Sort of an idle question. A buddy is in the market for a car in the US. I assured him this was a buyer’s market. Then I went online to look at new cars.
Gosh, I did not see super-duper offers from Ford or GM. Am I missing something? Are there presently steep discounts for cars?
So far I have seen fantastic financing offers (0%, no payments for 6 months, and so on). I have not seen price discounts, but I’ve got my eye out.
Everybody is waiting for this “V-shaped recovery” that is not going to happen, and manufacturers have been essentially shut down since early April so there is no production. The used car market is more of a buyer’s market because sellers are very motivated to keep inventory moving but even there you aren’t going to see such “steep discounts” that sellers are willing to lose money.
I would be leery about buying a new car right now just because of uncertainties in the cost of petroleum. Gasoline is inexpensive right now because demand has dropped precipitously and crude oil dropped to negative value but that means oil producers have shut down high cost production like extraction from oil shale and reduced refinery operations, and restarting that in an economy that is depressed and uncertain of how quickly it will revive (or be subject to repeated shutdowns) means that producers are not going to pour money into restarting or maintaining production. Once restrictions are lifted ‘for good’, who knows where the price of refined petroleum will settle out at. If buying a new vehicle I would seriously look at hybrid and flexfuel vehicles over low fuel efficiency vehicles unless your friend is prepared to pay double or triple what he was paying previously to fill up.
Stranger
My car was totaled and the same lender offered me a loan with 5% higher rate than the previous one and my credit score is exactly the same.
My cars were 2-3 year old used, though.
I bought a new one for one of my kids last weekend. Not a great deal, but a pretty good one. Needed to replace the old one, and the dealer had marked it down enough for me. In this market I didn’t want to sell the old one myself , and managed to get enough on the trade-in to be satisfied. FWIW: We got a basic low-end Corolla with no frills. This increased our “fleet” efficiency* to around 40 mpg on average – we’ve been replacing older vehicles with much higher mpg versions while gas prices are low. Got a 5 year old hybrid last year for a song (OK, a song and several thousand).
*10 years ago, the average mpg of our 3 “daily drivers” was under 20. We’ve managed to double it since we believe the last several years of cheap fuel is an outlier, and expect substantial increases in the coming decades. We wanted to be prepared for this during retirement. Barring accidents/theft, this is the last car I’ll ever buy. It’s a weird feeling.
Recent thread that may be helpful.
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[Moderating]
This is a matter of opinion, and so belongs in IMHO. Moving.
Interesting to see different outlooks on retirement. Fuel here is really expensive so it is a major factor in most decisions. In my case, I looked at my future mileage and decided that I really don’t care about consumption, what I care about is comfort etc. So I have a 2.0 Mondeo (Fusion) Estate with a lot of extras. It only creeps up to 30mpg (note that our 'g’s are bigger than American ones) on a long run, but at less than 6k miles a year, that is not significant.
I think everyone is holding out hope for the recovery, or are willing to just lose shitloads upon shitloads of money and then ask for a government bailout maybe? But you are right, nobody is offering great deals right now. Part of that is because no new inventory is being produced which puts pressure on people to move existing inventory. Once manufacturing starts again and people STILL aren’t buying those $40K+ crossovers, perhaps we will see some discounts.
Finances aside:
From a dealer? Maybe. But apparently my state failed to make allowances for private sales, so there is no way to register a car or retitle it by a private individual. The DMV does have a form letter to extend expired documents, but not create new ones.
Dunno, we were just about to drop the bucks on trading in our 2017 F-150 for a similar model except with the 4WD we now need, when the plague happened. We still get lots of Car Guru and other We Have Found Your Car For You emails. But the prices are pretty much the same, and the risks are in my opinion far too high right now. Not buying anything ‘virtually’. We drove three hours to look at the perfect truck to find out it absolutely reeked of cigarette smoke, I couldn’t even sit in it. That won’t show up on an online ad. For example.
From a pure economic theory standpoint, The reason you haven’t seen price reductions is that production is halted, therefore supply and demand went down together.
But when we open up again, I expect lots of products to go up in price, including cars. Because if demand returns to normal, the effect of two months of lost production will be felt as shortages, price increases, or likely both.
Also, there is a huge cash surplus right now, because no one is spending. All that consumption is being deferred into the future, but the loss of two months of production can’t be easily made up.
Also, if people stop taking long-distance road trips in cars, and stop taking transit for shorter distances, both of those trends will be very good for electric cars.
So I wouldn’t have expected to see discounts now, but we *might see price increases when things get back to normal.
Another factor is the Chinese goods problem. Even domestic cars have significant parts from China. If we wind up boycotting them or raising tariffs dramatically, the price of domestic cars will increase.
Here is my take. And I say this as someone who really, really abhors debt.
GM is offering 0% for 84 months. That’s insane, really. It’s free money.
Even at 4% I’m a cash buyer. But damn, son, free money. I’m taking that any day*
*If I needed a car; at the moment I don’t.
I keep reading articles on how used cars are a great deal now (and if Hertz dumps a bunch of their cars on the market, even moreso).
I’ve had great luck with local used car lots and Craigslist cars… if I can have my local garage look them over before I buy. And they’re still open and willing to do so.
I was going to wait another year, but might buy one soon. Take advantage of the uncertainty before anyone figures out what’s going to happen. Just looked at one today, but not serious yet, so didn’t test drive it.
The reality and it always has been is that buying a brand new car is highway robbery. You are overpaying tremendously. The moment you drive the car off the lot, it’s depreciated massively.
The best thing is to actually buy a used car that someone else took the brunt of the initial cost of buying it new. Now you are paying closer to what the real value of the car is and it’s only 1 or 2 years old with only a few thousand km/miles on it (of course assuming nothing is damaged about it).
I bought an everyday driver over 2 and a half years ago for only $900 cash. Still using it today. Talk about getting my money’s worth! I hope this car lasts me another 3 years or so…it’s like literally paying only $150-$200 a year for a car! (who cares if it’s an old car, if it runs and does it’s job, you’re saving a ton of money). Of course I also do have a weekend car and that was more costly even though it’s second hand, also but it’s a car that is much more closer to what I can consider my “dream car”, so I can’t complain.
But 7 years? The warranty will be void before it’s paid off. And beware of add-ins that a buyer may say sure I’m saving a bunch so give me the gap insurance, the extended warranty, the service plan, a Sirius subscription and concierge service and give it a Zurich shield too.
Good deal but it’s still to their advantage they’re willing to finance at 0%.
Unless you have a rock-solid job you know is not going anywhere even though we’re at probably 20% unemployment right now, I would not be buying a car. Yes, 0% financing is nice and all, but that doesn’t mean you can skip out on payments.
I interpret the deal as being an alternative to cash. As in, if the purchase price is the same, 7 years of 0% is better than paying cash because you can just take that cash and invest it somewhere else. Even just putting it in its own low interest rate account with an autopay for the car payment is a net win, since you’ve got a little bit more flexibility if times get bad.
That said, I’m extremely debt adverse, and don’t even like having a mortgage remaining on an 80% paid off house. So I probably would still just pay cash despite not technically being the optimal solution.
Is that really that true anymore? I was under the impression that given how reliable modern cars are a lot of the brands known for reliability (Toyota, Honda, etc.) don’t really depreciate as as fast as they used to. So I’m sure there is still a jump down in cost, but it’s not as dramatic as it was decades ago.
Well, wasteful add-ons are a separate issue. One can refuse them, and if they’re a bad idea at a high interest rate they’re a bad idea at a low one.
I tend to keep a car 10-12 years, so warranty doesn’t matter. And for what it’s worth, manufacturing has come a long way, and all my cars make it 10-12 years (and ~150,000 miles) without much trouble.
But carrying interest for a shorter term wouldn’t improve the warranty situation. As someone else mentioned, you’d be better off putting the money into an interest bearing account. One can always pay off early.
Imagine you could buy a $50,000 car and finance for 200 months. By the time you are 200 months out, that $250/month is a LOT less money than it is today (unless we’re heading into a deflationary spiral, but I don’t think it’s that bad)
To the point about unemployment and the risk of taking on debt in this environment, that’s a personal evaluation on the basis of job security, savings, etc. Some people are rightfully very worried about the current situation, and others know they’ll be fine.