Deals and Discounts Return to American Car Showrooms
New-Car Showrooms Offer Great Deals
The deals are back in America’s new-car showrooms. Automaker spending on new-vehicle incentives rose sharply in July compared with the previous year, driven by electric vehicle offers, luxury car lease deals, and growing inventory across the industry. Retail inventory is growing, production issues are receding, and as production increases, inventory on the ground will also increase, leading to better deals for consumers.
Increased Incentives and Discounts
Incentives averaged $2,151 per vehicle last month compared with $1,174 in July 2022. Incentives as a percentage of sticker price rose to 3.9 percent per vehicle in July vs. 2 percent in the previous year. Electric vehicle incentives are closing in on $4,000 per unit, more than double compared to last year. Tesla increased discounts and made deep price cuts, resulting in incentives reaching $2,506 per vehicle in July compared to $572 in the previous year.
While EV sales are increasing, production of electric vehicles at Tesla, Ford, and others is outstripping demand, leading to an oversupply. This oversupply is impacting nearly every electric vehicle, from low-priced cars like the Tesla Model 3 to high-priced nameplates like Lucid and Ford’s F-150 Lightning and Mustang Mach-E.
Improving Supply Chains and Leasing
The overall rise in incentives is a result of improving supply chains in the post-pandemic period, along with higher interest rates and dampened consumer confidence. The return of leasing, especially in the luxury segment, is also driving incentive spending. Mercedes-Benz, BMW, and Infiniti have all seen significant increases in incentives per vehicle. Lease spending overall rose to just over $6,000 per vehicle last month, and for premium brands, lease spending was $8,815.
Rising Incentives and Improved Sales Climate
Rising incentives have contributed to an improving sales climate in July. Light-vehicle deliveries increased by 15 percent compared to the previous year, and the seasonally adjusted, annualized rate of sales reached 15.9 million. The outlook for the remainder of the year remains positive, with resilience in consumer purchases supporting the industry and the economy.
Overall, the increase in incentives and discounts is good news for consumers in the second half of the year. Selection will improve, and prices will moderate as inventory increases and automakers and dealers continue to offer attractive deals.
