Consumer Car Buying Advice Blog

New car incentives are close to an all time high while leading economic indicators show a continuing moderation in the decline of the economy.

Buy low, sell high

Here at Auto Credit Express, it’s becoming more apparent that many consumers are playing the car market just like the stock market. The mantra of the stock market has always been “buy low, sell high”. If you are thinking of buying a car, this could be translated as “buy a new car at the cheapest price while getting the most money for your trade in.” But much like the stock market, the trick is to time your purchase so that you are getting the best possible price for the new car while, at the same time receiving the most dollars for your trade-in. This begs the question, “Have we reached that point yet?” The answer is, quite possibly, yes.

Used car values

As far as used car values are concerned, it really depends on the kind of car you are presently driving. Last summer, there were major fluctuations in the projected values of used cars and trucks due to the sudden upswing in the price of gasoline. Large trucks and SUV’s took a huge hit in wholesale values, while smaller and more fuel efficient cars actually increased in value.

But with the drop and subsequent stabilization in gas prices at about $2.00 per gallon, wholesale prices have begun to reflect the changing tastes of consumers, as well. Here are some of the changes noted by Kelley Blue Book:

• As of March, overall wholesale values showed a slight increase of 0.5%.
• The overall upward market trend of used car values seems to be moderating – although this could change with an increase in consumer demand.
• Compact cars and subcompact cars were down slightly (0.9% and 1.8% respectively) due to lower fuel prices and lessening demand.
• The truck segment was stable, while crossovers and SUVs were up 3-4 %.

New car prices

Manufacturers continue to aggressively market new cars. According to Edmunds.com, March incentives averaged $3,169 per vehicle. This was up about 30% from March of last year and, on average, up $171 from February. The report also shows that GM and Chrysler led the charge with incentives of almost $5,000 per vehicle, while even Toyota averaged almost $1,601 per vehicle.

These incentives, by the way, don’t include the additional payment guarantee programs of Hyundai, General Motors and Ford – policies that will make payments for anywhere from 9 to 12 months due to job loss and also, in some cases, either guarantee the value of your car or allow you to turn the car in while covering much of the negative equity of the vehicle. As an added bonus, the U.S. government will guarantee the warranties of both GM and Chrysler if either company goes bankrupt. At the same time, it must also be remembered that automakers have been rapidly slashing vehicle output to meet demand in an attempt to keep inventories as low as possible.

Conference Board report

These are obviously extraordinary times that we are living in. Under normal circumstances, springtime is usually the time that many manufacturers back off on incentives due to increased consumer demand for their products. This year promises to be different. A recent study by The Conference Board shows that the leading economic index for the U.S. declined 0.3 in March, following decreases of 0.2 in both February and January. According to economist Ken Goldstein at The Conference Board, “The recession may continue through the summer, but the intensity will ease. There have been some intermittent signs of improvement in the economy in April, but the leading economic index and most of its components are still pointing down.”

Although The Conference Board’s indicators show a larger decline in the most recent 6 month period than the previous 6 month period, that rate has moderated “somewhat” this year.

The Bottom Line

Without a crystal ball, it’s difficult to predict how new car incentives will change during the next few months. But depending on what kind of vehicle you are currently driving, now might be an excellent time to take advantage of better trade-in values and unprecedented new car incentives.

Tags: auto loan

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