CARS.COM — In the first quarter of 2017, the average price on a new car ran $31,400 after incentives. That’s according to Thomas King, a vice president at J.D. Power and Associates, who spoke today at an automotive forum held by J.D. Power and the National Automobile Dealers Association on the eve of the 2017 New York International Auto Show.
Despite skyrocketing discounts, that number is still on the rise. How much are those discounts? Try a cost of $3,563 per car in March, by Autodata Corp.’s count — up $452 (14.6 percent) from a year ago and the seventh consecutive month of double-digit increases. J.D. Power pegs it even higher: more than $4,000 per car at the end of 2016.
With vehicle base MSRPs getting more expensive, however, people are still paying more. In the first quarter of 2016, the average price after incentives was $30,900 per car, J.D. Power said. In early 2015, the price was $30,500. But any way you slice it, one thing is certain: Car shoppers have scored more than 10 percent off the average MSRP for a new vehicle in 2017 because of these offers. That’s a deal.
The price reductions are concerning for the industry, but plateauing new-car sales and increasing dealer inventories of unsold new and used cars on the market leave automakers in a squeeze this year. The industry had 4.1 million units of vehicle inventory in early 2017, King said. That’s up from 3.8 million in early 2016 and 3.6 million in early 2015.
“You only fix this problem in one of two ways: Take a production cut, try and stimulate the demand through incentives,” King said. Production cuts, he added, “are so painful.”
In this market, it’s more likely incentives will keep increasing. King said they could end up around $4,500 per vehicle by the end of 2017.
“Incentives at the industry level, when you correct for seasonality, only ever rise,” he said. “I think we’re going to see, at best, flat [incentives], but more than likely continued escalation.”
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