With new cars collecting dust on showroom floors as millions of people shelter at home, car manufacturers are going to great lengths to move inventory. They’re offering steep discounts and too-good- to-be-true deals, including zero percent interest for several years and deferred payments for as long as 120 days.
“There are powerful incentives offered right now that makes it a good time to buy specific cars,” says Karl Brauer, executive publisher for Autotrader and Kelley Blue Book. “But if you otherwise don’t need a car, don’t buy one just because of a great deal.”
VEHICLE SALES PLUMMET AMID THE PANDEMIC
The COVID-19 pandemic is having a disastrous effect on vehicle sales in the U.S. In addition to shelter in place orders for millions of people, unemployment is at unprecedented levels, and dealerships are shuttered, resulting in a steep decline in vehicle sales. According to Cox Automotive, new retail vehicle sales were 57% lower year-over-year as of the middle of April. Used car sales were down 51% in the same time frame. It’s also impacting the price used cars can fetch in a sale. Cox found wholesale used car values are close to 12% lower.
Because of declining sales, car manufacturers are rolling out really enticing deals to move inventory. Take Buick for starters. It’s offering 0% APR for 84 months for qualified buyers on most of its 2020 Buick SUV models and deferred monthly payments for 120 days on most models. Cadillac is offering 0.9% APR on its 2020 XT4, XT5, and XT6 SUVs, plus a $2,000 purchase allowance and 120 days of deferred payments. Jeep has 0% APR for 84 months and no monthly payments on select Jeep models for three months. It’s also offering the public employee pricing on some models, amounting to $5,000 off the MSRP.
What most car dealers have yet to do is slash prices dramatically to spur demand. That may happen in the future if vehicle sales continue their steep downward trajectory. “It’s too early to tell if we are headed for greater deals,” says Ronald Montoya, senior consumer advice editor at Edmunds.com. Dealers still need to make money and can’t chop $10,000 off the asking price. “Currently we are seeing more specials leaning toward financing,” he says.
The deals aren’t stopping with new vehicle purchases. Car manufacturers are also dangling incentives to get people to lease new cars. Honda is offering existing customers $1,000 toward the lease or purchase of select models, while Hyundai will cover the payments up to six months for buyers who lease or buy a vehicle and lose their job.
Those with vehicle leases that have or are expiring soon, the manufacturers are devising ways to help. With dealerships across the nation shuttered, the car manufacturers are collecting the cars from customers’ homes or in lieu of that offering the option to extend leases, typically on a month to month basis. Customers have to continue to make payments on the vehicle during the time frame.
CAR SALES MADE EASY THANKS TO THE INTERNET
If you want or need a new vehicle during the pandemic, there’s good news. It can easily be found, thanks to the Internet. The car industry, like many other service markets (including real estate,) has turned to the internet to get vehicles in front of would-be buyers. Many are doing everything online, from virtual walkarounds of vehicles to financing the purchase or lease. Salespeople will even deliver cars to customers’ homes for test drives, being careful to wipe down all touchpoints in the vehicle when exiting it.
“The technology to do digital car sales has been available for the last five years, but dealers typically want you physically there,” says Brauer. “Now in this world where you have to do it or no car sales, lots of dealers are suddenly jumping on tech.”
When shopping for vehicles, keep in mind the supply will depend on the car or truck’s popularity heading into the pandemic. The automobile supply chain has been impacted by the coronavirus for several months because of its reliance on China and Asia. That means vehicles in demand prior to the pandemic will likely face shortages once the virus is contained and the automobile industry begins to return to some sense of normalcy. “In the perfect world, it would be completely aligned with just the exact amount of demand and supply, but the problems are too complicated,” says Brauer. “When this is all over, it will take a little while to start producing vehicles again.”
LOOK BEFORE YOU LEAP
Whether you’re purchasing or leasing a vehicle, it behooves you to do your research. Those new car deals may be tantalizing, but the best terms are usually reserved for people with the highest credit scores. Buick’s 0% APR for 84 months is for “very well qualified buyers” while Hyundai’s 0% APR financing and no payments for 120 days is for “well-qualified” buyers. Translation: credit scores of above 700. Once you find a deal you like, contact the vehicle manufacturer to ensure you’re eligible. If not, shop around for your financing to get the lowest rate possible. Banks and credit unions may offer competitive or better rates on a car loan than the dealers and manufacturers. Above all, be patient and stay safe if your shopping requires you to enter the dealership. “It’s important to do your research. You don’t want to buy the wrong car,” says Montoya.
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