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New Vehicle Incentives Fall To Five-Year Low Amid Tight Inventory

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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.

We’ll have more insights like this to share soon, so be sure and subscribe to Ford Authority for 24/7 Ford news coverage.

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Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.

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Comments

  1. NCEcoBoost

    And the manufacturers just love it, raking in money like crazy. Some incentive for more chips, not. This is exactly what has led many to suspect a conspiracy regarding the chip situation. I can’t blame them. We very clearly need an economic correction to get this all back to where it should be. Federal Reserve, what ARE you (not) doing?

    Reply
  2. Mark

    My opinion thay need diffrent models of cars and trucks to test drive from the lot and if you like everything thing about what you test drive and the features then you can order what you want: I have a hard time ordering a vehicle you havent looked at or took it out on test drive.

    Reply
  3. HD

    The purchasing of a car in todays market is ludicrous.
    I just purchase a new car 2 days ago, not for desire, but for need. The days of negotiating down from the MSRP are long gone. Now we’re being forced to negotiate down from $10k above MSRP. The best I could do was to get the car at $4k above sticker and negotiated $2500 more on my trade in. But I guess with higher used car prices, it kind of washes out.
    In years past I’d buy a new car and drive away wondering how badly I was screwed. This time, I drove away knowing I was badly screwed!

    Reply

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