The paradox of a recession is that it’s a great time to buy when nobody else is buying. It’s especially true with car sales, which have been plummeting for months due to bad economic news and, until recently, high gas prices. This means that if you have the money, there hasn’t been a better time in the last two decades to buy a car, according to a recent story in The New York Times. Automakers are offering incentives over $2,500 on average, and some dealerships are giving $10,000 discounts on SUVs.
“Dealerships are desperate to sell cars,” William Ryan, an auto finance analyst at Portales Partners, an independent research firm, told The Times recently. “The reality is, you are probably going to get a pretty good deal if you can afford it. There is a lot of heavy discounting going on.”
Still, buying your favorite car is no longer as simple as showing up at a dealership with a pen and a driver’s license. It’s tougher to get a loan now, so consider these points:
- Make the dealership your last stop
Before you shop for a car, shop for financing. With the recent upheaval of the credit markets, a bad credit score will cost you – about $7,100 more on a five-year, $28,000 car loan, according to Edmonds.com. Make sure you get the best rate possible by comparing rates beforehand at your bank, credit union and online.
- Avoid long-term loans
You may get lower payments with a six-year loan. But if you plan to sell the car after two or three, dropping resale values may leave you owing more for the car than you can get on resale.
- Don’t Lease
Especially now that the resale value of gas-guzzling cars and SUVs has dropped as much as $5,000 apiece, carmakers are forced to make up the difference by charging more to people who lease. And many companies, including Ford, Chrysler and GM, have significantly curtailed their lease programs, so finding a car to lease may be impossible anyway.
- Consider keeping your SUV
If you have a gas-guzzler, now may be the worst possible time to sell, since resale values have dropped so fast. Instead of selling it to buy new, maybe find ways to park it and drive less.
- Visit Credit.com's learning center for more information on auto loans.
Credit.com offers straightforward tips and advice to help you make smarter financial decisions. Visit Credit.com to sign up for your FREE Credit Report Card and find out where you stand today!
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