Recession Watch: A new car is in your future
Auto makers are desperate to sell cars. It's all about volume for the big car makers, and they want to sell you a car. That means you can probably find a great deal on a new model. Look for "rebates" that give you $1,000 to $3,000 off the usual price of a new car. Also consider looking at the "old" model year. As 2009 models start coming off production lines, you can find better deals on the 2008s.
Use the power of the internet to your advantage. It's no longer a secret what a new car costs a dealer, and it's all available online for free. Find the model you want, and price out the "invoice" on the car to know where to begin bargaining. Remember that a dealer actually pays less than invoice when you factor in the incentives they receive from the manufacturers. Don't be afraid to offer the dealer less than invoice.
Auto dealers rely on volume. They can qualify for financial incentives from auto manufacturers if they reach certain sales milestones each month. That's why it's often better to go shopping for your car at the end of the month. The manager of the dealership knows how many more cars they need to sell to meet their quota or bonus, and your car could put them over the edge. They'll be motivated to make a deal.
Dealers make more money on used cars. Did you know that used cars are far more profitable for car dealers? They'd rather sell you a used car than a new one any day, because they'll make a lot more money. If you like the idea of a new car, consider getting a used one that is only a year or two old. You'll save a ton of money right out of the gate, and you'll have a lot more ability to negotiate on the price because of the dealer's higher profit margin. Make them give a piece of that profit margin back to you if they want to sell you a car.
Low interest rates are available. Recent interest rate cuts mean you can probably get a better deal on a vehicle lease or loan. Don't be afraid to shop around a little for a loan, and consider using a big-name online lender for your vehicle needs. The last time I did that, the auto dealer matched their low rate without any hassle.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud. This post is part of a series offering consumers advice on what to do during a recession.