With many areas of the country starting to open back up after COVID-19 quarantine situation, a lot of folks want to get a brand new ride for the summer. While the July 4th holiday is usually a good time to buy, there are a few reasons why it may pay to wait a bit longer.
Right now, there is a large influx of car buyers on the market who were sidelined by COVID-19, but there is not a large influx of new cars coming onto dealer lots since many of the factories were closed. This is creating a supply and demand situation that is more favorable for the dealerships. Buyers are either seeing limited inventory for the models they want and/or are experiencing dealers that aren’t nearly as motivated to discount those cars.
If buyers encounter inventory issues it may pay to cross-shop a competitor. I was recently shopping for an Audi Q5 Prem Plus, the most popular trim of Audi’s best seller. Dealers keep saying how they can’t keep these cars on the lot, so the discounts I was seeing weren’t great. However, I found inventory for the BMW X3 to be a bit better and the rebates and discounts were much more aggressive.
Once COVID-19 started to have a major impact on car sales, automakers offered a frenzy of zero percent financing offers in addition to deferred payment plans to entice people back into the showrooms. Now that the market is starting to stabilize, some of those programs are being adjusted. There are still a number of zero percent offers from a number of brands, but the loan terms may be shorter (this is a good thing), or they may only apply to specific models.
The other issue is that buyers often don’t realize that low APR specials often can’t be combined with big rebate offers. On a recent Jeep deal, there was a 0 percent offer on the table, but the customer had to give up $4,500 in rebates. This is why you always want to run the math to see if it’s more advantageous to take the cheaper loan or the cash on the hood, also remember the size of your downpayment may impact this equation.
A few months ago, almost every industry analyst predicted a massive crash on the used market due to an influx of lease returns, a limited buyer pool, and Hertz dumping inventory onto the market because of their bankruptcy. For a few weeks, wholesale auction prices did take a dive, but then buyers returned to the market. Now that new car inventory is limited, some folks are pivoting to pre-owned models, and there were a number of people who have had their budgets impacted by COVID that would have bought a new car and are now looking for a more affordable option.
Used car prices aren’t necessarily skyrocketing, but they are stabilizing from the initial shock, and shopping for pre-owned cars is much more about finding the best value than focusing on the discount. Another bit of good news when it comes to used cars is that there are some very aggressive financing offers from some brands on certified pre-owned models.
I recently helped a client with a CPO A3 e-tron and while the car was on the higher end of his budget, Audi’s 1.99 APR special for certified models made the payments more in line with slightly less expensive cars that would have been subject to higher rates.
Even though some restrictions have been lifted in certain areas it’s still not super wise to be mingling for hours at a dealership, if you are doing some car shopping this holiday weekend, conduct your research ahead of time, set your budget, and make sure you get all your offers in writing before you go to the dealership.