CHICAGO -

Cars.com projected that new-vehicle incentives dipped noticeably in January compared to sequential and year-over-year levels, but chief analyst Jesse Toprak doesn’t suspect that trend will continue, to the benefit of the used-vehicle industry.

Toprak estimated that the average incentives given by automakers to turn new vehicles came in at $2,383 during January, down $151 or 6.0 percent from January of last year and $425 (or 15.1 percent) lower than December.

Toprak explained to Auto Remarketing why he contends that trend potentially could reverse later in 2014 and eventually trickle down into an impact in the used-vehicle space.

“As you know, there is a correlation in incentive spending and used-car prices. Usually when incentives go down, that helps the used-car prices go up, especially since the newer, the 1- to 3-year-old vehicles tend to benefit from declining incentives,” Toprak said.

“In the short term, it will actually pull up used-car prices a bit. However, we think that’s going to be a short-lived phenomenon,” Toprak continued. “When we look at the rate of inventory buildup at the dealer lots, there’s actually a bit of concern. It seems like the buildup rate is pretty fast.

“Going into these winter months where selling rates are not necessarily that fast, with everything we see in the big picture by the time we get to spring, it appears there’s going to be an excessive inventory situation on dealer lots,” he went on to say. “What that means, there will be no choice but to utilize higher levels of incentives to get rid of these high levels of inventory later in year.

“The outlook for the rest of the year is that we expect the market battles for new cars to heat up, and dealers having to discount cars a bit more and manufacturers having to use higher levels of incentives, which in turn should have a negative impact on the pricing of used cars,” Toprak added.

Only one of the eight largest automakers Cars.com tracks gave out average incentive amounts above $3,000 last month. That company was Ford at $3,264.

Meanwhile, Toprak highlighted the level utilized by Chrysler as the OEM cut its incentive spending by 17.6 percent year-over-year to come in below the $3,000 mark.

“Chrysler has done a good job of scaling down and optimizing,” Toprak said. “If you look at say six or seven years ago, Chrysler routinely led the industry in per-vehicle incentive spending. And there were months when they were spending over $4,000 on incentives. Now based on the forecast, I believe they’re lowest among the domestics. They’ve come a long way from just throwing money out.”

Furthermore, incentive spending by Asian OEMs also caught his attention. In particular, Honda pushed its spending up by a whopping 48 percent year-over-year, according to figures from Cars.com, nearly double the combined amount of increases handed out by the other three automakers that had annual jumps in incentive spending.

“Japanese automakers have had to start spending more than they traditionally have been over the past couple of years due to competition becoming fiercer,” Toprak said. “It used to be small car categories were dominated by the Asian automakers, and they didn’t have to spend much money to move units. Now they have some formidable competition from domestic automakers with their new compact and midsize cars being very competitive. Therefore, they had no choice but to increase incentive spending. We certainly saw Asian automaker ramp up incentives in the last couple of years.”

Overall, despite the projection of additional incentive spending later in the year, Toprak insisted to Auto Remarketing that OEMs by and large are making much shrewder decision as not to erode used-vehicle down the road.

“They’ve gotten much better at it. I think in the past incentives were used willy-nilly without a master plan just to move the metal,” Toprak said. “Now most manufacturers have teams dedicated to optimize the incentive spending and only use incentives when necessary.

“The key beyond the success of newer incentive spending program has been that they’re highly targeted,” he continued. “In the past, especially domestic automakers, there would be blanket incentives on everything they sold, those days when there was 0 percent financing on everything they sold or cash back on everything. Now we don’t see that.”

Toprak went on to mention that OEMs now have teams that are positioning incentives based on the particular model and oftentimes a particular region.

“It’s become a very complicated where there are literally thousands of different combinations of incentive programs available for each city and sometimes going down to the trim level,” Toprak said.

“Nobody has it perfect, but the industry has gotten better at. There have been a lot of lessons learned from the last decade or so that’s being reflected,” he continued.

“Manufacturers have learned a lot of valuable lessons over the last decade in terms of how to spend the incentive dollars effectively, and we can see it in the market now. There is little money wasted in the marketplace,” Toprak added.