Edmunds.com Reports True Cost of Incentives for May: Summer Discounting Season Begins

[guitarlix]

SANTA MONICA, Calif.--Edmunds.com, the premier online resource for automotive information, estimated today that the average automotive manufacturer incentive in the U.S. was $2,497 per vehicle sold in May 2007, up $44, or 1.8 percent, from April 2007, and up $123, or 5.18 percent, from May 2006.

Edmunds.com's monthly True Cost of IncentivesSM (TCISM) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.

"The summer incentives hike has started. In previous months, we have seen year-over-year declines in incentives spending, but this month the trend reversed," stated Jesse Toprak, Executive Director of Industry Analysis for Edmunds.com. “Automakers typically enjoy the highest sales volumes during the summer months in part because of the generous offers intended to match customers to remaining inventory – and the incentives only get bigger as the end of the current model year approaches.”

According to Edmunds.com, combined incentives spending for domestic manufacturers averaged $3,258 per vehicle sold in May 2007, down from $3,269 in April 2007. From April to May, European automakers increased incentives spending by $483 to $3,510 per vehicle sold; Japanese automakers increased incentives spending by $156 to $1,374 per vehicle sold; and Korean automakers decreased incentives spending by $233 to $1,524 per vehicle sold.

In May, the industry's aggregate incentive spending is estimated to have totaled approximately $3.7 billion, up from $3.3 billion in April. Chrysler, Ford and General Motors spent an aggregate of $2.5 billion, or 67.3 percent of the total; Japanese manufacturers spent $736 million, or 19.9 percent; European manufacturers spent $367 million, or 10 percent; and Korean manufacturers spent $107 million, or 2.9 percent.

True Cost of Incentives for the "Big Six" Automakers

Automaker
May 2007
April 2007
May 2006

Chrysler Group $4,050 $4,250 $3,668
Ford $3,040 $3,021 $3,209
General Motors $2,963 $2,813 $2,761
Honda $1,399 $1,069 $922
Nissan $2,083 $1,955 $2,553
Toyota $1,140 $1,027 $886

Edmunds' AutoObserver.com has learned that this month, Honda broke its company record for incentives spending. “Honda is feeling a lot of competitive pressure. Some of their vehicles are a bit long in the tooth, and a handful compete in segments where generous incentives are essentially demanded. In those cases, the company has little choice. However, Honda’s newer and more fuel-efficient models sell with a fraction of the industry’s average incentive investment on the hood,” commented AutoObserver.com Senior Editor Michelle Krebs.

Among vehicle segments, minivans had the highest average incentives, $3,933 per vehicle sold, followed by luxury cars at $3,832. Sport cars had the lowest average incentives per vehicle sold, $937, followed by compact cars at $1,136. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows minivans averaged the highest, 14.1 percent, followed by large cars at 13 percent of sticker price. Sport cars averaged the lowest, 3.2 percent, followed by luxury sports cars at 4.3 percent of sticker price.

Comparing all brands, in May Mini spent the least, virtually nothing, followed by Scion at $77 per vehicle sold. At the other end of the spectrum, Cadillac spent the most, $7,870, followed by Saab at $5,877 per vehicle sold. Relative to their vehicle prices, Saab and Cadillac spent the most, 17.8 percent and 15.6 percent of sticker price, respectively, while Mini spent essentially nothing and Scion spent just 0.5 percent.

Source: Edmunds.com

[jon21]

Danggggg...Chrysler and Ford Group are bleeding themselves to death.

[SJZ3]

Originally Posted by jon21

Danggggg...Chrysler and Ford Group are bleeding themselves to death.

GM is in the same place as Ford, essentially.

Its good that GM had nice sales this month, but they need to make these sales figures without averaging 3k incentives. I am not expecting them to immediately go down to nothing, but their trend is up versus last year. Even if its just a small improvement, they need to use less incentives than last year.

[Porkfriedrice]

i think jus plain beginning the price lower i nthe first place is a better idea. Unless it gains a lotta publicity incentives dont really come to mind that often when im thinking about cars

[M_RABID]

Originally Posted by Porkfriedrice

i think jus plain beginning the price lower i nthe first place is a better idea. Unless it gains a lotta publicity incentives dont really come to mind that often when im thinking about cars

Then you are in the minority.

Average person comming into the dealership: "What's the rebate on that?"

[Salesperson reply... insert ANY dollar amount]

Average person: "Is that all? I should wait until GM gets serious about selling cars!"

Then they start again with "What can I get for under $200/month with 0 down?"

If you think I'm exagerating, talk to some salespeople.

[cobaltsslvr]

Originally Posted by M_RABID

Then you are in the minority.

Average person comming into the dealership: "What's the rebate on that?"

[Salesperson reply... insert ANY dollar amount]

Average person: "Is that all? I should wait until GM gets serious about selling cars!"

Then they start again with "What can I get for under $200/month with 0 down?"

If you think I'm exagerating, talk to some salespeople.

This is why I got out of selling cars, especially american cars. People are so unrealistic. I couldn't take the constant rejection anymore.

[asim]

Ouch that hurts. GM has the highest two divisions when it comes to incentive costs. Both of the brands are part of GM's luxury field, both Cadillac and Saab. That does not seem good to have these brands commanding the incentive fields. GM is doing well overall as a domestic automaker, but they could do ANOTHER bold move to reduce incentives even more.