 2008. That year, TrueCar found that six of the 10 best days to buy a car fell in December and provided average discounts between 6.74% and 7.25%

"Although there aren't as many 2011 vehicles as there were older model years in years past, I think the dealers that have those that are out there will be willing to let them go at a discount even if a cash incentive isn't available," says Alec Gutierrez, an analyst for automobile pricing firm Kelley Blue Book. "If consumers are looking to buy a gift for a loved one or a child in the family that just got their drivers' license or is headed off to college next year, December would be the month to do it."

While there are no statistics on cars as holiday gifts items and little anecdotal evidence of the same, a potential gift car buyer faces a holiday market much like that awaiting holiday shoppers heading to a discount store in search of cheap televisions or video game consoles. TrueCar goes so far as to call Black Friday the best automobile shopping day of the year, with dealers offering average discounts of 9.5% off the manufacturer's suggested retail price. This year, Mitsubishi made its 2011 Endeavor the $500 50-inch HDTV of the auto world by offering it at a 23.3% discount on Black Friday.

The December discounts get pretty deep as well. Last year, Honda's "Happy Honda Days" offered financing as low as 0.9% for 60 months or 1.9% APR for up to 36 months and no money down on leases on selected models. Its Acura luxury marque's "Season of Reason" promotion meant 0.9% APR for 24 to 36 months or 1.9% APR for 37 to 60 months, as well as $0 down payment, $0 security deposit, $0 first month's payment, and $0 due at lease signing on select models.

BMW, meanwhile, offered holiday credits of $1,500 to $2,500 on certain vehicles and lease financing rates as low as 0.9% or no down payment. Mercedes Benz was slightly more stingy in offering 1.9% APR sales incentives from 24 to 36 months on most of its models. As for that Lexus "December To Remember," last year's deal gift-wrapped APRs as low as 1.9% for up to 60 months on select models.

Though the earthquake and tsunami in Japan this year dropped Toyota and Honda inventory from a nearly 60-day supply of vehicles to a 34- to 37-day supply today, Kelley Blue Book's Gutierrez expects cash incentives to dwindle as APR support rises to help drivers take advantage of low interest rates. Despite that hurdle, automobile sales and leasing cycles still tend to work to a buyer's advantage around this time of year.

"December is a particularly good time for luxury-brand sales, usually their highest sales all year," says Kristen Andersson, analyst for TrueCar. "It mostly has to do with vehicles coming off lease and people purchasing/leasing a new vehicle in December."

After being a decidedly average month for auto sales since 1991, December got into the holiday spirit after the economic downturn and became the No. 2 sales month for all of 2009, according to automotive cost-comparison site Edmunds.com. Last December produced the most auto sales of any month on the calendar behind huge incentives and pent-up demand.

Since 2009, December has been the No. 1 sales month for Acura, Audi, BMW, Cadillac ( GM), Infiniti, Land Rover, Lexus and Mercedes-Benz. The past two Decembers have been the highest-volume month for almost every brand except Jaguar, which considered it second-best in 2009 and strictly middling last year.

Ivan Drury, an analyst at Edmunds, sees this as the best evidence that automotive gift giving isn't just some commercial fable, but economic reality. He insists that buying a car with wood-grain accents, all-leather interior, space-detecting parking sensors and heads-up display basically amounts to a gift purchase, even if that present is meant for the buyer.

Drury has a sleigh full of support for his self-gifting Santa theory. A survey by National Retail Federation and BIG Research, for example, found that holiday shoppers plan to spend 14% more on themselves this holiday season than last year. While that gives luxury automakers and holiday car shoppers who feel they've been extra nice this year reason for holiday cheer, putting a bow on that holiday buy may be a bit much when the neighbors are trying to stick to their holiday budgets.

"With Lexus pushing luxury sales by having the 'December to Remember' it does cause a chain reaction for other luxury automakers to up the advertising and incentives," says Ivan Drury, analyst for Edmunds. "If anyone were to have enough income to purchase a luxury vehicle during a time that you're busy spending on travel, gifts/presents, dinner out and all the other holiday expenses that come along with December, I'd certainly classify a luxury vehicle as a gift."

-- Written by Jason Notte in Boston.

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Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

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