Retail Incentives Could Average $4,000 per Sale in U.S.

The average sales incentive carmakers pay per new-car sales in the U.S. is likely to surpass $4,000 this year, J.D. Power predicts.

The firm says the average climbed to $3,900 in the first quarter of 2017, up $500 from the same period last year. Manufacturers are rolling out ever-increasing discounts to help maintain sales volumes. Incentives also are being used to prop up sagging demand for cars as consumers clamor for SUV/crossover vehicles.

Deepening discounts on new vehicles also help offset the growing appeal of used cars, whose prices have been softening. Power predicts inventories of used cars at U.S. dealerships will climb 22% to 14.5 million units by 2018 compared with 2015. The firm adds that the number of vehicles coming off lease will soar more than 60% to 3.7 million over the same period.

Analysts note that the shift in market demand to pricier SUVs generates more revenue with which carmakers can pay for incentives. But they warn that ratcheting up the level of discounting eventually will hurt profits.