Free Car Insurance for VW Golf & Beetle to be Tested in U.S. Dealerships

After three straight years of declining sales in the U.S., several U.S. Volkswagen dealers, announced it will begin offering free auto insurance for a one year period in Wisconsin and Illinois to lure buyers. VW will test the promotion between January 4 through March 31 and provide 12 months of free insurance to buyers and leasers of the new VW Golf, Beetle coupes and Beetle convertibles, according to Illinois and Wisconsin dealers.

"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 Dealership in Joliet, Illinois. "It's a way to get people in the dealership without sounding like everyone else."

Sales of Volkswagen vehicles in the US dipped 17.6 per cent through November of 2004. Industry analysts have even suggested that BMW could outsell Volkswagen in 2005. This would be the second time BMW beat VW since they began selling in the U.S. in 1949.

The free VW car insurance deal is not expected to hurt the resale value of the models as higher rebates programs normally do. Art Spinella, whose CNW Marketing Research in Bandon, Oregon, tracks auto-top incentive programs stated, "Every US$1 worth of incentives on a new vehicle takes away about US$1.05 from the value of the car if the customer tries to sell it three years later. Rebates cut the value of used models because buyers are paying less for the new car or truck."

Other car makers, such as General Motors Corp, have been experimenting with new ways of attracting buyers this year as well. GM offers have included overnight test drives, 72-hour sales and a program tied into to the US federal interest rate increase that would allow buyers to lock in an interest rate this year on a car or truck purchase up to five years in the future.

The free VW car insurance deal would be the first for any carmaker. If successful, analysts predict, it will signal a new trend in car buying incentives. Among typical people likely to buy a Volkswagen Beetle or Golf, the average insurance premium is US$846 a year, according to insurance data compiled by CNW.

Volkswagen does expect U.S. vehicle sales to rise toward the end of 2005 with the introduction of several new models. The automaker will replace the VW Jetta in March 2005 and the VW Passat in the fourth quarter and introduce the new Golf GTI at the end of 2005, the company has reported.