Incentives Up Nearly 10 Percent One Year After 'Cash for Clunkers'

SANTA MONICA, Calif. — Edmunds.com estimated that the average new-car incentive in the United States was $2,681 per vehicle sold in August 2010, down $84, or 3 percent, from July 2010, and up $225, or 9.2 percent, from August 2009.

“Historically, August incentives are lower than in July because there is less old model year inventory to sell at year-end close-out sale prices,” noted Edmunds.com Senior Analyst Jessica Caldwell. “However, this year many automakers are more generous than usual, supporting the bargain-hunting mentality that is driving most car purchases these days and making up for the ‘Cash for Clunkers’ hangover. Meanwhile, inventory is at a remarkably low level: It now takes about 50 days to sell the average vehicle after it arrives at a dealership, where last summer it took more than 70 ‘days to turn.’”

“It appears that some automakers are willing to sell fewer cars while spending less on incentives, thus make more profit per vehicle sold – a sound strategy really. They are learning to live on less – at least in terms of volume – as all Americans are," commented Edmunds.com Senior Analyst Michelle Krebs in her report on AutoObserver.com.

According to Edmunds.com, combined incentives spending for domestic manufacturers averaged $3,405 per vehicle sold in August 2010, down from $3,589 in July 2010. From July 2010 to August 2010, European automakers increased incentives spending by $187 to $2,643 per vehicle sold; Japanese automakers decreased incentives spending by $44 to $2,083 per vehicle sold; and Korean automakers decreased incentives spending by $88 to $1,819 per vehicle sold.

In August 2010, the industry's aggregate incentive spending is estimated to have totaled approximately $2.76 billion, down 4.7 percent from July 2010. Chrysler, Ford and General Motors spent an aggregate of $1.5 billion, or 55.0 percent of the total; Japanese manufacturers spent $845 million, or 30.6 percent; European manufacturers spent $238 million, or 8.6 percent; and Korean manufacturers spent $158 million, or 5.7 percent.

Among vehicle segments, premium sport cars had the highest average incentives, $8,221 per vehicle sold, followed by large trucks at $4,359. Subcompact cars had the lowest average incentives per vehicle sold, $1,215, followed by sport cars at $1,422.

Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 12.9 percent, followed by large trucks at 11.8 percent of sticker price. Premium luxury cars averaged the lowest with 3.4 percent and sport cars followed with 3.9 percent of sticker price.

Comparing all brands, in August Scion spent the least, $497 followed by smart at $502 per vehicle sold. At the other end of the spectrum, Lincoln spent the most, $4,832, followed by Saab at $4,790 per vehicle sold. Relative to their vehicle prices, Mercury and Chrysler spent the most, 14.8 percent and 13.5 percent of sticker price, respectively; while Subaru spent only 2.0 percent and Porsche spent only 2.7 percent.