An oversupply of vehicles is causing automobile manufacturers and dealers to rev up their incentives and rebates on all types of models.

The large supply of inventory, 120 days versus the ideal 60-day supply, has led to the escalation of incentives, says Paul Taylor, chief economist with the McLean, Va.-based National Automobile Dealers Association, or NADA.

"In many cases, the deals are tremendous," he says.

To entice tire kickers, the manufacturers are going overboard with larger-than-usual cash-back rebates, zero-percent financing for up to 60 months and other deals. Hyundai Motor America, Ford Motor Co. and General Motors Corp. have created programs in hopes of removing buyers' fear of not affording car payments if they are laid off.

"When one person in the cul-de-sac is laid off, you have at least six or seven other people concerned about layoffs," Taylor says. "The fact that a car is a big-ticket purchase means that customers are in some cases more reluctant to commit to a new car purchase at a time when there's some uncertainty with performance in the economy."

The Hyundai Assurance Plus program -- the first launched by a manufacturer -- allows buyers who lose their income within a year of financing or leasing a new vehicle to return it with no impact on their credit. The Ford Advantage Plan covers payments for up to one year on a new Ford, Lincoln or Mercury if the customer loses a job. The GM Total Confidence plan covers payments for up to nine months if buyers lose their jobs within the first 24 months of ownership.

"The deepness of the recession has caused manufacturers to pretty much pull out all the stops they can to try to move car sales," says Jack Nerad, executive editorial director and market analyst for Irvine, Calif.-based Kelley Blue Book and kbb.com.

The NADA expects U.S. light vehicle sales to total 12.7 million units this year, although Taylor says first-quarter sales were at a slower pace than expected. He expects sales to pick up in the third quarter, boosted by greater availability of credit.

Global demand for passenger cars and light commercial vehicles is expected to reach 53.3 million units this year, an 18 percent decline from 2008, according to R.L. Polk & Co., a Southfield, Mich.-based provider of automotive information and marketing solutions.

Hoping to jump-start sales
Nerad says the incentives are double and even triple what he's seen in the past, including $5,000 to $7,000 cash-back deals in addition to low- and no-interest financing.

"These days, the manufacturers and dealers are so hungry to make a deal," he says.