• by Karl Greenberg , April 2, 2009

In March, new-auto sales dropped around 40%, but incentive spend went through the roof. Market shopping and research firm Edmunds.com said last month that automakers spent the most money ever on incentives.

Edmunds says total March incentive spend was around $2.4 billion -- 19% higher than February 2009. The firm says the domestic automakers spent $1.5 billion, or 61.9% of the total incentive spend; Japanese manufacturers spent $511 million, or 20.8% of total automaker incentive spend in the U.S.; European manufacturers spent $227 million, or 9.3% of the total; and Korean manufacturers spent $196 million, or 7.9%.

Jesse Toprak, head of industry analysis at Edmunds.com says it is likely that April will also be a record month for incentives. "Typically, if you look seasonally, you see a drop from March to April in incentives.

"Obviously, we are dealing with very non-typical conditions so it is likely we will see very similar levels this month because we will also be figuring in the new [Ford Advantage and GM Total Confidence] programs which will pump up the average by few hundred dollars," he says. "So I expect another record month. There's not much chance for automakers to have the luxury to cut down on incentives."

The firm says the previous record was September 2004, when the domestic automakers were caught in a 0% financing death match, and -- per Edmunds -- raised average incentive spend to $3,146 per vehicle sold.

The average automotive manufacturer incentive in the U.S. was $3,169 per vehicle sold, up $171 -- or 5.7% from the month before -- and up $733, or 30.1%, from March last year. Only Toyota and Nissan reduced spend versus February, per Edmunds.

Domestic automakers spent the most. Combined, GM, Ford and Chrysler LLC spend at $4,505 per vehicle -- up from $4,134 in February. European automakers were next, increasing spiffs by $326 to $3,398 per vehicle sold. But Japanese automakers decreased incentives March versus February by $58 to $1,628 per vehicle sold. Honda, however, increased spend by about $50 per vehicle March versus February 2009.

The Korean Hyundai and Kia brands increased incentives by $360 to $3,572 for the month. Hyundai is trying to grab the initiative with record incentive spend and its Assurance Plus Plus program to grab market share while other makes are losing share.

"Hyundai is particularly interesting to watch right now," commented Edmunds' AutoObserver.com senior editor Michelle Krebs. "The company has a lot of momentum and is spending a remarkable amount of money to capitalize on it."

Automakers put the highest spend on premium sport cars, which had an average of $6,972 on the hood, followed by large SUVs at $5,323. Automakers put the least incentive dollars -- $949 -- on the subcompact segment.

When the incentives are parsed by brand Toyota's Scion brand had the least cash on the hood, just $87, with BMW's Mini brand next at $553 per vehicle sold. Cadillac spent the most, with $6,839 per vehicle, followed by Lincoln at $5,942.