New car incentives are high, used car values are down, and all of this could change next week.
That’s what seems to be the message in the upside down that is car shopping right now. As automakers and the market adjust to effects from the coronavirus pandemic, there’s no clear, sustained forecast from industry experts aside from fewer new car sales.
But what does that mean for car shoppers?
It is a good time to buy new: With most automakers offering steep financing incentives of 0% interest for 72 or 84 months, as well as deferred payments for the first three to six months on new car purchases, this is a good time to get a new vehicle at no extra financing charge.
New car sales were deemed an essential business last week by the Department for Homeland Security, and many dealerships are taking extraordinary measures to not only move metal but make consumers feel safe. Online pricing, electronic paperwork, and home deliveries of new cars might not be a temporary trend.
It is not a good time to buy new if you’re relying on a trade-in: Used car prices are down because wholesale prices are down based on what dealers are paying in the private auction business, which is starting to reopen in certain areas after more than a month of being shuttered, The Detroit Free Press reported. Those auction prices establish what dealers pay for your trade-in, and right now, with wholesale used car prices down 12%, they’re not paying as much as they were before the pandemic. If you can hold onto your used car for a new teen driver in the family, or can wait to sell it on the private market once the used car market stabilizes, that would most likely be better than a trade-in right now.
It is a good time to buy used, for the most part: Used car prices are down 2%, according to The Detroit Free Press, and they could go lower. An anticipated one million off-lease cars that are up to three years old are coming back to dealer lots in the next few months, rental car companies are selling off inventory with travel suspended, and the incentives on new cars are hard to pass up. All of this, as well as the general economic uncertainty, is causing less demand for used cars. The longer used cars sit on lots, the more dealers will discount them to clear them out.
The economic uncertainty means that assessing value on used cars comes down to timing. It is unclear if it’s better to buy a used car now, or in a month or two, when prices could fall even more. That’s the tricky part of all of this: the unknowable timeline and whatever the new normal will be once at-home restrictions lift and the economy is running on all cylinders again.
Automakers and dealers are ready to get back to business, with market indicators showing signs of recovery. Automotive News reported three consecutive weeks of retail sales since the last week in March, suggesting the economic hit might not be as severe or prolonged for the auto industry. Automakers such as Toyota, Volkswagen, and FCA, among others, are planning to gradually resume production in the next week, just in time for the historically robust car-shopping month of May.
Whatever happens in the near future, one thing is clear: the new car deal of a lifetime won’t last long.