(June 1, 2011) SANTA MONICA, Calif. — Increased demand in response to high gas prices — compounded by supply shortages — is making it harder to get an incentive-laden deal on a small car, according to Edmunds.com. Edmunds' analysis of the True Cost of Incentives found that manufacturer incentive spending for compact cars fell 23 percent in the last month, and incentives on subcompact cars fell 14 percent.

The decreases come even as average incentive spending across the entire industry fell just 0.7 percent in May to an average of $2,094 per vehicle sold. As Edmunds.com reported last month, average incentives remain at their lowest levels since 2005. The industry's aggregate incentive spending this month is estimated to have totaled approximately $2.3 billion, down 5.8 percent from April.

"The continuing market shift toward small fuel-efficient vehicles is keeping overall automaker incentives at the lowest levels we've seen in years," said Jessica Caldwell, director of industry analysis at Edmunds.com. "These low incentives are making it increasingly difficult for consumers to find good deals on small cars. But on the other end of the spectrum, we're seeing better offers on large vehicles that have taken a hit in demand."

Honda incentives drop dramatically

The largest drop in incentive spending last month came from Honda, which is increasingly looking like the biggest victim of the March earthquake in Japan among all automakers. The company dropped its incentive spending 46 percent in May as prices of its top two models — the Civic and Accord — have each climbed more than a thousand dollars in the last two months. Overall, Japanese automakers decreased incentive spending $334 in May to $1,351 per vehicle sold.

"Interestingly, with the exception of Honda, we aren't seeing a huge pullback of incentive spending by the Japanese automakers, which may indicate that they're not quite as concerned about their supply as they were just weeks ago," said Caldwell. "Toyota's average incentive spend fell from April levels, but the company actually boosted incentive programs part way through May. And Nissan, in fact, increased its spend almost ten percent."

Comparing all brands, smart spent the least per vehicle sold in May ($72), followed by Subaru at $365 per vehicle sold. At the other end of the spectrum, Saab spent the most, $5,137, followed by Cadillac at $4,714 per vehicle sold.

Relative to their vehicle prices, Saab and Chevrolet spent the most, 13.0 percent and 11.0 percent of sticker price, respectively, while smart spent 0.4 and Porsche spent 1.2 percent.

Edmunds.com's monthly True Cost of Incentives (TCISM) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.