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Ford Tightens Cash-Back Incentives

American car buyers may pay for Europe’s woes.

Darren Brode / Shutterstock.com

Ford’s (F) earnings nearly halved to $1.04 billion in the second quarter due to sluggish sales on the continent, the company reported Wednesday. As a result, analysts say deals and incentives will be boosted in Europe and scaled back in the United States – where the cars have been selling well.

The American market is so strong that Ford isn’t even compelled to match the incentives being offered by rivals such as Toyota, says Brian Moody, editor at Autotrader.com. In fact, the profit margin in Ford’s home market increased to 10.2% in the second quarter from 9.8%. “I expect to see very little in cash support this year in terms of rebates,” says Alec Gutierrez, a senior market analyst at auto-pricing publisher Kelley Blue Book. (Ford spokesman Eric Merkle says the company bases incentives on its inventory and competitive environment.)

In the past, buyers expected heavy discounts from Ford, says Ivan Drury, analyst at Edmunds.com. “The rules have changed,” he says. “Ford has a very high rate of redesigning its vehicles and can charge a bit more of a premium for that.” The average incentive for a light Ford vehicle fell 6.1% in June to $2,500 – compared to a 4.8% reduction for the industry overall, according to TrueCar.com.

But there may be a limit to how far Ford and other automakers can cut incentives, analysts say. The 2012 Ford Fiesta, for instance, is selling for 0% APR for 60 months or $1,000 cash rebate. “That’s pretty conservative,” Gutierrez says. Though Ford regained some pricing power in the U.S. and polished up its image, Larry Dominique, auto analyst for TrueCar.com says the company will be careful “not to cut back on incentives too much.”

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    • My first four cars were Fords; and Alan Mullaly and Bill Ford have done a superb job in bringing the company back from the brink, and building on its successes.

      Its new cars are stunning; and the 2013 Fusion may lead the pack, at least until the 2015 Mustang comes out, which hopefully will look just like Ford’s Evos concept. If so, it too will be a blockbuster.

      That having been said, Ford cars are not cheap. Also, Ford charges extra for features that are standard on other brands, which turns away prospective buyers. Ford may rue the day that it did this.

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