In a recent whitepaper, NADA Used Car Guide lists several factors — including rising incentives in the first two months of 2014 — that point to continued increases in pricing discounts this year. 

But here’s the thing: automakers aren’t likely to become “haphazard,” says NADA, which in fact suggests OEMs will temper their spending in the second quarter.

First, the data.

Citing statistics from Autodata Corp., the “2014 Used Vehicle Price Forecast” special report from NADA UCG notes that per-unit new-vehicle incentive spending in 2013 was at $2,576. This marked a 3.7-percent increase.  In the first two months of this year, spending climbed 8.4 percent.  

These two movements plus the widespread expectations for a calming of new-car sales growth can be seen as “strong evidence that discount levels will continue to rise in 2014,” NADA said in the report before adding this caveat.

Even though discounts will rise, automakers aren’t likely to take “a haphazard approach,” when it comes to spending, NADA suggests, and their recent discipline is proof of this new mentality.

“The big increase in spending over the first two months of the year was to a large degree expected; manufacturers are trying to ensure a strong end to a first quarter that was stymied by very poor weather conditions,” analysts noted in the report.

“In addition, automakers continue to repeat a mantra of profitability before market share, and the hard-won profit gains of the past few years among domestic manufacturers give reason to believe this is more than just investor-pacifying rhetoric,” they continued. “Manufacturers are painfully aware from past experience that it’s extremely difficult to shut off the incentive spigot once it’s been opened up.”

During Q2, it’s likely that incentive spending will slow down, NADA predicts. Moreover, OEMs are expected to continue honing in on finance and lease subvention as their discount approach instead of customer cash. NADA emphasized that customer cash is the incentive that is “most destructive to used-vehicle prices.”

Here’s another kicker: new-car transaction prices should rise.

In fact, last year, there was a 1.1-percent increase in prices, NADA said, citing the U.S. Bureau of Labor Statistics. And this occurred even with more spending.

There has been an uptick in transaction prices in each of the last six years, NADA said, following a decade-long downturn.  As for used transaction prices, these have mostly trended upward since 2009, but did soften a bit last year.

“With manufacturer suggested retail prices (MSRPs) continuing to rise — MSRPs grew by 1.6 percent for the 2013 model year and are up another 1.5 percent for 2014 models — combined with a favorable economic outlook, a reasonable increase in North American production (LMC Automotive predicts 2.9-percent growth) and the prospect of a modest incentive hike, it’s unlikely that new-vehicle transaction prices will fall this year,” NADA said.

“This will prevent direct downward pressure on used vehicle prices,” it added.

In the whitepaper, NADA also broke down the types of incentives spending while discussing the projected extent of lease subvention, strong credit quality among lessees, expectations for finance subvention and cash discounts, plus much more.

The complete white paper can be found here: 2014 Used Vehicle Price Forecast.