Motors

At the dawn of a new era of incentive selling

PAST IMPERFECT : Incentive selling has been around, in different guises, for more than 100 years, writes BOB MONTGOMERY

The success of Ford's Mustang would not having been possible without the incentive of instalment selling

Wed Jan 13 2010 - 00:00

PAST IMPERFECT: Incentive selling has been around, in different guises, for more than 100 years, writes BOB MONTGOMERY

The scrappage scheme is the latest method for tempting the public to buy new cars, but it is not the first. Instalment buying – or hire-purchase – first appeared in the Irish car market in the 1910s, and has been there in some guise ever since.

In 1823, Alfred P Slone became president of General Motors and he perceived a third movement in car sales was upon the market. The first era had been the dominance of luxury marques selling to the wealthy. Then, with the arrival of the Ford Model T, came a “mass” market, whereby manufacturers sought to put cars within the financial reach of vast numbers of people.

Sloan now led the way to what he termed the “mass class” era. Sloan’s idea was simple. The leading motor manufacturers sought to develop cars sold at lower and lower prices, at a time when banks didn’t offer car loans and customers had to pay cash.

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But a GM executive named John J Raskob, who knew little about cars but plenty about money, persuaded GM to set up a GM offshoot to offer car finance on GM cars. By the end of 1924, not only were one in three of all GM cars bought on finance, but customers buying with a loan felt they could afford a more expensive car than when they had to save money in advance. Other manufacturers soon followed.

By the end of the 1920s, instalment buying was so well established in the US that the great humourist Will Rogers noted: “Even the most experienced can’t tell by looking at a car how many payments are to be made.” Of Henry Ford, he declared: “He has given us the biggest problem. . . and that is, ‘where am I going to park it?’”

In today’s world, perhaps the time has come for another leap forward and perhaps the incentives used to sell cars need to change too. In 50 years, we could be reflecting on a new era of incentive selling that began right here.