Can I get a better deal buying a car in a down market?

A recent customer asked us if they can get a better deal today than they could have six or twelve months ago. I often wonder (when I get questions like this) if I should just give them the short answer they WANT to hear, or if I should explain to them the truth, and risk that they do not believe me and go see one of my competitors.

Here is what is happening at dealerships:

Dealers are still in a business that requires them to make profits. If they do not make profits, they go out of business. In todays economy, lenders have dramatically lowered the loan-to-value ratios of the auto loans they are still approving. In addition, the Kelly Blue Book and NADA value guides have lowered the values of their vehicles at a dramatic rate.

The same cars have a lower Kelly Blue Book and NADA price, and the lenders are lending less money on a given car (so dealers cannot charge as much as they want). So, in a sense, yes – right now is a great time to buy a vehicle.

Since lenders base their loan to value off of a value guide (which guide is lender preference) and the loan advance multiple is lower anyway, the dealers have a lot harder time making a profit without a large down payment. The dealers have less margin in each vehicle, and their average profit on each vehicle sold is down. In that sense, you have less negotiating power than you used to.

So you see, it all depends. To a dealer, every day is a good day to sell you a car. In the macro economy, prices on used vehicles have dropped because repos are up and sales are down. Everything is relative. If you need a vehicle, and you qualify for auto financing, buy one. The only way we will pull out of this economy is if consumers start consuming. Besides…prices will go back up.

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2 thoughts on “Can I get a better deal buying a car in a down market?

    • Leona,
      It really depends on financing. If you have good credit and do not have a negative equity issue on your trade in, there are lots of great deals out there and now is a great time to buy. If your credit leaves a little to be desired, I would make sure you get pre-approved before you step on to a dealership. If you are thinking about going brand new, I would stay away from the Chrysler and GM products. I have already seen lenders limit their lending on those brands due to their financial status. I heard they predicted a GM bankruptcy next week, and as we already know, Chrysler is in the middle of bankruptcy right now. Just do a little research, get a carfax, and you will not regret buying now.

      Like

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