By on August 31, 2012


People keep their eyes on automaker incentives for various reasons. Customers are hunting deals. Analysts hunt carmakers that are sitting on a glut of cars. Incentive numbers don’t always tell the full story, says Edmunds. In August, incentive spend was subdued and stable. Automakers and dealers have become adept in camouflage though, and the reported stability of incentive spending doesn’t factor in some of the “hidden incentives.”

Says Edmunds Vice Chairman Jeremy Anwyl:

“Automakers and dealers have been very creative this summer with how they’re packaging their deals and boosting sales numbers, whether through controversial stair-step incentive programs or by working with lenders to expand credit. Many of these programs are essentially impossible to quantify, but their cost to the manufacturers is real.”

BMW made headlines it did not want to make with a special offer to dealers on the last day of July. The Wall Street Journal reported that dealers received discounts of as much as $7,000 per 2012-model car, as long as each vehicle was reported as sold on that day only. The cars could then be offered to retail buyers at strong discounts with dealers still turning a good profit.

Average True Cost of Incentives (TCI) by Car Manufacturer
Manufacturer August ’12 July ’12 August ’11 MoM YoY
Chrysler $2,761 $2,777 $2,909 -0.60% -5.10%
Ford $2,844 $2,763 $2,680 2.90% 6.10%
GM $3,147 $3,194 $3,096 -1.50% 1.60%
Honda $1,554 $1,224 $1,666 27.00% -6.70%
Nissan $2,623 $2,869 $2,457 -8.60% 6.80%
Toyota $1,676 $1,623 $2,206 3.30% -24.00%
Industry $2,274 $2,237 $2,385 1.70% -4.70%
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20 Comments on “Incentives Stable In August, But Automakers Are Getting Good At Hiding Them...”

  • avatar

    I have seen more 0% ads than in recent history than I have in a long time.

    With this type of lending, it will cost the manufacture different amounts to buy down the loan for different buyers with different credit. I bet those type of incentives are hard to quantify.

    • 0 avatar

      0% isn’t so much of a bargain when interest rates are this low. My credit union will give me a 3% car loan, so is 0% really *that* much of an incentive?

      • 0 avatar

        Actually I don’t think 0% is really 0% at all. To me, it’s just a numbers game. Lets say you’re looking at a car that’s $25000 if you finance (at 0% of course), or, if purchased cash, that same car comes with a “$3k cash advantage”. The $3k is then interest, but being that most manufacturers own their own financing companies, they don’t have to call it interest, but being good marketers, call it “0% financing”.

        Am I wrong?

      • 0 avatar

        It depends, how long is the loan for and what is the price of the car. Also, for someone with poor credit that the manufactures financing arm allows to load at 0%, it is more an incentive because they would normally have a higher rate than the 3% offered.

        For people with good credit, it is likely better to take any cash incentives over the financing deal. For people without, it might be the other way around.

      • 0 avatar
        sunridge place

        Brian…you have to be 700+ credit score to qualify for the 0% The finance co will not approve the 0% deals at less than top tier.

        The OEM sets the rules though.

    • 0 avatar
      sunridge place

      Close…the cost is similar to the OEM but the $$ goes to different places.

      3k rebate? OEM pays the dealer who passes it onto the customer

      0%? OEM pays the finance co (usually captive) the interest the finance co would have earned at the standard rate. OEM still cuts the check even if its in-house for internal accounting etc.

  • avatar
    sunridge place

    It must be hard. has very different #’s (although they haven’t released their August #’s yet)

    In July for example:

    Truecar has Honda at $2346 and Edmunds has them at $1224.

    A lot of variety in the numbers.

    • 0 avatar

      I don’t think you comprehend the difference incentives and transaction prices.

      The typical Camcord has a ~$2000 difference between MSRP and invoice. Lets say the average transaction price is $500 over invoice. The dealer makes $500 on the car, minus overhead, plus holdback. The extra $1500 between sale price and sticker? Utterly meaningless. Lost dealer profit, not lost factory profit.

      Truecar is talking about transaction prices. Edmunds is talking about incentives. You’re subtracting both numbers from MSRP assuming they mean the same thing. Incentives are cash/financing considerations that are cut from the factory’s profits, not the dealer’s.

      Every time somebody like you perpetuates this myth that Honda or Toyota is running a fire sale to inflate sales, I check the available incentives. Every time, I see a couple of 0% for 36 month financing offers for people with great credit and some unremarkable $500 for military/recent grad rebates. Oh and those “giveaway” $199 a month Accord leases. Have you seen the residuals on late model Hondas? And have you ever looked at the fine print on a generic lease? Those numbers are calculated on MSRP. Both Honda and the dealer are making serious money on those.

      If you look at the token $500 rebates and sweetheart captive financing that “costs” the factory less than a grand over prime, then the Edmunds numbers for Honda are about right. Using a Truecar transaction price to claim Honda’s incentives are as bad as Detroit’s is either exceptional ignorance or a shameless lie.

      Given that your whole raison d’être here is to whitewash absolutely everything GM does, I’m gonna go with the shameless lie.

      • 0 avatar
        sunridge place


        As PCH said, scroll down a bit and you will see my point. I’m not whitewashing anything. I have a pretty good handle on how OEM pricing and incentives work.

    • 0 avatar

      “I don’t think you comprehend the difference incentives and transaction prices.”

      No, you need to scroll down to the second chart on the True Car link.

      He’s comparing the incentives that are being reported by TrueCar to those of the Edmunds TCI report. (Edmunds is here — click on the box to open the Excel file attached:

      TrueCar and Edmunds have fairly similar numbers for many of the manufacturers, but the Honda and VAG numbers are quite different. There obviously must be some difference in methodology, but what that difference may be isn’t clear.

      Per Edmunds, their incentives calculation excludes volume-based incentives. Perhaps that may explain the difference, but without asking them, we can only speculate.

      (Incidentally, I think that both reports include holdback, but that wouldn’t explain the differences between them. Also note that TrueCar provides a forecast while Edmunds only reports data after the fact, but even comparisons of the historical figures produce some disparities.)

  • avatar
    Secret Hi5

    Is GM’s 30-day return guarantee a sneaky incentive?

    • 0 avatar
      sunridge place

      Nope…its really easy. GM does theirs the same way Hyundai did their Assurance.

      Its around $500 per sale. The customer can decline the option at the time of sale and take the $500. If the customer does not decline, GM pays an insurance company around $500. The insurance company takes the risk and handles the return.

      What can be hard is trucks right now. GMC has a $8000 total savings on some Sierras but it breaks down like this:

      $3000 rebate
      $2000 option package discount on the sticker
      $1500 Bonus Cash for Regional Value Package
      $500 Loyalty
      $1000 Trade In assist

      Chevy has similar things on Texas Edition Silverados and other expensive packages.

      So, if you buy a more basic Sierra/Silverado, your rebate will be around 3k or 4k (more typical of trucks.) But, if you load up on options, you get a bigger discount.

      Trading in a 1999 or newer vehicle? That’s an extra $1000. Edmunds etc doesn’t know how many sales each month had a trade in although they probably apply some sort of industry standard if they are doing this thoroughly.

      OEM’s don’t report out sales by trim level/option package, so its a guessing game.

      That’s just one example.

      • 0 avatar

        Yep. Ford has something similar right now.

        Up to 7500 dollars on the F150. Here is the fine print.

        $2,000 Customer Cash (PGM #12150) + $1,000 XLT Bonus Cash (PGM #12046) + $500 5.0L Bonus Cash (PGM #12112) + $1,500 XLT Convenience, Chrome & Tow Discount Package (PGM #97220). SuperCrew XLT: $1,500 Ford Credit Bonus Cash (PGM #12152) + $1,000 Trade-In Assistance Bonus Cash (PGM #34050). SuperCab XLT: $1,000 Ford Credit Bonus Cash (PGM #12152) + $1,000 Trade-In Assistance Bonus Cash (PGM #34050) + $500 Trade-In Assistance Bonus Cash (PGM #34128). Trade-In Assistance Bonus Cash requires trade-in of 1995 or newer vehicle or lease terminated 30 days prior to or 90 days after delivery. Ford Credit Bonus Cash requires Ford Credit financing. Not all buyers will qualify for Ford Credit financing. 0% APR financing for 66 months at $14.17 per month per $1,000 financed for first 36 months and $16.33 per month per $1,000 financed for months 37-66 regardless of down payment (PGM #20364). Residency restrictions apply. For all offers, take new retail delivery from dealer stock by 09/03/2012. See dealer for qualifications and complete details.

    • 0 avatar

      I wouldn’t call it sneaky. I say it’s exceedingly honest. It does have a cost though, so it may fit the category if not the category name?

      Edit, OTOH, if they charge you 500 for it, it’s not an incentive at all, nor exceedingly honest.

      • 0 avatar
        sunridge place

        I don’t think you understand the program at all…it is hardly dishonest.

        At the time of sale, a customer can choose to take a $500 rebate and waive the option to potentially return the car in 30-60 days. Or, they can sign some paperwork and keep that option available and not get the $500. It is the customer’s choice.

        The cost of the incentive to Chevy is probably almost identical in either scenario. Either the customer gets a $500 rebate or the insurance company gets the $500. The insurance company bears the risk and cost to the dealer of the return. There is a reimbursement rate a dealer gets on a returned car plus a cash bonus (paid by the insurance company.) The dealer then resells the car as used.

        Hyundai did their Assurance program in a very similar fashion. Hyundai didn’t bear the risk of a buyer losing their job and returning the car. Hyundai paid an insurance company X amount per sale and that insurance company handled the ‘claim’ if a buyer lost their job and wanted to return their car.

        Actuarials are involved…the insurance company prices it out and accepts the deal from the OEM to administer these programs. Most insurance companies are quite profitable and they probably make money on these deals to. But, its a fixed incentive cost to the OEM and very open to the customer.

    • 0 avatar

      What’s more of an incentive is Toyota’s “free” maintenance program.

  • avatar

    IIRC the take rate on these refunds is incredibly low, right? I mean like 30 people in six months low.

    I mean, who gets sick of a new car in 30 days? That’s barely enough time to start noticing the bad things about the car, much less get sick of them.

    I suspect the dealer gets some kind of kickback from the insurance company or something, because $500 to cover a low probability event with minimal losses (maybe 3 thousand bucks in this market, if that) over a very short window— seems pretty profitable to me.

    • 0 avatar
      sunridge place

      Yeah…Chevy probably doesn’t cough up $500 to the insurance company…its probably a lot less.

      They keep the ‘alternative’ rebate for the dealer to help close the sale. You’re a few bucks off on your monthly payment…the salesman makes his fifth trip over to his sales manager….Ta da….the payment dropped a few bucks….’all you have to do is sign this piece of paper’ etc

    • 0 avatar

      Actually I can see a HUGE amount of people not liking a car after a few days, much less 30. The low take rate on the option to return probably has something to do with getting screwed/locked-out based on what was traded in for the new car. I think dealers refer to it as dehorsing.

      • 0 avatar
        sunridge place

        You really have no clue on how this program works. Its all locked in at the time of sale…there is no dehorsing.

        If you really want me to break down how a particular deal would happen under this promotion, I can.

        Not saying its a great promotion…but the low take rate isn’t about screwing the customer…they are made whole within reason.

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