Edmunds.com Reports True Cost of Incentives for May; Incentives Rise Five Percent From Last Year

By: iStockAnalyst

Edmunds.com, the premier online resource for automotive information, estimated today that 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 2008, and up $117, or 5.0 percent, from May 2007.

"Manufacturers are trying to avoid increasing incentives," stated Jesse Toprak, Executive Director of Industry Analysis for Edmunds.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^SM (TCI^SM) 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.

According to Edmunds.com, combined incentives spending for domestic manufacturers averaged $3,489 per vehicle sold in May 2008, up from $3,263 in April 2008. From April 2008 to May 2008, European automakers increased incentives spending by $241 to $2,935 per vehicle sold; Japanese automakers increased incentives spending by $94 to $1,324 per vehicle sold; and Korean automakers decreased incentives spending by $224 to $1,932 per vehicle sold.

True Cost of Incentives for the "Big Six" Automakers
Automaker	May 2008	April 2008	May 2007
Chrysler Group	$3,714	$3,795	$3,823
Ford	$3,326	$2,989	$2,964
General Motors	$3,477	$3,132	$2,996
Honda	$1,256	$1,405	$1,383
Nissan	$2,090	$1,796	$1,943
Toyota	$1,045	$840	$804

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 an aggregate of $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.

"Domestic manufacturers are expected to spend the most amount of money on incentives this summer," commented Edmunds' AutoObserver.com Senior Editor Michelle Krebs. "The Japanese manufacturers are not expected to increase their spending on incentives because of the public’s perception that they have more fuel-efficient vehicles."

Among vehicle segments, large trucks had the highest average incentives, $4,667 per vehicle sold, followed by large SUVs at $4,603. Sport cars had the lowest average incentives per vehicle sold, $1,198, followed by compact cars at $1,219. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large trucks averaged the highest, 14.4 percent, followed by large cars at 13.5 percent of sticker price. Sport cars averaged the lowest, 4.1 percent, followed by luxury sport cars at 5.4 percent of sticker price.

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.