Over the course of the last year or so, new vehicle incentives have fallen to record lows amid the semiconductor chip shortage. This has been caused by massive production cuts that have led to dwindling inventory on dealer lots, which has prompted those dealers to sell the inventory on hand at or even above MSRP. As a result, Ford’s incentive spending is down dramatically from previous years, while industry-wide, new vehicle incentives have fallen to a new five-year low, according to the latest data from Cox Automotive.
Total program volume – a count of the number of new-vehicle incentive programs offered by the automakers – is down 17 percent for the year compared to 2019 – when it reached an all-time high – and down 15 versus 2020. Program volume in Q4 of this year stands at 4,713, which is the lowest in five years and down 36 percent from Q4 of 2020.
Much of this can be attributed to tight inventory levels that fell below one million units last month – compared to a normal average of around 3.5 million units – which has shifted the automotive industry from a buyer’s market to a seller’s market. As Ford Authority previously reported, new vehicle average transaction prices reached a record high of $46,329 in November, the eighth straight month ATP has set a new high mark. Meanwhile, incentives fell to just 4.1 percent of ATP, or less than $2,000, compared to 10 percent and around $4,000 in November of 2019.
Cox Automotive estimates that in December, new vehicle sales will come in at 1.1 million units, which would represent a 30 percent decrease over last December. Meanwhile, the incentive program count plunged to 1,456 last month, which is the lowest of 2021 and one of the lowest numbers since the organization started tracking it back in 2017.