Is Now the Right Time to Buy a Car?

It Depends!

High gas prices in the last few months have had people feeling pain at the pump and thinking about more fuel-efficient vehicles. But gas prices have moderated while the nation’s economic picture has worsened. Many consumers have cut back on spending. Yet, the news is full of stories about slow sales and economic pressures on auto manufacturers and dealers. Maybe, you think, now could be a good time to get a good deal on a new or used vehicle. Yes or no?

The answer depends on your individual financial situation and needs in a vehicle. This report offers some questions to ask yourself and tips for savvy shopping.

What is your current financial situation?

Is your job stable or is the slow economy threatening your industry, company, or job? Are you easily staying within your budget and income or are you stretched, perhaps having some trouble paying bills? If your financial picture is secure, now may be a good time to trade. But first, think about the following questions.

Does your present car meet your needs? Would it cost more to trade than to keep driving your current vehicle?

If you are happy with your current set of wheels, it may be more economical to keep driving it for the next few years, particularly if it is less than three or four years old and in good mechanical shape. To determine which option is more economical you’ll need to compare the total costs to drive. For example, if your current vehicle is paid off, continuing to drive even a gas guzzler may be more economical than buying a new vehicle.

If you are thinking of downsizing, consider that demand has skyrocketed for vehicles with high fuel economy ratings. New and used gas sippers are the only vehicles whose selling price has stayed up. For some used fuel efficient vehicles, value and selling prices have actually increased in the last few months. Also if your current vehicle is a gas guzzling truck, sedan, or SUV, wholesale and retail values have dropped substantially during that same time frame—so you are unlikely to be able to sell or trade your gas guzzler for what it’s worth.

If you trade for a smaller more fuel efficient vehicle, how long will it take for your savings in gas costs (and possibly maintenance/repairs) to pay back the costs of buying another vehicle compared to keeping/driving your current vehicle? That timeframe is often longer than you might imagine.

What is your driving dynamic?

If you need a large capacity truck or SUV, now could be exactly the right time to buy while values are depressed. The same goes if you have a large vehicle such as a full-size SUV and want to trade for a mid-size. Dealerships do have plenty of inventory, but the latest news indicates that most are not as “overstocked” as the industry feared or most consumers might imagine. Also hurting financially, as many dealerships are, means they may work even harder to make maximum profits on you. So don’t forget to shop and bargain carefully. Use the steps in the Information Edge Car Buying Guide.

Are you a “short” driver or a “long” driver? Do you just do small trips with your vehicle, or do you commute long distances. If gas consumption really isn’t a big factor for you, now is a good time to look at a bigger vehicle—especially a late-model used-vehicle. You won’t believe the prices a smart consumer can get on one of these right now. Just remember that you’ll be living with higher gas consumption and cost for the life of the vehicle.

Tips for buying wisely in today’s market

If you’ve determined that your personal financial situation is stable and you have good reasons for buying a vehicle now, here’s what to do:

Slow down. If you don’t know what you are doing, you will pay more rather than less, both for the vehicle and the financing—no matter how depressed the automotive market is.

Go online. Read our Information Edge Car Buying Guide. Don’t skip this step.

Forget these two advertising pitches.

• “Buy any used car at NADA wholesale!” The “book” wholesale price of used vehicles is almost always higher than the actual wholesale value. For instance, NADA wholesale on a one-year-old luxury sedan might be $27,000, but the “actual” or “real” value now might be $13,000. Follow our guides in developing an offer.
• “New cars at cost!” Guess what? New cars aren’t worth what they cost the dealer any more. In fact, the minute you drive a new car around the block, it will probably drop in value thirty percent. Don’t think of buying new unless you plan to keep that car many years—time for you to amortize the “loss” you’ll take for buying new.

Biggest tip: Don’t feel sorry for the car dealers. Car dealers look after themselves; you look after yourself—and your pocketbook.

For more information

• The Information Edge Car Buying Guide
• When to downsize your car from Consumer Reports
• Fueleconomy.gov provides side-by-side comparisons of gas mileage, greenhouse gas emissions, air pollution ratings, and safety information for new and used cars and trucks.