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Incentives hit a low as car prices rise

Be prepared to pay significantly more if you need a new car in at least the few months — and probably longer — warn reports from auto research and information sites Edmunds.com and TrueCar.com today.

Almost every major carmaker has raised sticker prices in the past few months to cover higher commodity costs (which still are rising), and now comes news from Edmunds.com that carmakers have cut sales incentives in April to the lowest level since the site started tracking them in 2005.

Edmunds.com said their True Cost of Incentives average sales sweetener from automakers in the U.S. was $2,118 per new car sold in April, down $250 (10.6%) from March and down $515 (19.6%) from April 2010. The figure is the lowest since the average of $1,962 in October 2005.

Adding incentive for carmakers to cut incentives: The Japanese disaster likely will make supplies tight through the rest of the year. “This is the clearest indication yet that automakers are gearing up for inventory shortages,” said Jessica Caldwell, director of industry analysis for Edmunds.com.

Meanwhile, auto information site Truecar.com reported today that the average transaction price for light vehicles in April — what folks really paid — was $29,583 in April, up $305 from last month (1% — or a 12% annual rate).

“Despite high gas prices causing near record-level purchases of fuel-efficient vehicles, we saw the highest industry average transaction price ever recorded in April,” said Jesse Toprak, VP of industry trends and insights for TrueCar.com. “The increase in transaction price was due to the dramatic reduction in incentives, lower dealer discounts and consumer preference for better-equipped vehicles.”

TrueCar also tracks incentive spending. Using its own formula, it reported slightly different average industry spending, but the same downward trend. It put the April industry average at $2,386, down 4% from March and down 11.4% from April last year.

The industry appears to be testing how far it can go with pricing and solidifying profits before buyers who need a new car or want one with higher mpg’s start to hold out for a better deal. Carmakers report April sales today.

“Demand for new cars has been growing as economic recovery has strengthened, but now the industry may experience a hiccup if consumers decide to wait for the next deal to come around, which may not be until the autumn,” said Caldwell.

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