Chicago Tribune

The good news is that you now can buy a new Ford Escape for $4,735 less, a Chrysler Pacifica for $6,920 less, a Chevy Silverado for $6,914 less and a Lincoln Navigator for $9,012 less this month than you could only a short time ago.

However, when trading a 2-year-old Escape, Pacifica or Navigator for a new one, be prepared to pay the piper because the values of the old ones have gone south.

The declining trade-in values are a direct result of being able to purchase a new General Motors, Ford or Chrysler vehicle at the same low price the automakers charge their employees.

GM offered the program in June and sales skyrocketed, and now Ford and Chrysler have joined in.

“The beauty of employee pricing is that it makes the buying experience painless because consumers perceive no one is going to pay any lower for the car than they do,” noted Jim Hossack, vice president of AutoPacific, a West Coast automotive marketing and consulting firm.

Painless and successful, maybe, but not for used cars and trade-ins.

It’s a fact of life in the auto industry that “when new cars are reasonably priced, it puts a damper on used-car prices and trade-in values,” said Jerry Cizek, president of the Chicago Automobile Trade Association.

“A result of employee pricing on new cars is that used-car prices have dropped, and as a result of used-car values dropping, trade-in values have dropped,” agreed Hossack, who was quick to add: “The new car may be down $4,000, but your trade-in is worth $1,000 less. You still come out ahead.”

Just not as much as before the automakers went to employee pricing.

But the latest discounts are not the only things weighing on used-car prices.

“The new employee-pricing program hasn’t had much impact on used-car prices because the damage was already done (on values) from all the incentives that had been offered on new cars for several months,” said Bill Stasek, a Wheeling, Ill., Chevy dealer, citing 1- to 2-year-old vehicles as hardest hit.

“There’s been so much hype on new-car prices that the 1- or 2-year-old car is at risk. If you can afford to buy a 1- or 2-year-old model, you can afford to buy a new one,” Stasek said.

On the plus side, it’s a buyer’s market for used vehicles because you can get them on the cheap.

Another plus is that employee-pricing programs have taken the attention off rebates.

“Some rebate money still is involved, but the rebates are less than they were and not the focus of the program,” Stasek said.

Rebates are rolled into the final price so they don’t stand out.

Of the $4,735 savings on a new Ford Escape, $6,920 savings on a Pacifica, and $9,012 savings on a Navigator, $2,000 for each comes from a rebate, while of the $6,914 savings on Silverado, $3,000 comes from a rebate.

The long-term goal is for the manufacturers to lower window stickers to closer to transaction prices and reduce the amount of rebates.

“I think they (GM) are going to lower rebates and prices at the same time, but they have said they aren’t going to get rid of rebates totally,” Stasek said.

“I think what you’ll see is that if you buy a $20,000 car with a $5,000 rebate, it becomes a $15,000 car. But GM will attempt to get closer to that $15,000 transaction price with an MSRP of $16,500 plus a smaller rebate of $1,500,” Stasek said.