Home » New Car Incentives Up Almost 50% As These Dealers Need To Move Cars Off Their Lots

New Car Incentives Up Almost 50% As These Dealers Need To Move Cars Off Their Lots

Dealer Incentives Tmd Ts2
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There’s been a lot of movement in the car market this year and not all of it has been in favor of new car buyers. I think we’re now at an inflection point where there’s a lot of inventory and a stubbornly high average transaction price, which means the only lever left for some dealers is cash on the hood.

This Morning Dump is going to be, mostly, about the state of car sales and what you need to know as a consumer to be prepared to get a good deal if you want something new. The when is important, and it might be now, but the where is just as important, as not all dealers are going to be equally as enthused about forking over money.

Vidframe Min Top
Vidframe Min Bottom

And speaking of forking over money, Republicans in the House of Representatives passed a bill stating that federal tax incentives can’t even go to batteries built in America, if those batteries use Chinese battery technology. The timing of that is interesting given that GM is considering buying tech from China’s CATL.

There are many dull cars, but few dull moments around here lately. Tally ho.

There Are Still About 3 Million New Cars For Sale In The United States

July 2024 New Vehicle Inventory Chart 1

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There are roughly 333.3 million people in the United States right now. That’s an estimate, but it’s a good number for us because there are approximately 3 million new cars in the inventory of car dealers according to Cox Automotive. The math is pretty easy from here.

As of August, there was roughly 1 new car for sale for every 111 people. That’s a big increase over last year, when production hadn’t quite caught up post-pandemic and there were only approximately 2 million cars for sale.

We showed a version of the graphic above yesterday, but you can get a good sense of which brands are and aren’t moving cars quickly this year. The average Days Supply (i.e., how long it would take to sell all the cars on the lot) was 68 in July and climbed up to 72 in August. Generally, you want to be left of that green line, though brands like Land Rover and Ferrari are doing well, so it’s not a perfect measure.

Here’s Automotive News with an overall take:

Asian automakers continued to have the leanest supply levels, Cox said, while Ram, Lincoln, Dodge, Jeep and Mini have at least four months of supply on hand.

Among the seven automakers reporting monthly sales and inventory, Ford Motor, Volvo, Toyota Motor North America and Hyundai-Kia saw days’ supply increases in August from the previous month, according to the Automotive News Research & Data Center, while American Honda, Mazda and Subaru saw theirs shrink. Toyota remained the only automaker among the seven to report less than a one-month supply.

So we know some dealers have a lot of cars and some have fewer. Does that mean everyone is going to be offering great incentives? Not quite.

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Where The Good Deals Probably Are

Atp V Incentive
Source: Cox Automotive/KBB

Here is another fun graphic from Cox/KBB, showing the average transaction prices (ATP) of cars being sold in blue and the % of ATP given away in incentives (ATP doesn’t include incentives, FYI). There’s really no clearer way to understand the overall car market than this. You can see the large drop in incentives and quick rise in car prices that happened because of the pandemic slowdown/Trifmlation. With less inventory, automakers had no reason to give breaks on cars and found as many ways as they could to raise prices.

This is going in a better direction for consumers now, though incentives haven’t reached their 2019 peak of 10.9%, and average prices, while they’ve stabilized, aren’t going back down to pre-pandemic levels. Some of this ATP increase is likely due to product mix, with people desiring bigger/nicer cars. Some of this might be that everything is more expensive and so the cost of making cars is going up. Some of it might be that automakers found an excuse to increase the costs of their cars and just don’t want to lower prices because they got addicted to those sweet, sweet margins.

In theory, looking at this you’d think that it’s been an increasingly great time to buy a car. And, yeah, if you’ve got cash to buy a car and you’re willing to get a Volkswagen Atlas instead of a Toyota Highlander it is a great time to get a deal. If you have to finance one, that’s another story, as interest rates have remained stubbornly high.

The industry in general, though, is pushing incentives, and they’re up about 49% year-over-year (they were up almost 60% year-over-year last month) to 7.2% of ATP.

So where are the deals? From KBB:

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With new-vehicle inventory in early August higher by more than 40% year over year, consumers enjoyed more choices last month and, in many cases, notably higher incentive levels. Incentive packages for vehicles from Chrysler, Ram and Jeep all shifted from below the industry average in July to above the industry average in August, as many Stellantis dealers work through higher inventory levels. (Incentives for Dodge-brand vehicles declined month over month in August, falling from 6.9% of ATP to 5.6%.) Buick, Lincoln, and Mitsubishi posted notably higher discounts in August, while Nissan and Infiniti continue to offer substantial incentives as well.

In August, Porsche, Land Rover, Toyota and Lexus continued to offer the lowest incentives in the market. These brands also consistently carry inventory levels far below the industry average.

“In the face of a sluggish sales pace – 15.1 million in August – more dealers are pulling the only lever they have: higher incentives,” added Keating. “This shift to a buyers’ market is good news for consumers but certainly impacts dealer profitability. Automakers are coming to the table with more incentives, but credit remains tight, putting more pressure on dealers to get creative with additional discounts and financing, affecting the bottom line.”

Again, refer to the chart of inventory above for a very general sense of where to get a good deal. You can also check out this chart to see which automakers have seen the biggest ATP drops year-over-year. Nissan/Infiniti and Buick/Lincoln/Mitsubishi are near the top, though Stellantis is finally joining the party.

Lower pricing and higher incentives aren’t the only lever automakers have to pull. If you want to lease a car and make an EV work those are the best deals right now and it’s not even close. As CarEdge is reporting, 0% financing and lower financing in general are starting to become more common. Deals include 0% financing for the new F-150 and Expedition for 36 months and the Mach-E for 72 months. Mazda will do 0% financing for 36 months on the CX-30, CX-5, and Mazda3 and Jeep will do the same for Wrangler and Grand Cherokee models.

The best non-EV deals are probably the Nissan Titan and Volkswagen Tiguan as both can be had with 60 months of 0% financing for qualifying buyers (which you have to be in order to access these deals). The best, though? If you actually want to buy a Subaru Solterra (definitely lease, not buy one) they’ll let you have 0% financing for 72 months.

Republicans: No More Chinese Battery Tech

Ford Blueovalsk Battery Plant 001

Republicans in the House of Representatives just finished “China Week” which, I just found out, was not about Uma from Descendants 2.

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The ultimate result was the passing of “25 crucial pieces of legislation to protect Americans against the military, economic, ideological, and technological threats posed by the Chinese Communist Party.”

Most interesting to us will likely be H.R. 7980, or the End Chinese Dominance of Electric Vehicles in America Act of 2024 Act. Currently, for a battery to qualify for an EV tax credit the battery can’t be made in a prohibited foreign entity like China or Russia and can’t contain too many source materials from those prohibited foreign entities.

The technology? That’s not included in the Inflation Reduction Act, which is why Ford has been planning to build a plant in Michigan to build batteries using technology from China’s CATL, which is the biggest battery maker in the world (though that whole plan hasn’t gone so well lately).

It’s hard to argue that China is not ahead of us on battery technology, at least when it comes to the current era of lithium-based chemistries. Republicans (and a few Democrats) don’t love the idea of a joint venture between a Chinese company and a domestic manufacturer and are using this bill to target those entities.

Of course, there’s still a Democratic Senate and President, so this bill is probably DOA, as the South China Morning Post reports, but there was still quite the debate:

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A debate emerged among legislators from Michigan, the base of US auto making. Representative John Moolenaar, the Republican chair of the House select committee on China, argued that “the American people do not want CCP-affiliated companies setting up shop in their towns”, while Representative Debbie Dingell, a Democrat, contended that the bill would “lead to American job losses” and make it “harder for American companies to compete”.

Representative Judy Chu, a California Democrat, raised concerns about a provision in Miller’s bill that expands the list of entities restricted from receiving tax credits to include firms owned by “a citizen, national or resident” of China.

“This bill includes a harmful provision that would target immigrants who came to the United States from an adversary country, but who themselves have nothing to do with their governments of origin,” Chu said.

The impending election will likely impact whether this ever sees a vote.

GM In Talks To Buy Batteries With Chinese Tech

2024 Chevrolet Equinox Ev First Drive
2024 Chevrolet Equinox EV Ultium cells and battery modules

Bloomberg is reporting that GM is in talks to buy batteries from Japanese firm TDK, to be built in America, using some tech from China’s CATL:

Under the terms of the deal, TDK would license technology from CATL — the world’s biggest maker of EV batteries — to make lithium iron phosphate cells, the people said, similar to existing CATL partnerships with Ford Motor Co. and Tesla Inc. GM doesn’t plan to take an equity stake in the venture, one person said.

Such a technology licensing arrangement may help avoid scrutiny by US lawmakers and the Biden administration, who are wary of collaboration with China on key strategic technologies including EV batteries.

Talk about good timing.

What I’m Listening To While Writing TMD

The Roanaissance got a little more real this week at the MTV Video Music Awards with Chappell Roan doing “Good Luck, Babe” in front of a flaming castle. Is this Roan torching the fairytale idea of conventional sexuality? Maybe! I’m an old man, what do I know? It’s a great song.

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The Big Question

Are you more or less likely to buy a new car now than you were a year ago? Why?

Top photo: DepositPhotos.com

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Joke #119!
Joke #119!
24 days ago

Incentive packages for vehicles from Chrysler, Ram and Jeep all shifted from below the industry average in July to above the industry average in August, as many Stellantis dealers work through higher inventory levels. (Incentives for Dodge-brand vehicles declined month over month in August, falling from 6.9% of ATP to 5.6%.) Buick, Lincoln, and Mitsubishi posted notably higher discounts in August, while Nissan and Infiniti continue to offer substantial incentives as well.

But, I don’t want any of those cars.
Even at 50% off.

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