Sunday, November 9, 2008

Looking for an Auto? Now Is the Right Time

It's hard to remember such a perfect storm in the auto industry. It started with the dark clouds of tapped-out credit and foreclosures. The first squall of high gas prices then undermined large vehicle sales and left dealers out in the rain with the wrong vehicles. As that squall let up, a full torrent of unemployment and credit gridlock drenched the industry. Then, the downpour of new 2009 models.

So, too many 2009s, too many leftover 2008s and used vehicles. Once-profitable dealers strain to stay in business as sales drop and credit tightens. What does it mean for you? I got the straight scoop from Paul Campagna, general sales manager for a large Northern California dealership.

As he put it: As customers once gazed longingly into the showroom window, dealers now gaze out that window at customers, as in "Gee, I'd like to have one of those."

Campagna offered some advice for consumers seeking to buy a car now:

  • Know your credit and get in good standing. More than ever, a creditworthy buyer is gold. There aren't many. As a creditworthy customer, you're the rarest part of a rare breed. You have power.
  • Dealers are accepting smaller profits. Inventories are high and expensive to finance, that gives you power. Don't expect the dealer to take a loss, though. Do your research and bargain hard, but don't be unreasonable. "We won't say no to a small profit. Not now. If a customer walks away today, it's either because of financing or the offer just made no sense," Campagna said.
  • Analyze the financing. Financing is part of the deal, and it's hard to beat the growing zero-percent financing. You may pay down the vehicle faster than it depreciates. The finance charges saved outweigh any rebate if you keep the vehicle long enough.
  • Big dealer, small dealer? There are plusses and minuses in working with a big or small outfit. Big dealers can move cars around between branches and balance inventory more quickly, while smaller ones may be more sensitive to inventory costs and financing issues. But, according to Campagna, "many smaller dealers saw this coming and adjusted more quickly." Check out how many cars they have on their lots, and in storage lots if they have them.
  • New versus used. The shock of high gas prices knocked inventories out of whack a few months ago, bringing great deals on used cars, especially at dealers taking them in trade. The panic brought some SUVs and trucks for thousands under book; dealers were able to pass the savings on. Now the market is balanced again, but the new car glut has made used cars a tougher sell, so inventory is a problem here, too. Shop carefully, and remember, used cars have the most costly years of depreciation behind them.
  • Act soon. The best time for cars is now -- before everyone adjusts inventory, gets rid of the 2008s, lines up financing alternatives, and year-end and other sales events take hold.
So if you need a car there's no time like the present. But, I'll say it again: The wrong thing at the right price is still ... the wrong thing.

Source: MarketWatch

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