Incentive Magic

Incentives last month shot up 20% compared with June 2008, yet year-over-year vehicle sales plunged 28%. Despite the divergence, and a relatively low level of vehicle sales, incentives still seem to be doing their job.

June incentives averaged $2,930 per vehicle, according to fresh data from Edmunds.com. Vehicle sales, meanwhile, dropped to 860,101. In June 2008, the average incentive was $2,356 on 1.2 million vehicle sales.

Historically, though, even single-digit increases in incentive spending have sparked sales increases. From February to March 2008, incentives increased $84, or 3%. In turn, vehicle sales climbed 16%.When incentives dropped 3% the following month, sales dropped 9%. In May, incentives again grew — $34, or 1.4% — and sales rose 12%.

Here’s a look at incentives (courtesy of Edmunds.com) versus vehicle sales for the past 18 months:

Though sales started to plunge last August, the relationship between sales and incentives has held relatively steady. This past March, incentives grew 6% and sales climbed 24%. In April, incentives dropped 3% and sales fell 4%.