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Data Point

With Inventory Levels Improving, Incentive Volume Jumped in December

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Article Highlights

  1. The market in December was awash with incentive programs with incentives volume at a five-year high for December and well above 2019 levels.
  2. The biggest movers – those brands that streamlined their incentive offers the most – include BMW, Nissan and Subaru.
  3. Volvo, Honda and Acura all saw sizable increases in program volume in 2020, up roughly 30%, 40% and 50% respectively.

December auto sales will be in the books by the end of the week, and industry observers will have a clear view of how individual automakers performed in 2020. One thing we do know for certain, the market in December was awash with incentive programs. As measured by the Cox Automotive Rates & Incentives team, December 2020 incentives volume – literally a count of the number of individual incentive programs in the market each month – was at a five-year high for December and well above 2019 levels.  

Incentive volume in December typically drops below November levels, as automakers often carry late-November programs through to the end of the year. Not so in December 2020, when many incentive programs were adjusted – or all-new programs were introduced – during the month, increasing the volume count.

The high December numbers of incentives are an indication that inventory levels are improving, although they remain below 2019 levels, and automakers were trying to turn late-year shoppers into late-year buyers as 2020 came to a close.

2020 was a rollercoaster year for incentives, with program volume on a record-setting pace in Q1 as automakers worked to maintain sales momentum. Volume dropped significantly in Q2, with automakers pushing fewer programs as they tried to determine the best offers to motivate pandemic-worried buyers and new-vehicle inventory came under pressure when production was halted.

Incentive volume in Q3 and Q4 mostly moved back to normal, as inventory levels recovered and motivated buyers returned to the market. In all, despite the Q2 dip, total incentive volume in 2020 was down only 3% from 2019.

Of the 33 automotive brands tracked by the Cox Automotive Rates & Incentives team, the full-year volume of incentive programs was down year over year with 10 brands. The biggest movers – those brands that streamlined their incentive offers the most – include BMW, Nissan and Subaru. Nissan program volume was down 24%; Subaru slashed program volume in 2020 by nearly 40%, while BMW was down more than 50%.

Volvo, Honda and Acura all saw sizable increases in program volume in 2020, up roughly 30%, 40% and 50% respectively. Higher incentive volumes are often, but not always, an indication that the desired sales pace is not being achieved. More programs = more effort.

On a final note, incentive volume trivia: Specialty automaker Ferrari also saw significant increase in incentive volume in 2020, up over 80% from 2019. But don’t think Ferrari was giving away cars in 2020. Last year, Ferrari offered 11 factory-backed incentive programs, mostly special APRs offered through Ferrari Financial Services. In 2019, only 6 factory-backed incentives were offered.