New industry reports from TrueCar show that manufacturers are ramping up incentives to counter a slow down in January auto sales that is being attributed to poor winter weather.
Great time to buy a car
‘Incentive spending by automakers averaged $2,932 per vehicle in January,’ TrueCar reports, ‘up 13.4 percent from a year ago and down 4.2 percent from December 2015.’
So right now is a great time if you’re interested in anything that’s a traditional car, not an SUV or a crossover.
In the auto business, dealers and manufacturers aim to have a 55-day supply of cars on lots. That’s the theoretical number of cars that if manufacturers didn’t make another, dealers could sell what they have on the lot for 55 straight days. Fifty-five days represents a healthy inventory cycle. But right now, a number of manufacturers have over a 90-day supply on hand. That means they are way overstocked and that the incentives will continue to rise as your bargaining power gets better at the dealership.
Both Toyota and Honda are seeing declining sales. Nissan is flat. However, U.S. automakers that have a heavier reliance on SUVs are still reporting good numbers.
Toyota’s Scion brand is being phased out after failing to attract people in their 20s. Part of the problem was the nameplate got very heavily into passenger cars and missed the move in the marketplace to crossovers. With Scion becoming an orphan brand, I’m expecting we’ll see great deals on both new and used Scions in the coming weeks.
Generally, across the auto landscape, passenger cars or any of the alternative fuel cars are very much a buyer’s market right now. Meanwhile, the value of used vehicles is dropping significantly. So this is a really good time to buy anything that is a true car vs an SUV or crossover.
If you’re in the market for a new car, here are my tips for making a smart purchase…
Here’s how to buy a new car
- First, go to your credit union, online bank or traditional bank and pre-qualify for a car loan (or apply online.) That tells you how much car you can afford and what type of monthly payment you will have to budget.
- Start your research with at least two different vehicles in mind. Then check out the price, reliability and cost to insure each of the cars you’re considering. Check out the annual April auto issue from Consumer Reports for their list of recommended new car buys.
- Next, use the Internet to find out the dealer cost of the vehicle and the options you want. Websites like Edmunds.com, KBB.com and NADA.com offer great tools that will help you determine the value.
- When you’ve narrowed the search to one or two vehicles and have the actual dealer cost for each, shop online for instant price quotes. Websites such as CarsDirect.com, TrueCar.com and Overstock.com are great for this purpose. Costco has a car-buying program that moved 400,000 vehicles last year alone!
- If you prefer not to buy online, use the online price quotes as a guideline and call the dealers to see if they’ll match the price quote.
- Another relatively easy way to buy a car involves e-mailing the Internet department at a dealership and negotiating by e-mail. Make sure you always ask for a quote that includes all the junk fees a dealer may have.
- Some dealers are charging ‘packs,’ which are phony charges for documents, vehicle etching, fabric treatments, etc. It may sound silly, but it can amount to $300 or more just for doing the paperwork or spraying some stuff on your car seats! Not every dealer tries to do this, so that’s why it’s important to shop around.
- Look at cars when a dealership is closed, so there’s no salesperson to pressure you. The best way to test-drive a car is to rent it for a day or two. It’s the ultimate test drive.
- Finally, what if the manufacturer offers zero percent financing? Before you make any decision, consult with Edmunds.com‘s Low APR vs. cash back calculator.