Incentives Hit Post-Recession High as Market Cools

It’s increasingly looking like 2015 will be a high-water mark for U.S. auto sales, with September sales stats showing a cool-down in the new car market.

Faced with a long-predicted slump — the duration of which is still anyone’s guess — and growing competition over remaining market share, automakers have boosted incentive spending to its highest level since the depths of the recession.

According to Reuters, September incentive spending is on track to surpass a previous record set in December 2008. Industry data shows discounts averaging $3,923 per new vehicle sold, compared to $3,753 during those dark days eight years ago.

Mark Wakefield, North American automotive practice head at consulting firm AlixPartners, tells Reuters that the market has shifted. Instead of customers pulling vehicles off the lot, automakers are pushing them (with whatever deal helps moves the inventory).

Sales stats compiled by TTAC’s Tim Cain show a 0.7 percent decrease in sales in the U.S. last month compared to the same period last year. Even juggernauts like the Jeep brand and the Ford F-150 saw a decline. If the trend continues, it’s possible the industry won’t match the record 17.45 million vehicle tally of 2015.

Two automakers, General Motors and Toyota, still predict a new record in 2016, but others aren’t so optimistic. The industry as a whole is under increased pressure to discount new vehicles. Fox Business claims incentive spending as a percentage of average transaction price hit 10.2 percent in September, compared to 9.7 percent in September 2015.

If the looming slump isn’t as bad as some predict, and sales remain relatively high, there’s less of a concern that discounts will erode a manufacturer’s bottom line. Recently, a boastful GM announced that it could remain profitable if the market slumped by 40 percent.

[Image: © 2015 Mark Stevenson/The Truth About Cars]