This, according to TrueCar.com, is what automakers spent on incentives last month. Though Chrysler and GM have cut compared to November of last year, their incentive spending is on the march compared to last month, and they still vie for industry “leadership” in these profit-sapping spiffs. But that’s just TrueCar’s perspective…
Edmunds paints a slightly different picture with its True Cost of Incentives index for last month. Both GM and Chrysler are showing the same long-term progress and short-term regression, but Ford’s number is significantly higher than TrueCar’s calculation. Edmunds also calculates a significantly lower industry average, making Detroit’s indulgence seem all the more excessive. So which outfit has the right numbers? It’s hard to say, as incentives are often regional and are in constant flux. One other metric, provided only by TrueCar does cast a little more light on the situation, however.
GM and Ford lead the industry, likely fueled by high-margin, high-volume truck sales, but over the last year, Honda and Toyota are seeing the worst transaction price erosions among the major US-market players. Chrysler’s transaction prices have roared back in the last year (though, in fairness, they had nowhere to go but up), but GM’s 12-month improvement still pales compared to Hyundai’s one-percent gain. But, if there’s just one automaker who looks likely to slide towards low-price volume slinging, it’s Toyota. Having introduced big incentives to combat recall-related PR problems, Toyota’s sales are basically flat year-to-date (and fell last month), and their transaction price is down a whopping two percent on the year. That’s not a great sign for any automaker.
You can get Insights here locally with up to $2k+ off sticker (up to $3k with some dealers). Honda’s mild hybrids are not selling and they have to load them with incentives (may make sense why Honda’s incentives have gone up 60%). Honda’s most recent gains in sales are from its SUVs and minivans making more margin room for incentives.
I don’t see the issue over GM / Chrysler incentives. The MSRP is set with incentives in mind, and GM / Chrysler leave room for those incentives when they need them. If not, it’s extra profit for GM and the dealer.
What matters are the transaction prices. There’s not nearly as much fudging there, because that’s what was actually paid.
Also, given how car sales are seasonal, November incentives should be higher than October. November is clearing out the old stuff for the new models coming in.
The key thing is looking at individual companies – GM is doing better, with less on the hood and a higher transaction price. Toyota is in the toilet, with more on the hood and a lower transaction price.
Toyota sales may be flat, but they are still the Big Dog amongst import brands in the US.
I’m surprised to see their average transaction price below Ford and GM. Have you priced a mid level Camry or Highlander lately?
GM and Ford sell a lot more trucks… like tens of thousands more…..$$$…
Ford’s numbers also reflect a lot of extra cash on the hood of Mercury models which were cleared out in November. My dealer sold through all of our Mercury lineup in short order, and most others did as well, Ford piled some extra cash on the hood to make the closeout quick and painless which worked. Look for Ford incentive numbers to go down quite a bit by next month since there are few Mercury models left to sell at this point.
I don’t know what’s worse, GM’s $3K plus in cash on the hood or Toyota’s increase of 35% and Honda’s increase of 65%. And look at Nissan, positively Detroit grade cash out there.
Five years ago if someone told me that Hyundai would be putting the least cash on the hood of their cars by a significant margin to move iron versus the competition I would have called shenanigans.
Transaction price goes hand in hand with MSRP. Hyundai/Kia value price their cars from the start, so they can win a pricing war without having as much cash on the hood.
Once again with the silly ‘cash on the hood’ phrase.
Just lower the asking price.
Instead of saying you’re putting $2K on the hood of the sedan that has a $24K MSRP, talk like a normal person and say this car now has a $22K asking price.
Of course the dealers love anything that makes buying a mass produced object more complex with twists and turns.
This silly stunt keeps the image of car salesmen low just like the carpet chain that screams “all rugs priced at $99.99 for just $39.99!”
By law all cars have to have the Monroney sticker affixed at time of sale. Consumers are used to vehicles becoming cheaper as the model year progresses, and it isn’t logistically feasible to keep printing and affixing new stickers as the model year progresses.
Take for example a the Fiesta, which launched with no rebates or incentives, and stayed that way until last month when a $500 rebate was offered. If they just lowered the price by $500, it would require all unsold Fiestas on every lot to be restickered. Yes, Best Buy and the like can easily print new price tags when a TV goes on sale, but they typically have one display model of each model of television, vs dozens of cars of a particular model at a dealer, and all 52″ Sony XBR100s will have the same price, while not all 2011 Fusion SEL V6s will have the same starting price due to differing options.
Plus, manufacturers usually offer choice in the incentives – for example on model X of a car, you can take either a $3,000 rebate or 0% financing for 60 months. The rebate makes more sense for a cash buyer or someone trading in a paid off car or putting down a large down payment, but the financing incentive could save more money for someone planning on financing the entire amount of the vehicle. You also have differing incentives on vehicles depending on if it’s a lease or a buy. Finally, the incentives on a particular vehicle may not even be the same depending on the region the vehicle is being sold in.
The current incentive system is the most simple means of achieving the goal of incentivizing the sale of vehicles that are either getting older or not selling up to manufacturer’s original goals.
I want to agree with you but I worked as a salesman in a dealership in the UK and as a manager here in Canada. In both stores we tried “value pricing” and it absolutely didn’t work and it was quickly abandoned.
Almost without exception people would just make lowball offers and we had many, many people walk out in disgust because we wouldn’t negotiate.
The psychology of it is that most people want to feel like they “got a deal” much more than they worry about the actual bottom line price.
I think that most dealers would be quite happy to be able to set a fair price and not have to haggle but the market just doesn’t work that way.
Here are the percentages of incentives vs the transaction prices, puts things in a easier to understand light.
Honda 8.6%
Toyota 8.8%
Ford 9.1%
Hyundai/Kia 9.2%
GM 9.6%
Nissan 10.1%
Chrysler: 11.8%
So GM is still the leader of something:
Incentives.
Good for them.
I have to say that ‘value pricing’ does not work for most folks.
Hundreds of dealers have tried going down this road to no sustainable success. Ford even tried to make the Denver market abide by this sales strategy during the late 1990’s and sales went down dramatically.
Most consumers like ‘the deal’ when it comes to new car purchases. They don’t like the runaround. But they want to feel like they got that edge. It’s human nature.