The car buying experience has been a wild ride over the past few years as automakers and dealers grappled with all manner of disruption, from supply chain issues to a global pandemic. While the situation hasn’t completely returned to “normal,” things are calming down, and the market is moving in the right direction. J.D. Power recently released its U.S. Automotive Forecast that assesses car deals and incentives for February 2024, and one of its major takeaways was that incentive spending is on the rise, driven by aggressive lease deals and discounts.
J.D. Power projected that automaker discounts would climb to $66 this month, adding to an impressive trajectory since this time last year. The average per-vehicle incentive spend has increased by a whopping 75.3 percent since February 2023, and spending as a percentage of MSRP has more than doubled, from 2.3 percent last year to 5.3 percent now. That growth is expected to bring the average discount per vehicle to $2,565 this month.
Lease deals have played a significant role in driving this trend. J.D. Power said that leases now account for 23.2 percent of retail automotive sales, an increase of 4.5 points from last year’s 18.7 percent. Some automakers, including Nissan, have begun offering flexible leases with the ability to adjust mileage limits, and the number of deeply discounted lease deals is on the rise after lean times during the pandemic.
There are other signs that the automotive market is finding its way back to pre-pandemic bliss. Inventory levels are on the rise, giving shoppers the opportunity to buy a car the old-fashioned way – off the lot – rather than navigating the custom ordering process or paying a markup for an in-demand vehicle. Auto loan payments, which had been on the rise for quite a while now, have also slowed their roll. The average monthly payment stayed flat at $722 from last year, but interest rates remain an issue. They ballooned by 17 basis points to 6.9 percent from 2023.
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