New-vehicle incentives have made a comeback, with a noticeable spike in July.
According to J.D. Power data, incentives rose to 3.9% of the vehicle's sticker price, up from 2% in July 2022.
Automakers offered incentives of about $2,151 per vehicle, up from $1,174 in July 2022, according to Motor Intelligence data. J.D. Power put incentives at $1,830 per vehicle in July, a significant year-over-year increase from $908.
J.D. Power analysts note that the increase in incentives is driven by:
Electric vehicle offers
Luxury car lease deals
Growing inventory levels
The higher days' supply of EVs compared to combustion vehicles has increased the industry’s spending on incentives. In fact, EV incentives average $3,986, Tyson Jominy, vice president of data and analytics at J.D. Power, told Automotive News.
J.D. Power and Motor Intelligence data also noted that the return of leasing, which decreased significantly when vehicles were in short supply, also boosted incentive spending, particularly in the luxury segment. Overall lease spending increased to more than $6,000 per vehicle from $3,500 in July 2022, according to Jominy. For premium brands, lease spending reached $8,815 in July.
Greater inventories also drive the incentives increase as automakers strive to move more cars. As of August, GlobalData reported inventories of light-duty vehicles totaled 1.9 million, up 14% year-over-year. Although days' supply of vehicles remains low at 36 days, it has increased from 28 days in 2022.
