Auto Incentives Reach Lowest In Years

For the first time in three years, domestic automakers’ average spending on incentives fell below $3,000 per vehicle in February, according to a report by online automobile resource Edmunds.com.

Spending fell from an average $3,167 in January to $2,934 in February. General Motors decreased its incentives by $298 to $2,540 per vehicle sold. Ford’s spending was down $48 to $2,778 per vehicle sold and Chrysler’s spending was down $352 to $3,839 per vehicle sold.

“We’re seeing that domestic automakers are being more selective on where they spend money,” said Jesse Toprak, executive director of industry analysis at Edmunds.com. “We’re now seeing more regional programs than national blanket programs and a comeback of zero percent financing.”

GM led the pack with the biggest decline in spending.

The automaker is sticking with overhauling its pricing structure rather than digging into its pockets to offer incentives, said Mark LaNeve, GM North America’s VP-vehicle sales, service, and marketing.

“We’ve been there and done that,” LaNeve said of last year’s summer employee-discount programs. “I know what the ending looks like. There are periods of paybacks that follow those programs that are not good for any company.”

Toprak said GM’s stance is the right one to take, indicating that foreign automakers like Honda spend little on incentives but let the quality of the brand sell itself.

But while GM and other domestic brands seem to be backing away from incentives, Toprak said they won’t do so entirely.

“The truth is they can’t forget about incentives,” Toprak said. “Domestic consumers are used to incentives and they are important marketing tools in closing sales for dealerships who simply won’t forget about it now.”

Dr. Jane Liu, VP-data analysis for Edmunds.com, said that even though incentive spending is falling, the total dollar amounts spent in the category is still staggering.

In February Chrysler, Ford and GM’s incentive spending totaled $2.07 billion, representing 72% of the industry. Japanese manufacturers spent $502 million, or 17%; European manufacturers spent $210 million, or 7%; and Korean manufacturers spent $106 million, or 4%.