Are Incentives Working Again?

When underwriting went haywire in 2006 and 2007, industry fundamentals became skewed. What followed was a plunge in vehicle sales volume — to 10.4 million in 2009 from 16.1 million in 2007. Even $3,000 incentives did little to spark volume.

Theoretically, as incentives increase so should vehicle sales. Yet in 10 of the 24 months of 2008 and 2009, there was an inverse relationship between incentives and vehicle sales volume.

This year, though, the incentives-to-sales dynamic seems to have righted itself. Aside from October, vehicle sales moved in tandem with incentives. Take a look at this graphic (incentives data courtesy of Edmunds.com):

I think we’re getting back on our feet again.