Auto Makers Offering Even More Generous Incentives

Slumping auto sales have put consumers in the driver's seat.

To help clear out their crowded lots, struggling auto makers are offering lavish incentives on 2008 and, in some cases, even 2009 models. "This being a soft market, there are a lot of cars out there that need buyers," says Jack Nerad, executive editorial director for Kelley Blue Book.

Much of that glut stems from rising gas prices, which hit a national high of $4.11 a gallon in July, according to AAA. As a result, consumers abandoned once highly popular gas guzzlers. SUVs and light truck sales are down 19.3% since the beginning of the year; heavy trucks, 45.8%, according to Autodata Corp., a New Jersey-based market researcher. (Resale values for these vehicles also dropped precipitously, leading many manufacturers to scale back or even eliminate leases.)

And even though Detroit's Big Three auto makers reported this week that they sold more cars in August -- traditionally a strong month as they roll out lot-clearing incentives -- than in June or July, sales were still dramatically lower than the year before. Ford Motor's (F) sales dropped 26.5%, while Chrysler lost 34.5%.

Even General Motors (GM) saw a decrease of 20.3%, despite rolling out its "Employee Discount for Everyone" sale in late August. Not coincidentally, the same day it reported sales, GM said it would extend the promotion by almost a month to Sept. 30 and it would even honor the discount on many 2009 models. "Now it's employee discount plus cash on many models," points out Nerad. "The ads say you'll pay what the employees pay and not a cent more, but you may actually pay less."

While other auto makers may not be extending employee discounts, they are offering plenty of generous cash incentives and financing deals, says Tom Libby, senior director of industry analysis for J.D. Power & Associates. Now, with gas prices declining ever so slightly, automakers hope that throwing cash and other incentives at consumers will bring them back to the car lots, even for undesirable gas guzzlers.

In August, the average vehicle carried $2,642 in incentives -- a 7% increase from last year, reports auto information site Edmunds.com. Some categories offered much more: Luxury car incentives averaged $7,198; large SUVs, $6,211.

"Incentives will probably continue to go higher for the 2008 vehicles until they clear out completely," predicts Jesse Toprak, senior industry analyst at Edmunds.com. One thing to keep in mind, however, is that auto makers scaled back production as sales dropped, meaning that lot selection will shrink rapidly as discounts rise. "It's like going to the supermarket and settling for the fruit at the bottom of the barrel, after everyone else picked out what they wanted," he says. Wait too long and you might find that the only 2008 Chevy HHRs left are the vivid "Sunburst Orange II Metallic."

Drivers currently in the market for a new car would be best served to hit the lots now. Those considering buying a truck or SUV could likely hold out until mid-September and still get the model they want, says Toprak. Here are some of the head-turning incentives auto makers currently offer:

Data courtesy of Edmunds.com.

Dealer cash: Also known as marketing support, is typically an unadvertised manufacturer-to-dealer incentive. Dealers may choose to pass on some or all of the incentive in order to sweeten deals and spur sales. (They can also opt to not pass it on at all.)

Customer cash: An incentive that's given directly to the buyer from the manufacturer at the time of sale.

Bonus cash: An incentive that's given directly to the buyer from the manufacturer at the time of sale.

Loyalty cash: An incentive that rewards consumers who already own or lease a vehicle by the same manufacturer.