January Incentive Report

As any sales-watcher knows, volume isn’t everything. Fleet-retail mixes, incentive spending and transaction prices are all important considerations for putting volume numbers into context. As usual, we’ve assembled Edmunds’ True Cost Of Incentives index as well as TrueCar’s Transaction Pricing and Incentive Spending forecasts, for a complete picture of these important metrics… and after the jump, we’ve added a few notes on the discrepancies between the two firms’ numbers.

There are a few inevitable discrepancies between the Edmunds and TrueCar incentive spends, which we have learned are due to TrueCar’s inclusion of volume-based spiffs and differences in lease-subsidy calculation. Which number is closest to the truth? Well, much of TrueCar’s team used to do forecasting at Edmunds, and though non-disclosure agreements prevent them from explaining in detail how their secret sauce is better, it makes sense that they’d be trying to offer more than their previous employer (and they claim their data is based on more transactions than any other forecasting firm). Meanwhile, Edmunds’ forecasters say they’re “not comfortable” including tough-to-calculate volume-based spiffs. In short, either number could be off a little… but if I had to put money on it, I’d lean towards TrueCar’s numbers.

So, did GM rule incentive spending last month, or did Chrysler? Edmunds calculates that GM spent $3,762 per vehicle, but TrueCar sees The General at a much lower $3,089 average. Edmunds put Chrysler at second place with $3,386 per vehicle, while TrueCar puts ChryCo first with $3,557. Whether this discrepancies are accounted for by lease calculations or volume-based dealer spiffs isn’t at all clear, but TrueCar’s first-place ranking for Chrysler does seem to indicate that one of these factors is pushing up Chrysler’s incentive average. Similarly, the nearly-$500 difference between Honda’s two January 2011 incentive spend forecasts indicates that Honda may be dipping into the volume-based incentives that TrueCar tracks. Either way, it’s clear that incentives are headed down across the board in the short-term (although Honda and Toyota are still up huge in terms of year-over-year gains).

In the short-term, transaction prices seem to be rising slowly from their December levels, although the industry-wide average is still half a percent off its January 2010 mark. In the short-term, only GM appears to be losing ground on transaction pricing (which, taken with incentive levels, give some cause for worry), although over the last year, Honda and Toyota are clearly the biggest losers when it comes to transaction price. Part of that may be tied to falling consumer perceptions, but there’s another, somewhat perverse dynamic at play. TrueCar’s Jesse Toprak explains

Transaction prices dropped slightly in January as consumers purchased a relatively higher percentage of small cars and compact SUVs. If gas prices continue to rise, transaction prices could continue to decline, as consumers tend to shift purchases to smaller, more fuel-efficient vehicles

And because the Detroit automakers gain the greatest transaction-price benefits from strong truck and SUV sales, their transaction price levels could well be the first to suffer from a prolonged rise in fuel prices.