Traditionally, this time of year is car buying season. But, "As a car buyer this could be your summer of discontent," warns Jack Nerad, executive editorial director of Kelley Blue Book.
Due to Japan's March earthquake and tsunami, supplies of Japanese cars are already down, and many could reach precariously low levels in the next few weeks. This situation and the gradual improvement in the U.S. economy has also persuaded vehicle manufacturers that they don't need to be quite as generous with consumer incentives -- low financing offers, cheap lease deals -- as they have in the past. This means getting a great car deal is getting harder, adds Nerad.
It's not just new cars either. Used car prices are way up, says John Roehll, executive vice president of DAS, a vehicle relocation services company. "Recently, a 2008 Toyota Forerunner worth $14,400 last year was valued at $20,000 this year. Used car values are at a five-year high, as supply is very tight, largely because of the lack of lease returns from sales the last three years," he says.
During the recession, more people hung on to their cars instead of trading them in for newer models, and leasing dried up, so the number of quality used cars available for sale has been significantly reduced, says Julie Shipp, a spokesperson for AutoTrader.com, an automotive marketplace and consumer information website. High demand, coupled with limited supply means that vehicles command higher prices, she adds. On AutoTrader.com, average asking prices for the most popular used cars are up 30% since December 2008, which is in line with other recent industry analyses, says Shipp.
The good news, though, is that's it's not impossible to find deals. "The fact is, if you do your homework and stand your ground, you can emerge with a very satisfying car purchase deal," says Nerad.
The Power of Patience
If you don't need a new car right now, the smartest play is to wait until later this year and re-evaluate the market when production is back to normal, say the folks at Edmunds.com, an educational automotive site for all things cars.
Edmunds.com offers a couple of other tips: They recommend extending your car lease past the summer. Some drivers with leases scheduled to expire this summer may think they have no other choice but to get a new car. However, they can ask the lessor about extending the current lease. (Call the 800-number on your monthly statement.)
Another strategy, so says Edmunds, is to consider finishing up someone else's lease. Sometimes a person needs to get out of a lease early. LeaseTrader.com is one company that specializes in matching those consumers with car-shoppers who are interested in a short-term lease. LeaseTrader.com estimates that of the leases currently available for compacts and midsize sedans, about 6% have less than 12 months left to run, and many are offered with cash incentives of more than $1,000, according to Edmunds.com. Taking over such a lease could bridge the gap for a new car shopper until the inventory of new cars is restored.
"Be open to brands you may not have considered in the past," says Natalie Neff, road test editor for AutoWeek. "If you've always bought Toyotas, and the production slowdown in Japan is affecting supply in your area, seek out information on other automakers. You may be surprised to find out how good the quality is across the board,"
Think compromise too, when it comes to colors, make, models and more. "If everyone is buying six cylinders, consider the four-cylinder models or diesels," adds Neff. Always have at least a couple of models in mind. If your first choice doesn't pan out, or if you have a bad experience with a specific dealer, it's always good to have a back-up choice, says Neff.
"The surplus of vehicles in the local market has evaporated, you may have to travel further or utilize online shopping and transport the vehicle to find what you want at a price you can afford," says Roehll.
Tap Online Resources
ConsumerSearch.com automotive editor Alex Nunez says there are several automotive websites that keep track of the best monthly incentives being offered by automakers. Also, "If you want to purchase or lease a new car, sites like U.S. News & World Reports and Consumers Reports keep up-to-date charts on what special offers are available on a variety of makes and models," he says.
In addition, most auto manufacturer's websites will let you input your ZIP code to see what incentives are being offered in your area, he adds.
Throughout the summer, Edmunds.com will provide weekly updates the best vehicles deals. Also, "Look at private sales. Sites like craigslist.org and eBay.com and your local newspaper often have terrific cars at bargain prices," adds Neff.
Don't Get Scammed
While buying used can have many economic advantages, if you don't shop wisely, you can come away with no deal at all. So far this year, the National Consumer League's Fraud Center has received more than 100 complaints from U.S. consumers about scams, with a total reported loss of nearly $293,674.
The used-car scams reported to NCL generally involve a classified listing on any of a number of sales and auction sites such as craigslist.org, Yahoo! Autos, or eBay.com. The listings are generally for late-model automobiles, often luxury brands, at well below market value. In the schemes, when the victim contacts the scammer, they are told that the seller is not local and that payment for the car itself or for shipment of the car should be sent via wire transfer to the seller. Often, the seller claims to be a member of the armed services who is either already deployed or preparing to deploy. As such, quick payment is necessary to ensure that the buyer receives the "great deal" on the car.
"Never wire money -- no legitimate car dealer would require a wire transfer even if just for the down payment," says Roehll.
Validate the source: Pick up the phone and call the auto dealer or seller to get some information on their background and history. Anyone can build a legitimate looking website, but if the seller makes excuses for not being able to speak with you personally, that is a good indicator of a possible scam, says Roehll.
"Show me more than the Carfax: While you should always ask for a Carfax report, some scammers will actually pull real reports for their fake car," he adds. "To best protect yourself, do your own background check on the vehicle to ensure everything matches up correctly with the Carfax. Also, check that the registration or license plate matches the seller's name."
Validate the details: If the seller says the vehicle in question is currently being held by a vehicle relocation company and will be shipped once payment is made, spend some time verifying this statement, says Roehll. Do an online search of the vehicle relocation company. "Never trust the website or the number you are given -- and call to validate the arrangement," he adds.
Do Your Homework on Prices and Values
"A car is one of the rare consumer products for which you can learn quickly and easily the price the retailer paid for it," says Nerad. "On our site, you can find out what consumers like you are typically paying for virtually the same car you are considering. You can also get a precise idea of what your current car is worth, which is invaluable at trade-in time."
Be strategic. "Use the SWAT tactic, which is an acronym for Start, Want, Accept and Terminate," says Jennifer Funkhouser, CEO and co-founder of CarCheckup. "Name a low price to start and determine the price you find acceptable to pay. Terminate the negotiation for anything over what you'll accept. Remember to never give out the final amount you want to pay."
A Counter-intuitive Approach to Sticker Shock
"If you're looking for an economy car when gas prices are over $4 a gallon, you may be in for a bit of a shock," warns Neff. As gas prices rise, the most fuel-efficient cars will draw a premium. "If you're really in need of a new car, it might actually save you money to consider something a little less efficient," she adds. That gas guzzling SUV might come at a price that makes you smile.
Finally, be prepared to walk away. Says Nerad, "Don't be intimidated into making a deal you don't feel comfortable about because you've been told the deal is good, 'today only'. New vehicles are in some ways a commodity, so bargain hard and decline to make a deal if you are uncomfortable with any aspect of the transaction."
Also See: Now Is the Time to Sell Your Used Car