Category: 
June 24, 2009
The up and down economy has left it’s mark on the car industry. Automakers and dealerships, struggling to move their inventories, have been forced to deal with tighter credit terms, a smaller pool of prospective car buyers, and other difficult circumstances. For the experienced car buyer, this means opportunity to find bargain deals. As dealers become more motivated to extend generous terms to consumers, buyers can uncover surprisingly attractive bargains.
Below, we’ll explore 3 ways in which the auto industry is changing. I’ll describe how each of these changes affects the deals that are available to buyers who are alert, informed, and prepared.
#1 - Automakers Have Excess Inventories
Sales of new cars, trucks, and SUVs have been plummeting for the past year. Because of the situation, car dealerships are having a difficult time selling their inventory. Further, ports are becoming stacked with inventory that the dealership lots are unable to accommodate.
The auto industry is similar to any economic market, when supply is high, prices are reduced. If you are in the new to you car market, this is an perfect time to negotiate an awesome deal. Generous rebates, low-interest financing, and other incentives are creating a rare buyer’s market.
#2 - Credit Is Tight, But Only For Some
One of the circumstances that has had a significant impact on the automotive industry is the tightening of credit. Banks are wary of extending auto loans to subprime borrowers. If your credit score is dismal, you’ll find it difficult to secure financing. However, if your score is above 700, many banks and dealerships will be happy to offer an auto loan with a competitive interest rate.
In fact, the dwindling pool of prospective buyers with good credit has become more valuable than ever to automakers and car dealerships. Many of them are willing to offer fantastic incentives in addition to a low rate.
#3 - Lease Payments Are Increasing
The lease market has undergone a dramatic change over the past year. Long ago, you could lease a vehicle with monthly payments far below what you would pay to own the same model. Basically, you can purchase an much better vehicle for the same price as before. Today, most car manufacturers have forced a substantial increase in lease payments.
The reason is due to the glut of inventory. As the leased cars leases expire, deals must attempt to sell them as pre-owned car at a profit, which is now more difficult. The increase in monthly lease payments compensate them for the lost revenue. An unexpected corollary is that you can uncover great used car bargains by shopping the vehicles which have recently come off their leases.
The automotive industry will continue adapting to the rough economic times ahead. For learned car buyers, that means great deals when purchasing either a new or used car.