U.S. light-vehicle dealers reported an operating loss for the first time since the National Automobile Dealers Association (NADA) began collecting data in 2009. While everyone continues reporting pretax net profits, concerns are beginning to swell around their dependency on factory incentives, which are not included in operating tabulations.
NADA’s analysis of 2019’s first-quarter auto sales shows that incentive spending is down compared to the same period a year ago. The group expects above-average discipline from automakers in terms of incentive spending throughout the year. According to J.D. Power, average incentive spending per unit was down $119 to $3,821 through March 2019 — with the brunt of that going toward trucks. However, if sales remain low, spending may creep back up to help clear out languishing inventories.
Flat new vehicle sales and an industry that’s far more interested in making crossover lovers’ dreams come true add up to a poor environment for a traditional new car buyer.
We’ve already told you how high demand for a shrinking supply of off-lease sedans and hatchbacks has sent used car prices through the roof compared to just a few years ago. That erased a go-to option for many thrifty buyers. In the new car market, however, automakers’ need to boost profits in a stagnant market means incentive spending is dropping as fast as used car prices are rising.
It’s not just sedans that saw a decline in discounts last month.
North America’s love affair with SUVs and crossovers arose so suddenly and with such passion that manufacturers were left scrambling to meet demand. Luxury brands certainly aren’t exempt from this but, unlike mainstream marquis, the sudden shift in product demand has thrown those marques a bit of a curveball.
Since prestige brands tend to possess substantially higher leasing rates than their more-affordable contemporaries, luxury automakers are getting stuck with off-lease sedans that nobody seems to want. While that’s terrible news for corporate accountants, it’s good news for anyone looking for a good deal on a used Lexus ES or Audi A4.
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