Automakers, listen to your captives

Affordability issues will likely drive down new-vehicle sales, but automakers with captive finance companies have an advantage: a lender of their own -- with intel.

Automakers should listen to their captive finance companies about which incentives would best move metal off dealerships' lots. The automaker and captive relationship is becoming increasingly important for new-vehicle sales as many lenders and dealers double down in the used-vehicle market. Properly aimed incentives will drive sales and customer loyalty in the next few years, especially as automakers' product lineups become more pickup- and SUV-heavy.

General Motors has been trying to build up its captive business for years. When President Dan Ammann moves to Cruise, the company's autonomous vehicle unit, GM CEO Marry Barra will oversee the captive, GM Financial. Michelle Krebs, executive analyst at Autotrader, believes that will help focus Barra on the captive side.

"That's going to be a really important part of the business going forward," Krebs told Automotive News. "I would think she wants to pay much closer attention to it."

And she's right. As Cox Automotive noted in its most recent Dealer Sentiment Index, affordability problems are already hampering business now and darkening dealer outlooks for next year.

Cost cutting is a smart tactic automakers are employing to stay afloat in the case of another economic downturn, but that doesn't mean they should skimp on incentives. Offering automaker incentives is a strength unique to captives. If automakers want their dealerships to maintain a healthy new-vehicle business, they should work with their captives to determine which incentives will help move big vehicles with even bigger price tags.

You can reach Jackie Charniga at jcharniga@crain.com -- Follow Jackie on Twitter: @jccharniga

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