Manufacturers Help Dealers Clean Out Their Lots

Some auto dealers can look forward to cleaning out their new-car lots in 2025, fueled by a surge in incentives.

Compared to one year ago, new-vehicle incentives have increased more than 60% as automakers compete for sales, reports Kelley Blue Book. It’s hoped those incentives will clear dealers’ packed new-car lots.
“’Tis the season for automakers to make their final push for 2024 sales,” says Cox Automotive executive analyst Erin Keating. “While some automakers focus on managing production, many will likely maintain or even increase their seasonal incentives to attract buyers. With competition intensifying, these strategies will be crucial in maintaining market share and driving end-of-year sales. Our team is generally optimistic for new-vehicle sales to close out the year – extra incentives will certainly help."

To some, boosting incentives might sound odd. Incentives are already high – going from 7.2% in September to 7.7% in October. That’s an increase of 60% year over year, reports Kelley Blue Book. Those enticements bring consumers into dealerships and carve a chunk of dealer profits.

The new incentives are designed to stabilize dealers’ inventory and allow pricing flexibility.

Incentives were generally nonexistent in the fall of 2022 when new-vehicle sales hit their lowest point since the Great Recession of 2011. That changed when full-year 2022 U.S. auto sales finished at about 13.9 million units, down about 8% from 2021 and 20% from 2020, according to Cox Automotive, Kelley Blue Book’s parent company.

In October, eight mainstream automakers had average incentive packages above 10% of the average transaction price, and all four of the Stellantis’ “domestic brands” – Chrysler, Dodge, Jeep and Ram – had incentive packages above the industry average, as the company works to clear inventory. Ram incentives were among the highest in the industry. Porsche, Toyota, Land Rover and Cadillac continue to have the lowest incentive spend.

The average transaction price paid for a new vehicle in the U.S. in October was $48,623, according to Kelley Blue Book. Transaction prices in October were higher than the revised September price ($48,423) and higher by 1.7% from year-earlier levels ($47,826). For more than a year, new-vehicle prices in the U.S. have remained mostly unchanged at nearly $48,500, as higher inventories continue to keep downward pressure on the market.