There was an 18-percent year-over-year rise in the amount of cash incentives used by automakers during the third quarter, according to LMC Automotive data cited in a sales analysis from the Ernst & Young Global Automotive & Transportation Center. 

And surging cash incentives, says Ernst & Young’s Randy Miller, are having an impact on pre-owned, enticing many consumers to go new instead of used — perhaps one of the big reasons new-car sales came out quite rosy at 4.3 million units for Q3.

“This spike (in incentives) has led shoppers to consider new vehicles over used ones and has, more than likely, played a role in the strong new-vehicle sales for the quarter,” Miller, who is global automotive and transportation leader at EY, said in the analysis.

“It does not appear that automakers are using incentives to clear out leftover 2014 model-year vehicles in order to make room for new products, as incentive spending on 2015 model-year vehicles has been roughly 17 percent higher than spending on 2014 model-year vehicles in Q3 2013,” he added.

Meanwhile, showing declines for several months has been the price of used cars, Miller said, which began a downward slope when summer began. High off-lease volumes have driven up inventory, he said. 

Most segments saw their prices fall in the ballpark of 3 percent in September; the only outlier was the pickup truck, whose prices were actually up 6.5 percent given the continued strength in the housing/construction markets and subsequent constricting truck supply.

“The used-vehicle market is expected to continue its rebound through the remainder of 2014 and into 2015 and is anticipated to go back to historical norms as used vehicles become more affordable,” Miller said.

Much of these same trends were evident in the latest Beige Book report released by the Federal Reserve on Wednesday, which pointed to varying levels of auto sales growth across its 12 districts that was found to be “generally positive.”

Of particular note in two districts was talk of incentives.  

In the Cleveland district, for example, the Fed said it “heard several reports about automakers becoming increasingly dependent on the use of incentives to boost sales.”

Likewise, the Fed included this among its analysis via Richmond district contacts: “A car dealer near Washington, D.C. said he expects this year's sales to be about the same as the record sales of a year ago, with dealer incentives helping to move current-year models.”

The insight specific to the used-car market shared in Beige Book report were these findings:

• In the New York district, dealers in the Rochester area were finding that both the used- and new-car businesses were experiencing “favorable market conditions.”
   
• Additionally, the Buffalo and Rochester areas of the New York district continue to see solid wholesale and retail credit conditions for dealers.
   
• The Cleveland district showed a slight sequential dip in used sales, but year-to-date sales were ahead just a bit.