The COVID-19 outbreak may have lessened demand for new and used cars, but that means those still looking to buy may find better deals than they expect.
Recently, the federal government clarified their definition of “essential businesses” to include auto sales. That’s good because, for a whole host of people, putting off their next vehicle purchase might not be possible. First responders and other essential personnel literally need to keep their wheels on the road. Acquiring transportation ensures they can continue doing their vitally important work.
Given current economic headwinds, auto dealers are more eager than ever to move their existing inventory. That translates to generous discounts and financing options designed to entice would-be buyers into the market. In fact, we may not see another time when the market is stronger for buyers than right now. So yes, this can be a good time to buy a car.
While used car sales are often insulated from the economic turbulence, stay-at-home orders have impacted this sector along with the rest of the economy. According to J.D. Power, the wholesale values for used cars contracted by 11.8% over the first half of April. While used prices have remained relatively stable over that time (down roughly 1% so far) it’s likely they will soon see an associated drop. J.D. Power projects used car prices to follow wholesale prices, reducing by 8-11% and to be at their lowest somewhere between mid-May and Mid-July. That makes these next few months your best chance for finding a great deal on a used car.
Waiting a few weeks might be a good idea if you’re buying used, but if you’re looking to buy new, now could be your best chance to save money on your next car. That’s because, according to J.D. Power, the new car market is already rebounding, with some states showing shallower declines and still others trending positively compared to just a few weeks prior. You can check out how these numbers breakdown state-by-state here.
J.D. Power credits strong incentives and new efforts from dealers to operate within social distancing guidelines for the recent uptick in sales. Given that improvement, manufacturer and dealer incentives may be at their most generous during the next few weeks as they seek to maintain that recovery trajectory.
Currently, many OEMs are offering deferred payments for up to 120 days and 0% APR for 60, 72, and even 84-month terms on select vehicles. Let that last one sink in a moment … that’s zero percent with a capital 0.
Even with favorable financing numbers, if you’re considering a new vehicle purchase, there are a few tried and true bits of car buying advice to remember. Perhaps most importantly, it remains a good idea for car buyers to put money down whenever possible. Moreover, if you’re considering deferred payments on a new vehicle, it’s wise to start with some equity to counterbalance initial depreciation and the net zero you’ll be paying through the early life of your loan.
The first place most people look for existing equity is in their current ride. But you’ll have to take the current market for used cars into consideration when weighing any offers. As we noted above, wholesale prices on used cars are down, with dealers looking to reduce inventory and maintain cashflow. That means you might not get quite as much for your old car as usual. With that said, if you’re comfortable taking a slight hit on your trade-in’s value, it’s a great place to tap existing equity for a new vehicle purchase.
The good news for car buyers is this, dealers are motivated to make a sale, perhaps like never before. You can make the most of the situation by comparing offers, timing your purchase to the market, and making a strong down payment. So yes, if you’re ready to capitalize on the current market, now is indeed a good time to buy a car.