Automakers Cut Incentives on Small Cars as Fuel Prices Rise

U.S. consumers already embattled by a weak economy and record high fuel prices for the month of May can add another worry to the list – automakers have drastically cut incentives on small, fuel efficient cars.

This in effect is what amounts to price increases ranging from hundreds if not thousands of dollars on relatively inexpensive vehicles.

With demand for fuel economy rising once again and Japanese makers strapped for cars because of production disruptions caused by the Japan earthquake, incentives for compact cars plummeted 23% in May, according to Edmunds.com. This compares to an overall industry decline of just 0.7% across all segments. 

Honda dropped its incentive spending 46% as prices of its top two models, the Civic and Accord. Both of these perennial occupants of the Top Ten seller list had price increases of more than a thousand dollars in the last two months. Overall, Japanese automakers decreased incentive spending $334 in May to $1,351 per vehicle sold.

“Toyota’s average incentive spend fell from April levels, but the company actually boosted incentive programs part way through May. And Nissan, in fact, increased its spend almost 10%,”said Jessica Caldwell, director of industry analysis at Edmunds.com.

Incentives now average an estimated $2,094 per vehicle sold, but vary widely by maker and segment.

Comparing all brands, Smart spent the least per vehicle sold in May ($72), followed by Subaru at $365 per vehicle sold.

Saab spent the most, $5,137, followed by Cadillac at $4,714 per vehicle sold. Relative to their vehicle prices, Saab and Chevrolet spent the most, 13% and 11% of sticker price, respectively; while Smart spent 0.4% and Porsche spent 1.2%.