The Car and Truck Fleet and Leasing Management Magazine

Average Cost of Incentives Climbs to New Record

August 12, 2004 an online resource for automotive information, reported that the average manufacturer incentive per vehicle sold in the United States set a new record of $2,885 per vehicle sold in July 2004, up $217, or 8.1 percent, from July 2003, and up $138, or 5.0 percent, from June 2004.'s monthly True Cost of Incentives (TCI) report takes into account all of the manufacturers' various United States incentives programs, including subvented interest rates and lease programs as well as cash rebates to consumers and dealers. To ensure accuracy, 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. Overall, combined incentives spending for domestic Chrysler, Ford, and General Motors nameplates passed the $4,000 mark for the first time, reaching $4,011 per unit in July, up $192 from June 2004. Chrysler lowered its incentives spending in July by $185 to $3,384 per vehicle and lost 2.3-percent market share. Ford had the biggest monthly increase in incentives spending, $358, for an average of $3,686 per vehicle, while its market share fell 1.3 percent to 16.8 percent – the lowest level ever recorded by GM increased incentives spending for the fourth month in a row, by $156 to $4,467 per vehicle, and gained 3.4 percent market share. "Successful new model introductions like the Chrysler 300 – which made up 27 percent of the brand's sales in July – show the benefit of introducing exciting new products priced right for the marketplace," said Dr. Jane Liu, vice president of data analysis for "Both Ford and GM have new vehicles coming that should help them lower their incentives spending, at least at the beginning of the new model year." In July 2004, Korean automakers spent $1,833 – down $35 – and European automakers spent a record $2,562 – up $228 – per vehicle sold. Japanese automakers spent $1,024 per vehicle sold in July, up from $921 the prior month. "As evidenced by the record incentives spending by the European automakers in July, the incentives war is certainly not confined to the domestics," remarked Dr. Liu Of all brands, Mini spent the least on incentives, $80, while Scion spent only $212 per vehicle and Porsche spent only $257. At the other end of the spectrum, Cadillac spent the most incentives dollars per vehicle for the fifth consecutive month, $7,878, followed by Lincoln at $5,480, and Jaguar at $5,248. Among vehicle segments, large SUVs continued to offer the highest average incentives in July, $4,885 per vehicle. Other segments with high incentives were luxury cars at $4,306 and large cars at $3,663. Compact cars had the lowest average incentives at $1,662, followed by sports cars at $1,987, and luxury sport cars at $2,050. Midsize SUVs have lost the most market share since July 2003, decreasing from 13.5 percent to 12.9 percent, while large SUVs have gained the most market share during that period, up from 5.0 percent to 6.4 percent of the U.S. new vehicle market. "Although incentives don't always drive market share proportionally, it seems the great deals on large SUVs are hard for consumers to ignore," noted Dr. Liu.
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