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VW Offers New Incentive—Free Insurance

January 6, 2005

Volkswagen of America Inc. is offering a year of free car insurance to attract buyers who have grown bored with conventional sales incentives, according to a report this week in Automotive News.VW is conducting the pilot program, called "In the Car," from Jan. 4 through March 31 at its 43 dealerships in Illinois and Wisconsin. To qualify for the incentive, customers must buy or lease a new 2004 or 2005 Golf, New Beetle or New Beetle convertible.Other automakers have offered buyers cash payments they could apply to insurance costs. But the VW program is the first offer of free, full coverage, the automaker says.VW dealers say the plan's authors told them the incentive generally is worth $1,300 to $3,000. Program participants also remain eligible for low-interest financing on the vehicles, a VW spokesman said in the Automotive News report.VW hopes the initiative will help boost its U.S. sales, which have plummeted since 2002. Its models are aging, and the automaker came late to the incentive wars. The insurance offer and the cars it applies to are designed to appeal to younger buyers.Unlike 0 percent financing, the insurance incentive is not limited to the most creditworthy vehicle buyers. Unlike big cash rebates, the insurance program should have little impact on the residual values of the VW cars.Bob Kurilko, vice president of the automotive Web site Edmunds.com, says the free insurance offer is better than cash rebates."Traditional customer cash incentives have the effect of accelerating depreciation," Kurilko says. "What a consumer gets in an upfront discount is taken away in part at trade-in time."
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