The Auto Channel
The Largest Independent Automotive Research Resource
The Largest Independent Automotive Research Resource
Official Website of the New Car Buyer Reports Automakers' True Cost of Incentives: Average Incentive Swells Nearly 30% From 2002 to 2003, Expected to Level Off in 2004

SANTA MONICA, Calif., Jan. 20, 2004 -- ( ), the premier online resource for automotive information, reported today that the average incentive per vehicle sold in the United States was $2,455 in December 2003, up $251 or 11.4% from December 2002, and up 2.9% from November 2003. For calendar year 2003, the average incentive was $2,442 per vehicle sold, which was 28.9% higher than the 2002 average of $1,894.'s monthly True Cost of Incentives(SM) (TCI(SM)) report takes into account all of the manufacturers' various United States incentives programs, including subvented interest rates and lease programs as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.

Incentives spending for domestic models decreased slightly, falling 0.5% to $3,339 in December compared to $3,355 per unit in November. Chrysler increased incentives spending by 1.5% to $3,415 per vehicle and experienced a market share gain of 0.3%. Ford's total incentives spending per unit dropped by 3.3% to $2,868 in December while the company's domestic brands gained 0.2% market share. Despite reducing its incentives by 0.6% to $3,589, General Motors gained a sizable 2.4% market share.

Trucks and SUVs reached all time highs in market share in December despite lowered incentives over the last three months of the year.

"The increased market share can be credited to an increased variety of trucks and SUVs manufactured by both domestic and import automakers," stated Dr. Jane Liu, Executive Director of Data Analysis for "In the current market, enhanced product variety and quality motivate buyers more than incentives do, and create far more positive brand equity in the process."

The numbers clearly show incentives do not always translate into market share gains. The brands with the greatest incentives expenditures in 2003 included Mitsubishi, GM and Chrysler while the biggest losses in market share were suffered by those companies. Conversely, the biggest market share gainers overall in 2003 were Honda, Toyota and Nissan, which were among the companies that spent the least on incentives.

"Going forward, we should no longer expect to see the rapid acceleration of incentives consumers enjoyed this year," said Dr. Liu. "Incentives will flatten out as automakers introduce a record number of new models and major vehicle redesigns that will have more intrinsic appeal to buyers just as the overall economic outlook becomes more optimistic."

About True Cost of Incentives(SM) (TCI(SM))'s TCI(SM) is a comprehensive monthly report that measures automobile manufacturers' cost of incentives on vehicles sold in the United States. These costs are reported on a per vehicle basis for the industry as a whole, for each manufacturer, for each make sold by each manufacturer and for each model of each make. TCI covers all aspects of manufacturers' various incentives programs (except volume and similar bonus programs), including dealer cash, manufacturer rebates and consumer savings from subvented APR and lease programs (including subvented lease residual values used in manufacturer leasing programs). Data for the industry, the manufacturers and the makes are derived using weighted averages and are based on actual monthly sales and financing activity.