Incentive spending increased again in May making it the fourth consecutive month that we have seen a lift in both mainstream and luxury brand spending.  According to the latest data from Autodata, May average incentive spending grew to $2,667, which was a 4.9% increase relative to last year’s figure of $2,542.  While new sales improved by a healthy 8% in May, many manufacturers substantially increased incentive spending which undoubtedly helped final results.

At a brand level, Hyundai and Buick increased spending more than most other mainstream manufacturers, as average spending rose by 53.7 and 48.6% compared to last year.  Despite the large increase, Hyundai still maintained one of the leanest overall averages of just $1,349 per unit sold.  Other heavy spenders were Chrysler and Volkswagen who increased spending by 25.3% and 22.5%, respectively.

Although incentive spending grew materially in May, a few brands did actually pull back on offers.  Jeep was the thriftiest of all, decreasing spending by 29.1% compared to last year to average $1,720 per unit sold.  Honda also decreased spending by a substantial 25.9%.

On the luxury side, Cadillac and Volvo led the way with incentive increases again in May.  Cadillac increased average spending by 39.4%, and Volvo followed closely behind with a 37.2% jump. Cadillac’s per unit average of $5,295 was also higher than all other luxury brands save Jaguar.  Cadillac’s sales have this year have been vastly improved, but it could be argued that high incentives are playing a consequential role in the sales rise.  Porsche and Lexus reduced spending the most out of the group, lowering spending by 51.2% and 19.3%, respectively.

While finance and lease subvention remain the two most prominent forms of incentives, associated monies allocated to these two types has declined year-to-date, while customer cash incentives have grown by an average of 6.5%.  This is more worrisome from a used vehicle retention standpoint, as “cash on the hood” has a direct and immediate impact on used vehicle prices.


 
This trend bears close scrutiny, particularly as the year wears on because prior-year new sales comparisons are expected to become less favorable.  This will undoubtedly cause some OEMs to feel added pressure to maintain a certain level of growth, and further raising incentives is one tried-and-true way to do this.