TrueCar.com Diffuses Notion of New-Vehicle Price War, While Edmunds.com Spots Leasing Growth

SANTA MONICA, Calif. -

Are automakers engaged in a “pricing war” to move new vehicles? Or is leasing on a continued track higher? TrueCar.com and Edmunds.com weighed in on these points while analyzing February new-vehicle sales expectations.

TrueCar.com estimated Tuesday that the average transaction price and incentive level connected with February new-vehicle sales moved only slightly from the previous month.

The site thinks February’s average transaction price for light vehicles in the United States was $29,176, an amount $132 or 0.5 percent higher than January. However the estimate actually is $97 or 0.3 percent lower than February of last year.

In addition, TrueCar.com estimated that the average incentive for light vehicles was $2,708 last month. That figure was down $12 or 0.4 percent from the same month a year ago, but it was $129 or 5.0 percent higher than the first month of 2011.

“The industry average for incentives is the lowest for February since 2007,” declared Jesse Toprak, vice president of industry trends and insights for TrueCar.com.

“The perception of a pricing war and overindulgence of using incentives is exaggerated,” Toprak insisted.

So what kind of strategy are OEMs employing?

"Automakers are now using incentive programs that are much more favorable,” Toprak responded.

“They are no longer spending as much up front by offering customer and dealer cash and are instead pushing low APR and leasing programs,” he added.

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TrueCar.com Transaction Pricing Forecast

Manufacturer	February 2011 Transaction Price	January 2011 Transaction Price	February 2010 Transaction Price	Percent Change February 2011 from February 2010	Percent Change February 2011 from January 2011
Chrysler	$28,086	$28,162	$27,828	0.9%	-0.3%
Ford	$31,853	$31,625	$31,336	1.6%	0.7%
GM	$32,965	$32,452	$33,634	-2.0%	1.6%
Honda	$24,827	$24,838	$24,876	-0.2%	0.0%
Hyundai	$20,372	$20,205	$20,025	1.7%	0.8%
Kia	$17,933	$17,945	$18,122	-1.0%	-0.1%
Nissan	$27,495	$27,350	$27,119	1.4%	0.5%
Toyota	$25,268	$25,213	$25,452	-0.7%	0.2%
Industry	$29,176	$29,044	$29,273	-0.3%	0.5%

TrueCar.com Incentive Spending Forecast

Manufacturer	February 2011 Incentives	January 2011 Incentives	February 2010 Incentives	Percent Change February 2011 from February 2010	Percent Change February 2011 from January 2011
Chrysler	$3,676	$3,414	$3,557	3.3%	7.7%
Ford	$2,571	$2,407	$2,816	-8.7%	6.8%
GM	$3,683	$3,663	$3,346	10.1%	0.5%
Honda	$2,111	$2,016	$1,817	16.2%	4.7%
Hyundai/Kia	$1,563	$1,375	$2,166	-27.9%	13.6%
Nissan	$2,706	$2,510	$3,048	-11.2%	7.8%
Toyota	$2,134	$1,962	$1,801	18.5%	8.8%
Industry	$2,708	$2,579	$2,720	-0.4%	5.0%

Edmunds.com’s Incentive Estimation Slightly Lower

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Edmunds.com placed its February estimate of average OEM incentives to move new vehicles at $2,558 per unit sold. The figure was flat compared to the site’s tabulation for the previous month but $99 or 3.7 percent lower than February of last year.

“This month’s incentives demonstrate the industry’s renewed emphasis on leases,” declared Jessica Caldwell, director of industry analysis for Edmunds.com.

“Leases made up an estimated 25.2 percent of new car transactions in February, making it the highest single month for lease penetration since November 2005 when almost one out of every three new car sales was a lease,” Caldwell added.

According to Edmunds.com, combined incentives spending for domestic manufacturers averaged $3,351 per vehicle sold in February, down from $3,431 during the previous month.

From January to February, the site calculated European automakers decreased incentives spending by $324 to $1,777 per vehicle sold while it found Japanese OEMs increased incentives spending by $103 to $1,974 per unit sold. Edmunds.com also determined Korean manufacturers increased incentives spending by $92 to $1,452 per vehicle sold.

Site analysts projected the industry’s February aggregate incentive spending at approximately $2.4 billion, up 14.6 percent from the previous month. They pegged Chrysler, Ford and General Motors at $1.5 billion or 60.6 percent of the total.

A further Edmunds.com breakdown showed:

—Japanese manufacturers spent $703 million or 29.4 percent of the February total.

—European manufacturers spent $138 million or 5.8 percent of the February total.

—Korean manufacturers spent $101 million or 4.2 percent of the February total.

“General Motors and Nissan are showing the biggest year-over-year boosts in incentives among the top six automakers,” Caldwell pointed out.
“It isn’t any coincidence that Edmunds.com also reports that both companies saw their highest single-month lease penetrations in at least the last decade,” she added.

Moving along, Edmunds.com determined Subaru spent the least in February incentives at $542 per vehicle sold, followed by Porsche at $632 per vehicle sold.

At the other end of the spectrum, the site found Saab spent the most at $7,349, trailed by Cadillac at $6,242 per vehicle sold.

Relative to their February vehicle prices, analysts figured Saab and Mercury spent the most — 17.9 percent and 16.1 percent of sticker price, respectively. They also found Porsche spent just 0.7 percent and Audi spent 2.0 percent.

Among vehicle segments, Edmunds.com determined large cars had the highest February average incentives at $5,046 per vehicle sold, followed by large trucks at $3,697.

The site discovered subcompact cars had the lowest average incentives per vehicle sold at $1,237 followed by compact SUVs at $1,679.

Analysis of incentives expenditures as a percentage of average sticker price for each segment showed large cars averaged the highest (16.0 percent) followed by midsize cars (10.1 percent).

Edmunds.com noted premium sport cars averaged the lowest with 2.2 percent and premium luxury cars followed with 2.5 percent of sticker price.

Edmunds.com reiterated that its monthly True Cost of Incentives report takes into account all automakers’ various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers.

“To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used,” analysts explained.

**Edmunds.com February True Cost of Incentives**
Automaker	February 2011	January 2011	February 2010
Chrysler	$3,124	$3,411	$3,644
Ford	$2,837	$2,855	$3,320
General Motors	$3,849	$3,828	$3,518
Honda	$1,468	$1,544	$1,420
Nissan	$2,734	$2,329	$2,470
Toyota	$2,041	$1,942	$1,904
Industry Average	$2,558	$2,561	$2,657