Automakers using aggressive incentives to close out year

Incentives continued to soar in October as automakers pushed to clear inventory in the last months of 2024.

Driving the news: Incentives have climbed steadily since mid-2022. With the holiday season around the corner, manufacturers and dealers are driving the trend forward even more in an effort to end the year on a high note.

• Incentives accounted for 7.7% of the average transaction price (ATP) for new vehicles, up 6% from September and an increase of over 60% compared to last year, according to Cox Automotive. Eight of the biggest manufacturers carried incentives worth more than 10% of last month’s ATP.

• Out of all model types, compact SUVs saw the best offers last month, with prices 30% lower than the industry average and incentive packages worth around 9.4% of the segment’s ATP.

• Electric vehicles continue to see much higher incentive spend than other drivetrains. EV incentives rose from 11.6% in September to 13.7% last month, more than double their year-ago value.

Zooming out: While incentives continue to rise across the board, ATP movements are proving to be more sluggish, heading in different directions depending on model and brand.

• October’s ATP was $48,623, $200 more than September’s and 1.7% higher year-over-year. Prices have continued to hover around $48,500 since late 2023.

• Certain segments moved against the flow in terms of pricing. For example, full-size pickups, which are seeing slower sales compared to previous years, saw a 1.3% decline in ATP from October 2023.

• Electric cars remain substantially more expensive than other vehicles, costing about 14% more than the industry ATP. However, while October EV prices grew slightly compared to last year, they were down 1.2% from the segment’s average in September. Although Tesla prices jumped sharply over 2023, rising by 10%, they also saw a small decline compared to September.

Bottom line: With ATPs in constant flux, incentives are proving to be the biggest driver of affordability and demand in late 2024. This will be key to achieving sales targets in the coming weeks as dealers and automakers prepare their end-of-year reports.

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