April Sales: Incentives And Transaction Prices

Edward Niedermeyer
by Edward Niedermeyer

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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  • APaGttH APaGttH on May 04, 2011

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

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    • Steven02 Steven02 on May 04, 2011

      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.

  • Robert.Walter Robert.Walter on May 04, 2011

    "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...

    • TR4 TR4 on May 04, 2011

      "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...

  • Steven02 Steven02 on May 04, 2011

    EN, 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?

    • Steven02 Steven02 on May 04, 2011

      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?