• by Karl Greenberg , March 2, 2011

Auto sales numbers in the U.S. were remarkably strong last month after a slow start in January. GM and others reported huge sales gains and record sales for February. But there's another piece of the sales news that, while perhaps less obvious than the big numbers, is at least as important to automakers: incentives spend, a bit of a mixed bag last month on a brand-by-brand basis, was actually down overall, but companies that did increase incentive spend got more than their money's worth.

Edmunds.com says that in the U.S., Chrysler, Ford and General Motors spent an aggregate of $1.5 billion, or 60.6% of the total, while Japanese manufacturers spent $703 million, or 29.4%. European manufacturers spent 5.8% percent and Korean manufacturers spent 4.2%.

The firm said General Motors and Nissan showed the biggest year-over-year boosts in incentives among the top six automakers and that leases constituted about a quarter of new car transactions, making it the highest month for lease penetration since November 2005, when nearly a third of transactions were leases.

Jesse Toprak, an alumnus of Edmunds who now works at TrueCar.com as its head of industry trends and insights, tells Marketing Daily that this trend shows how automakers have gotten a lot smarter about offering incentives. "They are no longer spending as much upfront by offering customer and dealer cash and are instead pushing low APR and leasing programs," he says. "What is changing is that they are much better at optimizing the incentive spend, meaning that they now have a decade's worth of data. They know what works now and what doesn't, which regions to focus incentives on, what type and how much to offer. And there are endless combinations; by looking at efficiency of programs, they are able to get a better return."

Toprak says the industry average for incentives, which the firm pegs at around $2,708, is in fact the lowest for February since 2007. "The perception of a pricing war and overindulgence of using incentives is exaggerated," he says. According to TrueCar, the average incentives were down slightly from the month last year, but up $129, or about 5% from January.

The firm says GM increased incentives about 10% in February versus last year, and about half a percent from January. Honda increased its incentive spend by 16.2% versus last year, per TrueCar. Toyota also increased incentive spend by 18.5%. The biggest drop in incentive spend by an automaker was Hyundai and its sibling Kia, which combined spent 27.9% less versus last February. Ford dropped incentive spend as well versus last February by almost 9%.

Edmunds says domestics averaged $3,351 per vehicle last month in incentives; European automakers spent $1,777 per vehicle; Japanese automakers spent $1,974 per vehicle; and Korean automakers spent $1,452 per vehicle sold.

Toprak warns that the big numbers don't really tell the tactical story, and he says GM is a case in point. "They increased spend by around 10% year-over-year last month, but their sales were up 50%. Of course, if the company weren't making the right kind of products it wouldn't matter how you optimized incentives -- you wouldn't sell. So it's a combination of having cars people want to buy but also the right incentives."