Toyota Incentives to Affect New, Used Truck Sales

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An analyst from Edmunds' AutoObserver.com explained how the recent cash incentives given by Toyota to promote its full-size pickup show the current sluggish status of Tundra sales and the resulting effect on sale prices for used Tundras.

Analyst Alex Rosten commented during an interview with Auto Remarketing about the $1,000 in dealer cash Toyota is giving for the Tundra Double Cab and $2,000 for the Tundra Regular Cab.

"A couple of thousand dollars in dealer cash on your trucks just a couple of months after you've launched is not a good sign," Rosten said.

"It means that Toyota is falling short of their sales target this month so they're really trying to push up the volume to meet their monthly sales target. I don't think they're going to. They haven't released their target, but they've said they want to sell 200,000 trucks this year. That's probably not going to happen," he continued.

Rosten went on to note the great differences between the 2007 Tundra and versions of the pickup from '05 and '06.

"For the Toyota loyalist, the problem is the new Tundra is so much better than the old one," Rosten pointed out.

"You can now get a new Tundra for a couple thousand dollars less, that's going to drive down the value of the used ones. The older model Tundra, it's a good truck, but compared to the new model, it's inferior," he continued.

"In general any time a new incentive comes out, it impacts the most recent used model year. So in this case, the 2006 model will be affected by about 70 to 80 percent of what that current incentive would be. An extra $1,000 off on a 2007 Tundra will probably impact a 2006 Tundra by about $700 to $800," Rosten added.

Rosten also pointed out how the 2007 Tundra is at a disadvantage because it was introduced later in the year — after the Super Bowl — and its average transaction price is higher than full-size trucks offered by Chevrolet, Ford, Dodge, GMC and Nissan. However, the Tundra has additional standard features on its base model that the other nameplates do not have such as stability control and side air bags, according to Rosten.

"Most of it you can't really see when you walk into the dealership," Rosten pointed.

"Toyota also hasn't done a very good job of marketing the added content they've put into the truck. If somebody does some research, they're mainly going to just see the price. That's going to turn them away, particularly for conquest buyers who are coming from other brands," he continued.

"I don't think the sales staffs at dealerships have done a very good job, either, of conveying that message. But it's really not their responsibility. Toyota should be conveying that message about all of the added content," Rosten said.

The recent incentive announcement by Toyota might be just the start of a series, Rosten said.

"If you're looking to buy a used Tundra and can find a 2005 or 2006 model, this is good news because you could find them on the cheap side," he pointed out.

"If Toyota's launching cash back this early in the game, over the summer when the incentive battle really heats up, the incentives will really increase and they'll be even more discounts on the truck," Rosten added.

Effect of Toyota's Decision on Other Nameplates

Toyota's incentive announcement prompted other OEMs to reveal promotions to boost full-size pickup sales.

The offer from GMC and Chevrolet is $1,000 bonus cash and APR rates ranging from 0 to 4.9 percent. The incentive from Dodge is the choice of $3,000 to $5,000 bonus cash or APR rates ranging from 0 to 5.9 percent. The choice from Ford is $3,000 bonus cash or APR rates ranging from 0 to 2.9 percent.

Edmunds.com officials recommended consumers who are in the market for a full-size pickup to use these incentives.

"Truck shoppers would be wise to take advantage of this unexpected opportunity to get a great deal on a new truck," noted Phil Reed, consumer advice editor for Edmunds.com.

"There are many terrific new vehicles on the market, and yet market conditions are forcing the automakers to offer dueling incentives that will allow consumers to save a lot of money on the purchase," Reed concluded.