Incentives shift toward financing as dealers focus on affordability

Auto dealers are increasingly leaning on financing incentives over traditional rebates as affordability pressures reshape the market. At Kunes Auto Group , the move toward more financing is shaping its financing approach, Scot Hensel , finance director at the Delevan, Wisc.-based company, told Auto Finance News . “If the OEM has an aggressive rate, we would go that route, otherwise use the cash rebate and use outside financing,” he said. The strategy reflects an industry pivot amid higher vehicle prices and interest rates. Those things contributed to Cox Automotive forecasting the new vehicle sales’ seasonally adjusted annual rate (SAAR) in April to close at about 16.1 million, down 1.2% month over month and 5.8% year over year, according to an April 24 company release. Cox Auto’s April sales forecast landed at 1.4 million units, down 1.9% MoM and 5.4% YoY, according to the release. Dealers also continue to structure deals around monthly payments rather than total vehicle cost, Hensel said. “The payment seems to be what most of our customers are looking for,” he said. “We have seen a big increase on customers opting for 84-month financing to keep it more affordable for them.” Meanwhile, automakers are boosting incentive spending to offset affordability pressures and rising negative equity, with average incentives climbing to about $3,141 per vehicle, up 11.1% YoY, according to an April 23 JD Power release. EV incentives remain significantly higher at roughly $10,018 per unit despite a slight annual decline, while leasing activity is rebounding as more consumers return to the market, supporting overall demand. Inventory, pricing discipline return With inventory levels stabilizing, dealers are shifting back to more traditional inventory management practices, Hensel said. “As our inventory ages, we have a strict write-down policy and we can pass this savings on to the consumer and help us move our inventory,” he said. Still, incentive activity remains relatively muted overall, according to Adam Leaver , director of new-car sales inventory at Walser Automotive Group, which has 33 dealerships across Minnesota and Kansas, according to its website. “There really has been no major month-end enhancements to the incentives,” he said. “EV incentives have not really changed since the $7,500 tax credit went away.” Leaver added that the timing of OEM fiscal calendars also plays a role. “Since many OEMs started a new fiscal year in April, it is typical that we see less incentives,” he said, though he expects increases in the coming months. EV demand softens despite incentives While automakers, such as Hyundai and Kia , continue to offer aggressive rebates on electric vehicles, those incentives have not translated into stronger demand at dealerships. [caption id="attachment_58360959" align="aligncenter" width="630"] (Chart/Auto Finance News | Source: Edmunds)[/caption] “There are some aggressive rebates from the factory, but our EV sales are down from last year due to the tax credits going away,” Hensel said. “Our customers seem to be more afraid of the range they get on an EV as opposed to gas prices.” As incentive spending becomes more measured, dealers are increasingly relying on targeted customer outreach to drive sales. “We use equity mining tools and will reach out to customers within a three- to nine-month lease maturity date,” Hensel said. “We do a lot of subprime loans … and we follow up with them at the 12- and 18-month mark to see if we can get them a better interest rate.” Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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Incentives shift toward financing as dealers focus on affordability

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