Car Buyers Got $5.3B in Discounts in July

Automakers offered an all-time record of $5.3 billion in discounts to sell new cars and trucks in the United States in July, highlighting the cost of Detroit's escalating price war, industry tracking firm Edmunds.com (search) said Thursday.

As expected, it said General Motors Corp. (GM), Ford Motor Co. (F) and DaimlerChrysler AG's (DCX)Chrysler arm — Detroit's traditional Big Three — provided the bulk of the discounts or consumer incentives, spending a combined total of $4.33 billion to drive customers into showrooms.

Edmunds.com said its monthly "True Cost of Incentives" report takes into account all of the manufacturers' various discount programs, including cash rebates to customers and dealers and discounted interest rates and lease programs.

Its calculations are also based on sales volume, and sales across the industry strengthened nearly 21 percent in July to a seasonally adjusted annual rate of 20.9 million vehicles. That was the highest level since a record 21.7 million set in October 2001 and far above the 17.2 million rate in July last year.

Edmunds.com's incentives figures for Detroit's Big Three discount kings are actually lower than July estimates provided by Autodata Corp. (search) , a rival industry tracking firm, earlier this week.

But it said GM, the world's largest automaker, trimmed its average incentives spending by $56 in July to a total of $4,135 per vehicle sold.

Ford increased its spending by $688 to an average total of $3,776 per vehicle, Edmunds.com said, and Chrysler cut its spending by $73 to $3,623 per vehicle sold in July.

By contrast, Japanese automakers increased their incentives spending by $189, raising it to a record-high average of $1,236 per vehicle sold, while European manufacturers upped their incentives by $447 to an average of $2,382 per vehicle.

South Korean automakers ratcheted up spending by $99 to a per vehicle average of $1,945, according to Edmunds.com.

It said fuel-thirsty large sport utility vehicles continued to offer the highest average incentives, at $5,164 per SUV sold, while GM's Cadillac division spent the most of any brand sold with incentives totaling an average of $6,442 per vehicle.

That compares with an average of just $28 per vehicle for a hot-selling Mini from Germany's BMW AG .

GM and Ford have said they are cutting sticker prices and increasing features or content on many 2006 models as part of a strategy aimed at weaning consumers off big rebates and other incentives.

But Dr. Jane Liu, Edmunds.com's vice president of data analysis, said the strategy may not work as well as the leading U.S. automakers would like in a nation of buyers increasingly accustomed to deals.

"Many consumers are programmed to expect incentives and may not even notice that sticker prices have been lowered. Automakers in that situation may be forced to offer incentives that drop prices even further," said Liu.