Free Car Insurance with VW purchase

By Jeff Green

Of Bloomberg News



Volkswagen AG, in its third straight year of declining U.S. sales, will offer free auto insurance in Illinois and Wisconsin to attract buyers, dealers said.



The German automaker from Tuesday through March 31 will test the program by offering 12 months of free insurance to people with valid driver's licenses who buy or lease new Golfs, Beetle coupes and Beetle convertibles, according to Illinois and Wisconsin dealers. Volkswagen spokesman Tony Fouladpour wouldn't comment on the program.



''It's definitely original and unique, and I think it will be a lure for college graduates and first-time buyers,'' said Harry Nesbitt, sales manager at D'Arcy Volkswagen in Joliet, Ill. ''It's a way to get people in the dealership without sounding like everyone else.''



Automakers in the United States boosted incentive spending 7.2 percent last year, with rebates as high as $8,000 on some models, to lure shoppers conditioned to expect deals. Volkswagen turned to low-interest loans and reduce-priced leases in March for the first time in several years to boost demand as its models aged.



Volkswagen's U.S. sales fell 17.6 percent through November. Bayerische Motoren Werke AG, based in Munich, this year may outsell Volkswagen, of Wolfsburg, Germany, for only the second time since Volkswagen entered the United States in 1949.



Zimbrick Volkswagen in Middleton, Wis., has ordered more Beetle and Golf models in expectation that the offer will increase sales, said sales manager Amy Wach. The program, open only to residents of states where it's offered, won't hurt the resale value of the models as higher rebates do, she said.



Every $1 worth of incentives on a new vehicle takes away about $1.05 from the value of the car if the customer tries to sell it three years later, said Art Spinella, whose CNW Marketing Research in Bandon, Ore., tracks auto-top incentive programs. Rebates cut the value of used models because buyers are paying less for the new car or truck, he said.



General Motors Corp., the world's largest automaker, has also been varying its ways of luring buyers this year. Its offers have included overnight test drives, 72-hour sales and a program tied to the U.S. federal interest rate increase that allowed buyers to lock in an interest rate this year on a car or truck purchase five years in the future.



''People just aren't motivated by incentives anymore,'' said Spinella. ''People expect to get a $4,000 rebate no matter what.''



The Volkswagen program would be the first insurance giveaway by an automaker, he said. If the program is successful ''other automakers will follow, no question. This could be a new trend for the industry,'' Spinella said.



Only about 7 percent of customers this month said they buy sooner or decide to purchase a new car instead of used because of increased rebates, compared with 20 percent in 1990, he said. In addition, 23 percent of buyers say they don't buy new because of the high price of insurance, Spinella said, citing CNW consumer surveys.



Among people likely to buy a Volkswagen Beetle or Golf, the average insurance premium is $846 a year, according to insurance data compiled by CNW. Dealers said the program won't be restricted based on driving records.