Car buying in a recession
December 19, 2008 2:09 PM   Subscribe

Buying a new car considering the current US economy. Have the rules changed?

So, I am in the market for a new car. I love my old car, but sadly I need to sell it for something with a little more space in the rear seat, so we can fit two kid car seats.

I won't be using credit, I will be paying cash, so I don't need to worry about getting a loan from the dealer. The only exception to that is if I decide to buy something brand new, from a dealer that is offering ridiculously low interest rates, like 1% or less - that's such a good offer it's better to take it up and keep the cash in a savings account! I know some manufacturers are offering these rates, so that's a consideration.

I was originally operating under the premise of all the advice I have heard before about going into the dealer at the end of the month (or even better, Dec 31st) because salespeople want to make up their numbers for the end of month (or year) and will be more willing to cut a deal. I am wondering if really this is irrelevant now, and I don't need to hurry and buy the car soon. I am in no rush, the deadline for the new car is May next year, so I can take my time and find the best car/deal for me if this end of year rule is moot in the current economy.

Second question, is it fair to assume that if I were to buy a new car (am considering 1 year old cars and new ones) that I would get the best deal if I buy a new 08 car off the lot? Are dealers likely to be in a position where they are more keen to sell an 08 new car because they are likely paying finance on it to the manufacturer, whereas a 1 year old car on the lot they might have got on trade-in and own outright?

I am also re-considering the idea of trading in. I know that you always get less to trade in your car at the dealer, but I was willing to take that hit for the convenience of getting rid of it without the hassle of a private party sale. I'm thinking that in the current economy dealers just don't want your old car, and therefore will offer me a REALLY crappy price, rather than a regular crappy trade-in price. Would it be better if I was buying the same make of car as I am trading in, or make no difference?
posted by Joh to Shopping (12 answers total) 10 users marked this as a favorite
all i can say is that you have cash in hand to buy a car at a time when dealers are having a very hard time moving product off the lot. find two cars you like at two different lots. play the dealers off against each other. you're sure to come out with a pretty good deal.
posted by TrialByMedia at 2:32 PM on December 19, 2008

just to give you a data point, Earnheardt Dodge just ran this promo

Buy a 2008 Ram at MSRP and get a 08 Ram, 08 Dakota, or 08 Caliber free.

yes. really.
posted by phritosan at 2:58 PM on December 19, 2008 [1 favorite]

The multi-page article on Buying a Car at Motlely Fool is pretty great. It's not tailored to the current economy, but it might still give you some useful info.
posted by kristi at 3:06 PM on December 19, 2008

Best answer: Hold onto your car. The trade-in value is just another point in the equation for the dealer to try to confuse, cajole, badger, or shortchange you. The fewer variables the better. You already are not financing, so you can just short circuit the questions like "What are you looking to spend per month?" And without a trade in, you can just be a hard-nosed negotiator on sticker price and price alone.

I think you might even get them to pay for the dockage(?), delivery fees, plates, etc.

But don't do that until the very end. Print out what the car costs the dealer from and then just go to work offering them $500 more than they paid for it. Then when they finally relent, ask them to split the fees with you. Many car dealerships buy their cars outright, so they're paying some kind of mortgage on the cars already -- so the car is actually already in the red. But getting it off the lot and into your driveway is them losing less money at least.
posted by zpousman at 3:14 PM on December 19, 2008 [2 favorites]

My parents bought a new car in the spring, so their experience is not quite in the current economic climate, but it may be of use. They also had the cash in hand but found that many of the advertised or better prices required financing. They were able to get the better price (nearly $2000 better I believe, on a $15,000ish car), by getting a financing deal that allowed for payment in full after 3 months of financing.

My father sent in the balance in full the day he was permitted to do so without penalty and they were very happy with the outcome since the amount they paid in interest for those three months was substantially less than the savings they received.
posted by Caz721 at 3:16 PM on December 19, 2008

Best answer: David Pogue just wrote about buying a car via email. He was very pleased.
posted by veggieboy at 3:24 PM on December 19, 2008 [1 favorite]

Remember that the salespeople don't have any authority to make prices. They are just there to run interference between you and the decision makers.
posted by gjc at 5:22 PM on December 19, 2008

Worth thinking about - will the manufacturer of the car you're buying still be around in 12 months' time? (Spares / repairs / servicing / general aftersales)
posted by finding.perdita at 5:24 PM on December 19, 2008

Search the internet - if the car you're interested in has a web forum, sign up and ask (politely) what dealer invoice is and how much more (less) than that you're likely to pay in the current market. (You can pick up a GMC truck for thousands less than invoice, they'll pay you to free up some lot space at the dealership, for example, but a GMC truck may not be what you want to buy.)

If the warranty and availability of spare parts is important to you more than a couple years down the road, be advised that all the American automakers are on pretty thin financial ice right now.
posted by ikkyu2 at 9:23 PM on December 19, 2008

I would do my research before offering any money over cost. Most of the '08 cars being sold around here are at least several hundred below cost.

So few people plunk down cash (especially recently) for a car that they rarely advertise the deals they'll give for money in hand. Ask them what they'll do for you with cash.

And skip the trade-in. Sell it yourself.
posted by Ookseer at 12:06 AM on December 20, 2008

Two helpful links for buying a new car:
1. How to buy a new car and not get screwed. (short video)
2. Confessions of a Car Salesman Long article written by a reporter that went undercover at two (haggle and no-haggle) car dealerships. He shares some interesting tactics used by salespeople.
posted by k1ng at 8:11 AM on December 20, 2008 [1 favorite]

Just wanted to say that I just read "Confessions of a Car Salesman" as linked directly above and found it very useful. Having worked in sales in a different industry I can say that it seemed very accurate.
posted by tiamat at 11:02 PM on December 21, 2008

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