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Luxury-Car Firms Woo
Buyers With Reward Cards

May 5, 2005; Page D5

In an effort to boost customer loyalty, more luxury-car brands are offering credit cards that reward customers with rebates on car purchases, leases and repairs.

Two luxury brands joined the ranks last month. Last week, DaimlerChrysler AG's Mercedes-Benz launched two Visa cards for owners of its cars. The cards, issued by Bank of America Corp., reward extra points for dealership purchases and can be redeemed for perks such as repairs.

Toyota Motor Corp.'s Toyota Financial Services, operating under the name Lexus Financial Services, announced its first credit card for consumers in the U.S., the Lexus Pursuits Visa card. The card, which will debut in June, offers car-related rewards including as much as 10% off new vehicles.

As growing competition in the U.S. during recent years has made it harder to court car buyers based on pricing and incentives alone, car makers are increasingly turning to credit cards as a way to boost driver loyalty and lure them into dealerships between purchases. According to J.D. Power & Associates, the average new-vehicle buyer during the first quarter of 2005 had kept their prior vehicle for 5.2 years.

The spread of rewards programs specific to car customers also is a sign of the increasingly saturated credit-card market where companies are seeking to become the first card out of the wallet by catering rewards programs to specific types of customers.

Gail Sneed, director of market development at loyalty consulting firm Maritz Loyalty Marketing, estimates at least 10 car makers currently offer cards in the U.S., including BMW AG and General Motors Corp. GM, for instance, offers a GM-branded MasterCard that lets holders earn 5% of every dollar they spend toward the purchase of a new GM car or truck. GM estimates about four million new vehicles have been purchased using the program since the card launched in 1992, and there are about six million card members currently.

Mercedes-Benz's new cards will replace a Mercedes-branded card offered since 1997 that wasn't tied to a rewards program. Only about 70,000 of Mercedes-Benz's roughly two million owners in the U.S. had the card.

With its new cards, Mercedes-Benz hopes to boost use by adding a rewards program and other user perks its customers requested in surveys. Card rewards can't be used for rebates on car purchases, but they can be used for other car-related expenses.

One card, the Mercedes-Benz Visa Card, is replacing the older card. This card, which comes with no annual fee, rewards five points for every dollar spent at authorized Mercedes-Benz dealerships or on other Mercedes-Benz merchandise and one point for every dollar spent on other purchases. Points earned on this card can be redeemed for parts and service at Mercedes-Benz dealerships and to purchase extended limited warranties, among other things.

Meanwhile, the Mercedes-Benz Visa Signature card comes with an annual $90 fee and rewards as many as 10 points for every dollar of certain dealership transactions and 1.5 points for every dollar purchase elsewhere. Its points can be redeemed for the same rewards as the basic Visa and in addition, for airline tickets, among other perks.

Lexus card points, by contrast, can be used to buy vehicles. The card, which has no annual fee, rewards five points for every dollar purchase at a Lexus dealership and 1.5 points for dollar purchases elsewhere. Points can be used for as much as 10% off a new Lexus, toward parts and service, as well as for travel rewards for a $60 annual fee.

While points earned with the Lexus card don't expire, Mercedes-Benz points expire after five years.

Write to Jennifer Saranow at [email protected]
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