People are wary of buying a new car during this shaky economy and who can really blame them? There are many questions out there and very few answers. For instance, will GM, Ford or Chrysler be around in three to five years? How tough is it to secure an auto loan right now? How will buyers be able to cover their car payments if they suddenly lose their job? And are there any advantages to buying a new car now?
Our first bit of advice to you is this—take a deep breath and relax. Getting caught up in all the gloom and doom and letting negative thoughts about purchasing a new vehicle creep into your psyche will only stress you out.
I have many friends who have decided to ignore this recession and focus on maintaining a positive attitude. And most of them are succeeding in their jobs. I mean, there’s nothing we can do about it anyway, right? The world doesn’t stop rotating when the economy goes bad, so don’t let it taint your thinking process, especially when you’re doing something as important as buying a new car.
So let’s try to answer these very pertinent questions one by one:
Will the Big 3 survive this downturn?
There’s no doubt that the Big 3 are in trouble. U.S. car sales peaked in 2000 with a record 17.4 million vehicles, and G.M., Ford, and Chrysler had two-thirds of the market. This year’s sales will total less than 15 million cars, the lowest number since 1994, says automotive research firm J.D. Power and Associates.
Since 2000 alone, the three Detroit companies have shed 269,440 employees, nearly a third of their combined total, and they’re still issuing pink slips in bulk. In the past three years, they have racked up more than $67 billion in losses, a number that would be larger if Chrysler were included for all of 2007. (Since Chrysler was bought by private equity powerhouse Cerberus last summer, its financials are no longer public.) The automotive press used to refer to the U.S. carmakers as the Big Three, but once Toyota surpassed Ford and Chrysler domestically, a new name was needed. The Little Three? The Big 2.5? They’re now simply called the Detroit Three.
Will they fold? Most certainly not. What is more likely to happen is a downsizing followed by a possible merger. But rest assured—they’re not going anywhere. One of the main problems is that they opened too many new dealerships and became fat and happy. Now they have to think about being lean and mean. This is more of a cycle and a correction than anything else. Sure, more of their dealerships will undoubtedly be closing their doors in 2009. But, in the end, a new car buyer can rest assured that the Big 3 will be around—in at least one form or another—for a long time to come.
How hard is it to secure a loan right now for a new car?
I won’t lie to you; it’s tougher than ever to get a car loan today. Dealers are being extremely careful about who they’re approving. A credit score in the 700’s used to make a car loan a slam dunk, but not anymore. Many people are being rejected, but there is good news.
Dealers are starting to loosen up a little. It just takes a little more research and care nowadays to secure a new car loan. Once you've decided on the amount you need, start looking at different banks and lenders. Don’t start filling out applications until you’ve completed this step. If you’re declined multiple times, it will have a negative effect on your credit rating. Try to use a company that searches for loans for you. Loans are out there, you just have to be proactive in locating them.
If you can’t get a loan by yourself, consider getting help from a relative or family member. There’s no shame in needing a co-signer, especially in a recession.
How will people make their car payments if they lose their job?
With layoffs becoming the norm rather than the exception in peoples’ lives, this is a very pertinent question that is a real concern for many potential new car buyers.
If you’re in a lease situation and you lose your job, you can try to find someone to take over the lease. There are many companies that can assist you in this, including www.swapalease.com. Usually, you’ll have to take some sort of a financial hit in the process, but it’s better than completely defaulting on the lease and seriously damaging your credit.
If you buy a new car and then can’t make your payments, the best advice I can give you is to attempt and re-finance your car loan. Dealers know better than anyone that money can tighten up when pink slips are issued, so they will in many cases try to work with you. Establishing a lower monthly payment could be the relief you’re looking for and re-financing is the best solution.
What are the advantages of buying a new car now?
If you have the money and can keep your job, this is the ideal time to buy a new vehicle, as long as it’s within your financial means. Dealers are clamoring for your business and you’re in the driver’s seat when it comes to making a purchase.
My advice here is to haggle, shop price and look for dealers that are offering “value-added” propositions. Search for things like extended warranties, free extras and accessories and deals on service and maintenance. If you get lucky and work hard at finding a good deal, you may be able to save as much as 20-35% off the sticker price.
But, buyer beware—some dealers are using this rocky economy to scam novice buyers. Make sure you get everything in writing and don’t let an aggressive salesperson corral you into a deal that isn’t fair or equitable. Read the small print and don’t get sucked into add-ons that are overpriced and under-performing. When I leased my Infiniti, I made some mistakes that I now regret, like buying wheel and tire insurance that isn’t worth the paper it’s written on. Car dealers make a lot of money on these extras and will push to get them. Don’t buy into it.
Hopefully you can use this advice to get a new car if you’re in the market for one. When a door closes for one person, it usually opens for someone else. Play the game, do your due diligence and try to anticipate problems down the road and you’ll be able to drive away with a new vehicle that you can afford and hopefully make the payments on for many years to come.