With new vehicle transaction prices at record highs, it would stand to reason that incentive spending is at a low point.
According to a report from Cox Automotive, new vehicle incentives fell to 4.1 percent of ATP in November 2021 – equivalent to less than $2,000. In November of 2019, the average incentive package for a new vehicle was more than 10 percent of ATP, or over $4,000.
Incentive program volume, meaning the number of incentive programs offered by automakers, is also down this year. Total program volume from January 2021 to the end of December 2021 was down 17 percent from 2019 and 15 percent from last year, Cox reports. . Program volume in Q4 was also the lowest in 5 years at 4,713, which was down 36 percent from Q4 2020. Incentive program volume is tied to days’ supply, with program volume reaching an all-time high in 2019 when new vehicle inventory was sitting at over 80 days’ supply.
Cox also predicts new vehicle inventory levels will remain tight through the first half of 2022 and that shoppers “can rightly expect incentive levels to remain low as well,” in the New Year. This is due to the fact that the effects of the global chip shortage are expected to persist in 2022, limiting new vehicle production output and thus reducing incentive spending at dealerships and driving up prices. A recent report from Edmunds also predicted high demand for new vehicles to last in the New Year, as well.
“In 2022 there won’t be a question of how many new vehicles consumers will buy, but how many vehicles automakers can actually produce,” Edumunds’ experts said.
“Consumers who are planning on making a vehicle purchase in 2022 must prepare for a much different market and car shopping experience compared to years past,” the publication added. “Competition for new vehicles will be fierce as inventory shortages persist, and serial lessees might need to do some extra planning and research before their lease agreement ends to find affordable options.”