Incentives and Affordability: Key to Vehicle Marketing Success

Welcome to the February edition of the Polk Automotive Marketing Monitor. As we watch the US automotive market continues to evolve, budget and price matter more to consumers than ever. Monthly payment has become the primary driver of vehicle purchase behavior.?In this issue, we explore how rising vehicle costs, declining vehicle inventory levels and the growing importance of targeted incentive spending are reshaping vehicle marketing efforts across the industry.

The Polk Automotive Solutions team will be attending the Ramp Up conference this week. Reach out to a member of our team if you are in San Francisco attending!

--Joe Kyriakoza, VP and GM, Polk Automotive Solutions, S&P Global Mobility

The US automotive market is undergoing a shift as inventory levels decline. With rising vehicle costs and fluctuating consumer demand, vehicle marketing must adapt to emphasize affordability, particularly monthly payments.

To stay competitive, brands and dealers should prioritize financing strategies and incentive spending as key components of their marketing efforts.?

Inventory is shrinking, but remains higher than last year

US vehicle inventory has taken a notable dip for the second straight month, plunging to 2.8 million retail units — a 10% decrease from the 2024 peak of 3.1 million units in November.? Despite this decline, inventory is still up 16% compared with the previous year.

As the industry adapts to a shifting inventory landscape, understanding consumer behavior and buying triggers becomes increasingly important. For vehicle marketers, the key to success lies in targeting consumers who are now more budget-conscious and increasingly focused on monthly payments rather than overall vehicle prices. By honing in on financial options and leveraging personalized marketing tactics, dealerships can meet consumer demands even as inventory fluctuates.

Why monthly payments matter more than ever

As affordability becomes the focal point for today's consumers, vehicle marketing must pivot to emphasize monthly payments as a central messaging tool.

Over the past four years, the average monthly payment for a new vehicle has surged by 30%, to $742. Electric vehicles (EVs), which remain among the most expensive monthly payment options in the marketplace, have closed the gap significantly over the past four years. The average monthly payment for EVs is now $755, less than 2% above the industry average. (Figure 1).?

This shift is changing the landscape of car buying. In the fourth quarter of 2024 nearly 1 in 5 new car buyers secured financing with a monthly payment exceeding $1,000. Many middle-income households and first-time buyers are feeling the squeeze, leading them to postpone purchases or eliminate new car options entirely, thereby increasing demand for used vehicles.?

The industry has started to respond: the average cost of a new car purchase declining by 16% in the third quarter of 2024. However, at $45,400, prices remain 30% above pre-pandemic levels.

These trends present an opportunity for vehicle marketers to fine-tune their campaigns, highlighting payment flexibility and financing options to meet consumer demand for affordability.

Lower EV payments having an impact

In 2020, EV monthly payments were 34% higher than the industry average, but today, they are nearly equal. In fact, monthly payments for an EV decreased slightly in 2024 compared with 2020. Meanwhile, gasoline and hybrid vehicle payments increased by 30% in the same period.

As a result, dealers and marketers can now promote EVs as a more affordable option, helping to reduce EV inventory, which fell by 21% from June 2024 to January 2025.

Incentive spending: Key to moving inventory

Incentive spending is instrumental to lowering payments and moving inventory, particularly for EVs. Industry incentive spending has surged by 182% over the past two years, with the luxury class leading the way, up nearly 200% (Figure 2).?

Incentive spending programs for light trucks have surged by 198% since January 2023. Passenger car incentives, in comparison, grew by 115%.

As marketers look to capitalize on this trend, incorporating incentive offers into marketing campaigns can drive consumer interest and encourage quicker decision-making, particularly in a market where consumers are more cautious about spending.

Why vehicle marketing should focus on monthly payments, not sticker prices

Favorable supply conditions and a broader range of financing and payment options are enabling consumers to continue to gain control over the vehicle buying process. To thrive in this evolving market, brands and dealers should emphasize leasing and buyer financial profiles to develop audience strategies and refined messaging that prioritize monthly payments instead of purchase price.

Customers are now more comfortable extending payments over longer periods, which allows them to calculate monthly costs across various lenders and terms — an approach that can significantly influence purchasing decisions. Using data from TransUnion, Polk Audiences provides household automotive monthly payment segments to help marketers reach their customers more effectively.?

By focusing campaigns on households with financial profiles and budgets that align with vehicle affordability, marketers can reduce waste, enhance customer engagement and grow sales.

With over 1,000 segments, including monthly payment options, see how Polk Auto Direct delivers for dealers.

S&P Global Mobility in the News

Our partnerships are important to us, and we love to collaborate! In a recent article for AdWeek, AMC Networks highlighted our partnership for real-time outcomes measurement:

“Here’s how it works: AMCN Outcomes starts with privacy-compliant ad exposure data showing where specific ads ran across the company’s distribution footprint as well as the viewer segments that received the messages. Using its data clean room (built with Snowflake and LiveRamp’s anonymized RampID), AMC Networks has connected ad exposures to measurement and attribution partners in specific verticals—like Polk Automotive Solutions [from S&P Global Mobility] for U.S. auto sales and NCS Solutions for purchasing insights into consumer-packaged goods.”