By on May 3, 2011

So, sales are up… but what are the automakers spending in order to get those sales? And what are they getting for their cars? Step inside our incentives and transaction price tracking center for a look at the factors that play affect how sales turn into profits (or don’t). But first, take a look at the graph above showing US-market incentive spending broken out by the regions where automakers are based. As usual, the US-based OEMs put more cash on the hood than their competitors, but more importantly notice how much money is spent on sales each month: nearly $2.5b was spent last month. And despite being a serious chunk of change, Edmunds AutoObserver says that’s the lowest overall level of incentive spending since 2005. So if you’re inclined to ignore incentives when it comes to your monthly sales education, you might want to start paying some attention…

Here, via TrueCar, comes the important stuff: incentives as a percentage of transaction prices. Once again, GM and Chrysler are leading the pack in this dubious distinction, and GM appears to be adding incentives relative to both last month and April 2010, the only automaker trending upwards in both comparisons. But the strong declines year-over year across most of the rest of the industry are likely to only accelerate as the Japanese automakers deal with supply interruptions in the aftermath of the Japanese quake and tsunami. GM and Chrysler need to either start dialing back those incentives aggressively, or start showing strong market share gains as the competition takes cash of their dwindling number of hoods.

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13 Comments on “April Sales: Incentives And Transaction Prices...”

  • avatar
    SVX pearlie

    Given that GM has the highest transaction prices of any major automaker, it is obvious that GM inflates the MSRP by an extra bit to cover the “cost” of a larger “feel-good” incentive.

    Therefore, as long as GM incentives are within historical ranges, they’re doing fine, and there’s no obvious need to reduce them.

    After all, it’s not like every automaker sells the exact same car with the exact same cost.

    At some point, TTAC and TrueCar will learn this simple fact.

    Still, credit to TrueCar for finally moving to incentives vs transaction price, as a more balanced metric.

    • 0 avatar

      The Japanese earthquake and tsunami are probably the best thing that could have happened to the US auto retailers, in essence reducing availability of new cars across the board in the US, thereby increasing transaction prices and reducing the need for incentives.

    • 0 avatar

      Exactly what I wanted to say.

      GM transaction prices are up, and the General has given customers with deeper pockets more reasons to look at their products.

      The Chevy Camaro is a perfect example. The thing is outselling the Mustang, and many of those Camaros purchased come with the pricier V8 engine and lots of bells and whistles. If GM is throwing some cash on the hood, but then convincing buyers to purchase a pricier model, I’d say they’re spending money wisely.

      You’ll see in those charts that almost 35% of Camaro sales have been of the $35,000+ 2SS model, and another 7% of the 1SS (42% of total Camaro Production. When all is said and done here, we’re talking about selling $40,000 sports cars with a Bowtie badge. That ain’t too shabby.

      The next most popular Camaros were the 2LT and 1LT V6 models. The base 1LS Camaro accounted for just 15% of 2011 Camaro sales. People are spending more money on GM products, so apparently a little bribery goes a long way.

      It also helps heal those taxpayer-bailout blues when you walk into the dealership and they’re taking $6,000 off the MSRP before you’ve said boo.

      • 0 avatar
        SVX pearlie

        Exactly. Those Camaros stickered over $43k in the window, so having $3k on the hood for a net price of $40k really isn’t a bad thing. GM can do that deal all day long.

  • avatar

    This metric doesn’t help show if the mix of vehicles is more to account for than the actual price – which would be more helpful if one is shopping for a specific vehicle, not the entire range of vehicles a manufacturer offers (simpler to deconstruct / estimate for the smaller automakers than the larger ones).

  • avatar

    Bloomberg has reported that GM incentive spending had dropped from April to March, not increased. Why the difference between the two reports?

    • 0 avatar

      Because March actually comes before April.

    • 0 avatar

      Incentive spending doesn’t seem to be calculated by the auto manufactures, but by 3rd party companies. There are a few around. A year or so ago there was a story that GM had the fewest incentives for the month. According to one 3rd party company, they did. To another, they were still offering lots of incentives.

      Incentives are hard to structure since not all incentives apply to all people and I don’t know how they calculate residuals on leases at the 3rd party companies.

      Bottom line, it is really hard to know what is going on with incentive spending. Look at the 2 sources of the article. GM is going up on TrueCar and down on Edmunds. TrueCar says up 6.3% month to month, Edmunds says down 7% month to month. Look at all of the brands, you can see $500 swings per brand. Some are less. Hard to say what is going on with the 2 sources who report this the most can’t agree.

  • avatar

    “But first, take a look at the graph above showing US-market incentive spending broken out by the regions where automakers are based.”

    Technically, I think it is a distribution (pie) chart; a graph displays changes over time…

    • 0 avatar

      “a graph displays changes over time…”

      Rather narrow definition of “graph”! What about torque vs. rpm, or amplitude vs. frequency, or price vs. demand or…

  • avatar


    Do you think it is fair to post 2 sources who have different data and then start saying GM and Chrysler are doing the wrong thing because one source says incentive spending is up, but the other source you use in this article says incentive spending is down for them?

    I don’t know who you can is right in this case, Edmunds or TrueCar. How do you make the distinction of which on you think is correct?

  • avatar

    Are they going to ramp up the incentives to move the Volts off the lots?

    • 0 avatar

      563 vehicles for sale in all the markets that are available and you think they are going to raise incentives? Looks like several dealers are trying to sell them for over sticker. What are you talking about here?

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