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Incentives begin to determine timing of new car purchase

Edmunds.com, the US online resource for automotive information, reports that the average manufacturer incentive per vehicle sold in the US was $2,365 in January 2004, up $343, or 17%, from January 2003, and down $90, or 3.7%, from December 2003.

"The meteoric rise of incentives spending over the past few years has been largely driven by a desire for market share, especially by the domestic manufacturers, but we are starting to see evidence of a change in focus," stated Dr. Jane Liu, Executive Director of Data Analysis for Edmunds.com. "Starting with the 2004 model year and becoming more apparent with the 2005 model year vehicles, automakers are rediscovering the importance of profitability and are hoping to achieve it through a new pricing strategy of setting sticker prices closer to actual transaction prices, aiming to eliminate the expectation of large cash rebates and low APR programs and letting each vehicle sell itself."

But another survey released this week suggests manufacturers may find it hard to wean buyers off headline cash discounts. AutoVIBES, a monthly automotive omnibus study from Harris Interactive(R) and Kelley Blue Book shows that a majority of consumers are timing their new vehicle purchase based on available incentives.

According to AutoVIBES research, 67% of consumers planning to buy a new vehicle in the next 12 months say their purchase timing is 'very much or somewhat' affected by the availability of incentives. Of that group, 52% (or 35% of the total sample) said they were 'not at all likely' or 'not very likely' to purchase a new car if incentives were not offered. It was forecast this week that Europe's volume models would, as in the US, increasingly be pushed with price incentives, given market conditions comparable to those faced by the domestic manufacturers in the US.

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