Edmunds.com Reports True Cost of Incentives: High Incentives Spending May Be Hurting Some More than Helping

Edmunds.com, the premier online resource for automotive information, estimated today that the average automotive manufacturer incentive in the U.S. was $3,031 per vehicle sold in April 2009, down $134, or 4.2 percent, from March 2009, and up $680, or 28.9 percent, from April 2008.

"This month’s sales reports may prove that there is a point of diminishing returns for incentives spending," stated Jesse Toprak, Executive Director of Industry Analysis for Edmunds.com. “For some automakers, this month’s high incentives diluted brand image and hurt residual values while delivering only a negligible lift in sales.”

* Denotes a record

According to Edmunds.com, combined incentives spending for domestic manufacturers averaged $3,959 per vehicle sold in April 2009, down from $4,465 in March 2009. From March 2009 to April 2009, European automakers increased incentives spending by $26 to $3,410 per vehicle sold; Japanese automakers increased incentives spending by $132 to $1,740 per vehicle sold; and Korean automakers increased incentives spending by $87 to $3,591 per vehicle sold.

In April 2009, the industry's aggregate incentive spending is estimated to have totaled approximately $2.6 billion, down 3.8 percent from March 2009. Chrysler, Ford and General Motors spent an aggregate of $1.5 billion, or 59.5 percent of the total; Japanese manufacturers spent $575 million, or 22.1 percent; European manufacturers spent $257 million, or 9.9 percent; and Korean manufacturers spent $221 million, or 8.5 percent.

"Despite earning little return in the way of higher sales on their incentive investments, automakers seem to be playing a game of chicken – all are waiting for the other guy to drop back first,” commented Edmunds' AutoObserver.com Senior Editor Michelle Krebs. "Automakers appear to fear the bottom falling out completely if they back down on incentives.”

Among vehicle segments, premium sport cars had the highest average incentives, $6,540 per vehicle sold, followed by large SUVs at $4,797. Subcompact cars had the lowest average incentives per vehicle sold, $1060, followed by compact cars at $1,893. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large car averaged the highest, 14.0 percent, followed by large trucks at 13.0 percent of sticker price. Premium luxury cars averaged the lowest with 4.5 percent and subcompact cars followed with 6.7 percent of sticker price.

Comparing all brands, in April Scion spent the least, $160 per vehicle sold, followed by Subaru at $884. At the other end of the spectrum, Cadillac spent the most, $5,675 per vehicle sold, followed by Infiniti at $5,504. Relative to their vehicle prices, Kia and Mercury spent the most, 20.9 percent and 16.2 percent of sticker price, respectively; while Scion spent 0.9 and Lexus spent 3.3 percent.

Edmunds.com's monthly True Cost of IncentivesSM (TCISM) 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.

About Edmunds.com Inc. (http://www.edmunds.com/help/about/index.html)

Edmunds.com Inc. publishes four Web sites that empower, engage and educate automotive consumers, enthusiasts and insiders. Edmunds.com, the premier online resource for automotive consumer information, launched in 1995 as the first automotive information Web site. Its most popular feature, the Edmunds.com True Market Value®, is relied upon by millions of people seeking current transaction prices for new and used vehicles. Edmunds.com was named "Best Car Research Site" by Forbes ASAP, has been selected by consumers as the "Most Useful Web Site" according to every J.D. Power and Associates New Autoshopper.com Study(SM), was ranked first in the Survey of Car-Shopping Web Sites by The Wall Street Journal and was rated "#1" in Keynote's study of third-party automotive Web sites. Inside Line launched in 2005 and is the most-read automotive enthusiast Web site. CarSpace launched in 2006 and is an automotive social networking Web site and home to the oldest and most established automotive community. AutoObserver.com launched in 2008 and provides insightful automotive industry commentary and analysis. Edmunds Inc. is headquartered in Santa Monica, California, and maintains a satellite office in suburban Detroit.