Will Incentives be Dragging Down Resale Values? Art Spinella Thinks So

by Jon LeSage, edi­tor, Used Car Mar­ket Reports

CNW Research Pres­i­dent Art Spinel­la sees new vehi­cle incen­tives com­ing back up that will even­tu­al­ly hit used vehi­cle val­ues.

In this video, he uses Ford F-Series pick­ups as an exam­ple with Ford Motor Co. offer­ing up to $8,000 cash back, and then if you add deal­er and region­al incen­tives, that could bring it up around $12,000 in incen­tives on a $35,000 vehi­cle. Chrysler and GM have to respond with their own incen­tives in the bat­tle for mar­ket share, he said.

Deal­ers are in a posi­tion where they have to increase deal­er amount – such as dis­count­ing more and giv­ing more on trade-ins to close deals.

Data for 2013 shows a re-widen­ing between MSRP and trans­ac­tion price for both cars and trucks, impact­ing everyone’s bot­tom line – CNW Research said in its lat­est Retail Auto­mo­tive Sum­ma­ry.

Oth­er remar­ket­ing experts appear to dis­agree with Spinella’s warn­ing.

Tom Kon­tos saw a decline in new vehi­cle incen­tives in August, which was part of strength­ened whole­sale prices. He sees prices soft­en­ing in months ahead through an influx of whole­sale vol­umes.

NADA Used Car Guide saw incen­tive spend­ing drop in August to its low­est lev­el since Feb­ru­ary – down from its June high of $2,700 to $2,520 in August.

See chart above from NADA UCG on where incen­tives have been in past year. While spend­ing increased slight­ly by 1%, year-over-year, the rise in incen­tives lagged great­ly behind the siz­able growth in sales for the indus­try, accord­ing to Guide­lines.

Per­haps there’s a dif­fer­ence between how CNW Research counts incen­tives ver­sus Auto­da­ta (which is wide­ly used in the oth­er reports)?

CNW counts sub­si­dized leas­es, low inter­est loan rates, high­er trade-in val­ues, deal­er­ship sales­peo­ple spiffs, quo­ta awards, short-term upgrades in equip­ment, extend­ed war­ranties, local and region­al dis­counts, and more.

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