Yesterday I wrote about how increased vulture floor traffic at GM and Chrysler dealers has diminished the likelihood you'll be able to negotiate a great deal on a vehicle from these manufacturers. Afterward, I had a chance to discuss the current state of the car shopping market with Phillip Reed, Consumer Advice Editor with Edmunds, the car info experts.
Where should consumers look for the best deals on new cars today?
"The Golden Rule in the industry is that when foot traffic is up, so are prices," Reed told me. Accordingly, he cautions that shopping on a weekend, when the showrooms are busiest, is not the best time to strike a good deal.
He believes that Americans, having been cultivated to expect enormous price cuts when shopping for furniture, clothing, and other items, expect similar cuts in the showroom, cuts that are impossible in the car industry. Don't ever expect to find cars 50% off; the margins won't support such a drop. He also cautioned that dealers, who have suffered over a year of a tight market, will be anxious to recoup some of those losses as car shoppers gradually emerge from their bunkers, so don't expect them to give it up willingly.
Vehicle sales dropped from 16 million units in 2007 to 12 million in 2008, which Reed believes implies a huge pent-up demand. Given that manufacturers have cut back production, a sudden increase in purchases could result in short inventories, meaning that, this summer ,late buyers may be stuck choosing among the ugly sisters; unpopular colors and odd combinations of accessories.
Reed said that good deals are available from all manufacturers, however, but not on all models. He suggests checking out the incentives and rebates offered by manufacturers, a good indication of what models they have in excess. He pointed to the example of Honda's minivan, the Odyssey, a car known for its quality. Edmunds found recently that it was selling well below sticker price. I found that the the 2009 Dodge Journey currently carries a rebate of up to $3,000. A lack of incentives, on the other hand, means the vehicle is popular. Expect to pay top dollar for a popular car.
One class of vehicle to consider is the high-mileage car or SUV. When gas hit $4 a gallon, everyone wanted a Prius. Now, however, demand is diversified across many model classes, and good deals can be found in fuel-efficient rides- until the price hits $4 a gallon again, I suspect.
According to Reed, the credit market for car sales is thankfully loosening up, although the excesses of easy credit that troubled the industry pre-bust are no longer prevalent.
How tight is the used car market?
Reed told me that customers are still hammering the used car market. Dealers have been complaining about the lack of inventory, which bodes ill for the deal-seekers but well for those selling or trading a used car. Again, with low inventories, shoppers will find more picked-over stock and oddball choices, along with higher prices.
I asked what impact he expects should Congress pass the 'cash for clunkers' legislation currently under consideration. This program would provide cash incentives for people to trade in their jalopies for new, more efficient models.
Reed reminded me that the program as currently proposed would only pay those people trading in a car with a combined highway/city gas mileage average of 18 mpg or worse. He said that Edmunds compiled a list of cars that met this criterion, and found that most cars made since the early 1990's V-8s already exceed the mileage ceiling. Also, he was skeptical that a person who was still driving a behemoth from 1990, probably out of necessity, could actually qualify for credit to buy a new car.
He said that truck sales might benefit from this program, as the requirements are much more lax. I asked him which manufacturer would most benefit from this legislation, and he replied, without hesitation, "GM". Great news for a company that needs some.To finally emerge from the doldrums, Reed said, the nation needs to go back to work. Once people are back on the job, confidence will return and the new car sales will recover. The showrooms will once again be crowded, and you know what that means-bye, bye bargains.