Watch for "Value Pricing"

A number of carmakers are going to give "value pricing" a try for 2006. Since it may affect what you pay for your next car, you should be aware of this new automotive marketing technique.

Value pricing is simply reducing vehicle sticker prices to more realistic levels -- the prices that customers are actually paying for those vehicles. This will reduce the need to negotiate and haggle for discounts. It is also hoped, by car manufacturers, that this will reduce or eliminate the need for cutthroat discounting and incentive programs that seem to have become fixtures in the industry. Carmakers, and dealers, simply can't survive if current levels of price cutting continue.

There are, of course, many questions about how value pricing will be structured and how it will be accepted by automotive consumers. Will prices actually be noticeably lower? After the first year, will customers realize that the prices are discounted from previous levels? Will all carmakers play along? Will dealers accept the new program? Will customers still want to negotiate for even lower prices?

The success of this new pricing scheme will depend on how it's marketed and implemented. The highly competitive nature of the automotive sales business makes dealers and manufacturers resort to techniques that tend to set customer expectation levels for a long time into the future. Dealers can't advertise "lower-than-invoice" price promotions and not expect customers to think that, indeed, it is possible to buy cars at those prices at any time, if you negotiate hard enough. It will be very difficult, if not impossible, for carmakers and dealers to change the customer mindset that they've been building up for many years.