Edmunds.com Reports True Cost of Incentives: Average Incentives Fall To Lowest Level in Nearly Three Years

Edmunds.com Reports True Cost of Incentives: Average Incentives Fall To Lowest Level in Nearly Three Years


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Edmunds.com Reports True Cost of Incentives: Average Incentives Fall To Lowest Level in Nearly Three Years

SANTA MONICA, Calif. — November 1, 2005 — Edmunds.com, the premier online resource for automotive information, reported today that based on preliminary data, the average automotive manufacturer incentive in the U.S. was $2,066 per vehicle sold in October 2005, down $589, or 22 percent from October 2004, and down $278, or 12 percent, from September 2005. Incentives in October were the lowest since January 2003, when average incentives were $2,022 per vehicle.

Edmunds.com's monthly True Cost of IncentivesSM (TCISM) report takes into account all manufacturers' 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.

"Manufacturers are finally beginning to see returns on their efforts to lower incentives," remarked Dr. Jane Liu, vice president of data analysis for Edmunds.com. "There will be some sales sacrificed in the short run, but this trend is good for the entire industry in the long term."

The industry's aggregate incentives spending is estimated to have totaled $2.5 billion in October, down from $3.0 billion in September. Domestic Chrysler, Ford and General Motors nameplates spent $1.9 billion, or 75 percent of the total; Japanese manufacturers spent $373 million, or 15 percent; European manufacturers spent $168 million, or seven percent; and Korean manufacturers spent $91 million, or four percent.

Based on preliminary data, combined incentives spending for domestic manufacturers averaged $2,909 per vehicle sold in October — the lowest since February 2003 — down $178 from September 2005. All domestic automakers decreased incentives spending in October: Chrysler's incentives spending was down $172 to $3,206 per vehicle sold; Ford's incentives spending was down by $275 to $2,751 in October; and General Motors' decreased its incentives in October by $129 to $2,844.

From September to October of this year: European automakers decreased incentives spending by $587 to an average of $1,936 per vehicle sold; Japanese automakers decreased incentives spending by $226 to $966; and Korean automakers decreased incentives spending by $130 to an average of $1,562 per vehicle sold.

Comparing all brands in October, Mini spent only $18 while Scion spent $125 and Porsche spent $470 per vehicle sold. At the other end of the spectrum, Jaguar spent the most, $7,225, followed by Lincoln at $5,825 and Buick at $4,233 per vehicle sold. Mercury and Buick spent the most as a percentage of MSRP for their brands, 14.7 percent and 14 percent, respectively, while Mini and Porsche spent the least, 0.1 percent and 0.6 percent, respectively.

Among vehicle segments, large SUVs continued to offer the highest average incentives, $4,905 per vehicle sold, while sports cars had the lowest average incentives per vehicle at $744 and compact cars followed closely at $793 per vehicle. Analysis of incentives expenditures as a percentage of MSRP for each segment shows large SUVs were the highest, 11.4 percent, while sports cars and luxury sports cars were the lowest at 2.6 percent.

"Employee pricing was effective in clearing inventory that typically would have carried high incentives later in the year," Liu added. "By pulling sales into the summer — earlier than is typical — employee pricing promotions also pulled the higher level of incentives forward, as well."

About Edmunds.com True Cost of IncentivesSM(TCISM)
Edmunds.com's TCISM is a comprehensive monthly report that measures automobile manufacturers' cost of incentives on vehicles sold in the United States. These costs are reported on a per vehicle basis for the industry as a whole, for each manufacturer, for each make sold by each manufacturer and for each model of each make. TCI covers all aspects of manufacturers' various incentives programs (except volume and similar bonus programs), including dealer cash, manufacturer rebates and consumer savings from subvented APR and lease programs (including subvented lease residual values used in manufacturer leasing programs). Data for the industry, the manufacturers and the makes are derived using weighted averages and are based on actual monthly sales and financing activity.

About Edmunds
Edmunds.com is the premier online resource for automotive information. Its comprehensive set of data, tools and services, including Edmunds.com True Market ValueŽ pricing, is generated by Edmunds.com Information Solutions and is licensed to third parties. For example, the company supplies content for the auto sections of NYTimes.com, AOL, About.com and IGN.com, provides weekly data to Automotive News and delivers monthly data reports to Wall Street analysts. Edmunds.com also publishes a high-speed, on-screen car magazine called Inside Line available free at www.insideline.com. 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 StudySM and was ranked first in the Survey of Car-Shopping Web Sites as reported by The Wall Street Journal. The company is headquartered in Santa Monica, Calif. and maintains a satellite office outside Detroit.

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