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Toyota offers free maintenance to new-car buyers

Analysts say that giving attributes of a luxury nameplate to the Toyota and Scion lines is a low-cost way to attract customers.

October 08, 2010|By Jerry Hirsch, Los Angeles Times

In an effort to boost sales, Toyota Motor Co. has begun pitching two years of free maintenance with the purchase of its Toyota and Scion cars, making them the first mass-market auto brands to offer such a service.

The offer is the latest in a campaign by the world's largest automaker to reassure buyers that its cars are desirable amid massive recalls that have slowed sales.

The perk includes normal factory-scheduled maintenance, such as oil changes, as well as 24-hour roadside assistance for two years or 25,000 miles, whichever comes first.

The plan was "developed to help improve overall cost of ownership and provide invaluable peace of mind for our customers," said Bob Carter, Toyota Division group vice president and general manager.

Toyota, which has had to recall millions of vehicles in the last year because of sticking gas pedals and other problems, has been pitching similar incentives since spring as a special deal. It is now making the maintenance plan a permanent offer.

Analysts said that was a smart move because it offers a low-cost way to attract buyers that, unlike a cash offer — which can cheapen the brand's image — enhances an automaker's aura by giving it attributes of a luxury nameplate.

"It differentiates the brand," said Jesse Toprak, an analyst with TrueCar.com. "No other mainstream brand offers a free maintenance program. It has proven to be a positive for customer satisfaction with luxury brands such as BMW."

BMW provides maintenance at no extra charge for four years or 50,000 miles, whichever comes first. Cadillac and Jaguar have similar programs.

"There is not a major service in the first two years, not a whole lot of heavy expenditure, so the cost to Toyota isn't that great," he said, adding that the retail value of Toyota's program is about $300.

Other automakers are likely to follow Toyota.

"They want to be competitive, and this forces the consumers to go back to the dealerships for their oil changes," Toprak said. "They hang out in the showrooms and look at the new cars, and you would be surprised at how many people wind up buying a car just because they are at the dealership."

It could also help Toyota counter the effect of the recalls.

Through the first nine months of this year, Toyota's U.S. sales have inched up 1% to just more than 1.3 million vehicles. That has lagged the 10% growth in the overall auto market. For the same period, Toyota's share of the U.S. auto market has fallen to 15.2% from 16.6%, according to Autodata Corp.

The move also demonstrates how prominent import brands such as Toyota and Honda are having to increase perks and incentives to fight stagnating sales while domestic car brands are spending less on incentives as their sales rise.

Honda Motor Co., for instance, has offered attractive lease rates as its sluggish sales grew just 3% for the first nine months of this year over the same period a year earlier.

Meanwhile, domestic brands such as General Motors Co.'s Buick and Cadillac have posted among the largest sales increases this year — 57.5% and 43.8%, respectively — according to TrueCar.com. They have cut spending on incentives 14% compared with last year.

Toyota and Honda are spending 30% more on incentives this year.

Of the major Asian brands, only Hyundai Motor Co. continued to see a large surge in U.S. sales and consequently has slashed incentive spending 37%, Toprak said.

jerry.hirsch@latimes.com

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