So how harmful are incentives to residual values and used-car prices?
It all depends on the incentive type and length of time they are used, experts say.
Here's the rundown:
-- Subsidized leases can move a lot of vehicles but can depress used-car prices if large numbers return to the market at the same time, says Eric Ibara, director of residual-value consulting at Kelley Blue Book. "The intensity of volume has more to do with it than the period of time," Ibara says.
-- Special finance rates can make new-vehicle prices and payments as attractive as or more attractive than those of used cars, says Ivan Drury, an analyst at Edmunds.com. "The only reaction for dealers is to either wait until the low APR offer is over or drop the asking prices of the used vehicle," Drury says.
-- Customer cash can lower current used-car values but has no impact on residuals, Ibara says.
Adds Drury: "Incentives spending is useful and doesn't always have to be seen as a sign of weakness. It only becomes an issue after prolonged use."
