An analyst at JD Power has cautioned that the US auto industry needs to keep an eye on incentives that are now running close to record levels.

Speaking at NADA's annual convention in New Orleans,  JD Power's vice president of vehicle analysis and analytics, Jonathan Banks, said: "Everyone needs to keep an eye on incentives."

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

Related Company Profiles

View all

According to Banks, the supply of used vehicles, and increased new-vehicle incentives, contribute to depreciation, which is accelerating.

Supply

Led by a 33 percent increase in off-lease maturities, total used supply increased 13 percent in 2016, according to JD Power. Lease volume will continue to spearhead used supply growth moving forward, but at a reduced pace.

Banks said: "We're looking at a surge of about 3,000,000 vehicles coming off their leases this year. With so many vehicles available in the used market, prices take a hit."

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

The car share of used supply will be 49 percent in 2017, which is much higher than the 39 percent share of new sales, but supply growth is slowing. Pickups and utilities will continue to experience large increases in supply, according to JD Power.

Incentive Pricing

JD Power says the December 2016 incentive spend per unit was 7 percent above December 2008's all-time record. Incentives as a percentage of the manufacturer suggested retail price (MSRP) is also up substantially, but remains marginally below December 2008 levels. J.D. Power analysis forecasts incentives to rise further moving forward.

Depreciation

"In a nutshell, luxury car prices are taking a beating and losing a ton of value in their first three years of use," said Banks. According to his presentation, the year's estimated decline would leave wholesale used vehicle prices 9 percent below 2014's all-time high, and 8 percent above 2007's pre-recession level.

Banks also said that ongoing increases in used supply and new vehicle incentives will continue to take a toll on used vehicle prices. "Less favourable credit conditions will increasingly depress used prices as well — the credit impact will worsen as time passes (interest rate increases, reduced appetite to extend and/or take on credit)."