Incentives Edge Higher, Sales Rate Hits A New Record

Incentive spending is up among many automakers, and when incentives rise, car sales often follow. In fact, new data suggests a Seasonally Adjusted Annualized Rate (SAAR) of 13.4 million new car sales for the year, which is higher than the U.S. has seen since August 2009.

Incentives make a comeback

Incentives hit record highs in the spring of 2010, but tumbled after the Tohoku earthquake and tsunami that hit Japan on March 11 of this year. The subsequent shortage of vehicles from Asia forced vehicle prices upward and caused automakers to roll back incentives. Even car companies that weren't directly affected by the disaster cut incentives -- after all, if low supplies caused Toyota and Honda to keep prices high, there wasn't much need for Ford, GM, or other brands to make deep price cuts. 

Japanese automakers still face hurdles on the production front -- including the floods currently ravaging Southeast Asia -- but they've recovered enough to scale up supply in the U.S. And of course, with greater supply comes reduced demand, meaning more incentives for consumers.

Not surprisingly, Asian automakers are leading the pack on incentives, with Nissan up 6.1% over September 2011, Toyota up 6.6%, and Hyundai/Kia up a whopping 13.6%. (That's especially interesting since Hyundai/Kia's home in South Korea wasn't affected by the earthquake or tsunami, though many consumers assumed they had been and began avoiding the brands.)

Incentives from U.S. automakers were slightly lower in October compared to September, but generally higher than they were a year ago. Ford incentives were up 2.4% compared to October 2010, and GM's were up 2.7%. Chrysler is the only one of the Big Three to post a year-over-year drop, ringing in 3.3% lower than October 2010.

Sales are on the rise

On average, automakers are now shelling out $2,669 per vehicle on incentives. That may help explain why they're on track to sell some 1,035,042 units this month -- a drop of 1.7% from September, but an impressive 9% above October 2010. If those projections come true, that would bring the SAAR up to 13.4 million light vehicle sales for the year, up from 13.1 million last month and up from 12.2 million in October 2010. In fact, a SAAR of 13.4 million would be the highest we've seen since August 2009 -- a period when some might argue that sales stats were artificially inflated because of the federal government's Cash-for-Clunkers program.

This data comes from TrueCar, which uses actual sales to project trends across the industry. The company's Jesse Toprak expects to see the SAAR maintain its upward trend: "Consumers are no longer dragging their feet on new vehicle purchases as they feel the economy is moving in the right direction.... This will be the fifth straight month where SAAR will rise and the highest we’ve seen in over two years."

Accordingly, most auto brands are doing better than they were a year ago. At the high end of the scale, Dodge is up 33.7% compared to October 2010, Volkswagen is at 42.8% (not surprising, given yesterday's news), and Mazda -- which was, of course, affected by the Tohoku disaster -- is up a stunning 47%.

Most of the downward trends are meager by comparison: Scion is off 15.3% compared to October 2010, and its big brother, Lexus, is down 17.1%, but both are set to make gains compared to September 2011. Saab is one of only three companies (the others being Lincoln and MINI) that are in the red compared to both last year and last month, clocking in 22.4% below September 2011 and a staggering 55.1% below October 2010.

If you're a statistics junkie, there are plenty more numbers where these came from. Click here to view the full report.

This story originally appeared at The Car Connection