Incentives Rise Nearly Six Percent from Last Month, Edmunds.com Reports
June 03, 2008

SANTA MONICA, Calif. - As vehicle sales have slowed, incentives have been edging higher.

Edmunds.com estimates the average automotive manufacturer incentive in the U.S. was $2,483 per vehicle sold in May 2008, up $132, or 5.6 percent, from April, and up $117, or 5 percent, from May 2007.

"Manufacturers are trying to avoid increasing incentives," said Jesse Toprak, executive director of industry analysis for Edmunds.com, parent company of AutoObserver.com. "But we predict that incentives will continue to rise throughout the summer months to help boost vehicle sales."

Edmunds.com's monthly True Cost of Incentives (TCI) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.

Combined Spending by Country of Origin

In May 2008, the industry's aggregate incentive spending is estimated to have totaled approximately $3.56 billion, up 5.6 percent from April 2008. Chrysler, Ford and General Motors spent a combined $2.35 billion, or 65.8 percent of the total; Japanese manufacturers spent $767 million, or 21.4 percent; European manufacturers spent $313 million, or 8.8 percent; and Korean manufacturers spent $144 million, or 4.0 percent.

According to Edmunds.com, combined incentives spending per vehicle for:

· domestic manufacturers averaged $3,489 per vehicle sold in May 2008, up from $3,263 in April;

· European automakers increased by $241 to $2,935 per vehicle sold;

· Japanese automakers edged up by $94 to $1,324 per vehicle sold;

· Korean automakers decreased by $224 to $1,932 per vehicle sold.

Domestic manufacturers are expected to spend the most amount of money on incentives this summer, Edmunds.com's forecast. Japanese manufacturers are not expected to increase their spending on incentives because of the public's perception that they have more fuel-efficient vehicles.

Spending by Vehicle Segment

Among vehicle segments, Edmunds.com's analysis shows:

· large trucks had the highest average incentives at $4,667 per vehicle sold;

· large SUVs had the second highest at $4,603;

· sport cars had the lowest average incentives per vehicle sold at $1,198;

· compact cars were next lowest at $1,219.

Analysis of incentives expenditures as a percentage of average sticker price for each segment show:

· large trucks averaged the highest, 14.4 percent;

· large cars the next highest at 13.5 percent of sticker price;

· sport cars averaged the lowest at 4.1 percent of sticker price;

· luxury sport cars averaged the second lowest at 5.4 percent of sticker price.

Big Spenders, Little Spenders

Comparing all brands in May, Scion spent the least at $214 followed by Mini at $294 per vehicle sold.

At the other end of the spectrum, Saab spent the most, $7,140, followed by Cadillac at $6,673 per vehicle sold.

Relative to their vehicle prices, Saab and Cadillac spent the most, 20.3 percent and 14.6 percent of sticker price, respectively, while Scion spent the least with 1.3 percent and Mini spent just 1.4 percent.

 Source: Edmunds.com

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