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Buying a Car During the Credit Crunch

Kirstie_HKirstie_H Posts: 10,896
How has the economy affected your vehicle buying decisions and purchasing power? Are you waiting for an upswing before you buy? Or is this the perfect time to get a great price?

Let's talk about purchasing decisions, financing, and finance rates as we navigate the current credit crisis.

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  • volvomaxvolvomax Posts: 5,274
    This is really a funny market.
    You have a combination of high gas prices,and the angst that produces along w/ banks getting more selective about lending and interest rates going up.
    Plus, you have people coming back into the market who had low finance rates from banks 4-5%, and now they have to pay more.

    I've seen a lot over the last 20 yrs, but nothing quite like this.
  • "...is this the perfect time to get a great price..."

    Just bring a brown paper bag filled with 100s down to the car dealer. Just be sure to wear clean socks because the salesman will be kissing your feet.

    Don't have a bag of cash? Stay home, you shouldn't be buying anything. ;)

    2009 PT Cruiser, 2008 Eclipse, 1995 Mark VIII, 1988 GMC Van

  • corvettecorvette United StatesPosts: 4,153
    More people are keeping what they have, rather than buying anything at all...

    New car manufacturers? They're all going to miss their yearly sales targets--the only question is by how much. Unless they put up some monster incentives in the next three months, there are going to be some irate "stakeholders" (which seems to have replaced "shareholders" in the lexicon).

    The finance companies are also going to be facing a glut of lease turn-ins, with no one to buy them, as lessees balk at the residual purchase price (and balk at the new, and higher lease prices on most cars) and downgrade to something a little less expensive.

    Used car market? From what I've read here on Edmunds, there has been a slight uptick in used SUV values. I think that between the gas shortage in the southeast and the turmoil in the stock market, the SUV uptick will be more than cancelled out. 30+ MPG cars will command a premium, especially if they hail from Japan... Those are the only vehicles that most people truly "want" to buy right now. Most everything else will be sales to people who "have" to buy--lease is up, car broke down, stolen, totalled, etc... Those people will gravitate towards used models, but will still represent a smaller number of sales than is typical for the market.

    Just my $0.02...
  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,333
    Microsoft employees still pay inflated prices for their wheels in Redmond, Bellevue, & some parts of Seattle. Rancho Mirage isn't lowering their asking prices by much in the Used market. Texas and the SE seem to be a lot more economical.
  • andre1969andre1969 Posts: 22,026
    but if I did need a new car, I wonder how hard it would be to get financing these days? Last time I checked, my credit score was something like 759. I always pay my credit card in full every month. Relatively tiny mortgage. Yet, about a month ago, I applied for a Shell Mastercard, so I could get a 5% rebate on gasoline, and got declined! Their reasoning was that I had too much open credit.

    I have to admit, that I got a bit spoiled the only time I ever bought a new car. With my 2000 Intrepid, I got it for around invoice, and the term was 0.9% for 5 years. I just checked my credit union, and right now they're at 4.9% for 5 years. Or 4.64% for 36 months. Big whoop.

    I hate the idea of paying that much interest to finance a car, but at the same time, the idea of paying cash scares me too. I guess I'd rather just get into a car in $300-400 increments, rather than lock away $20K or more all at once. So I guess that kind of catch-22 thinking is going to keep me out of the market for awhile.
  • corvettecorvette United StatesPosts: 4,153
    "I guess I'd rather just get into a car in $300-400 increments, rather than lock away $20K or more all at once."

    Same here, especially since my cash buffer has dwindled in the past year.

    I got approved for a car loan at Pentagon Federal Credit Union--4.75% for up to 60 months. I think if you have good credit, you can still get a loan.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    last two car loans were at 5% or less. I wouldn't buy a car at a higher interest rate than that. Does that mean I am out of the car market for the next decade? :surprise:

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • lemkolemko Posts: 15,193
    ...I got 0% financing on my DTS. Girlfriend had 1% on her LaCrosse.
  • mattandimattandi Posts: 588
    We came into a bit of money this past winter and paid off our current car. It is 8 years old with about 120k miles on the clock. Lots of issues last year to keep it running. This year has been better.

    We would like a new car, but for the time being we are holding tight. Some poor choices, a job loss, and conscious decision to live on essentially one income has tightened our situation. We are eliminating some older debt, student loans and credit cards. Our credit is not top tier, but improving. We could pay cash for a car, but would rather not, and it doesn't serve us well right now to take out a new loan.

    We rent and would like to buy a house. We have not been in a hurry. We are closely following what is going on there. No new car loan for us until that happens. Maybe within the next few months. On the plus side, we work in the public sector in education, and that opens up a host of attractive programs.

    Credit crunch is a limiting factor, but not a prohibiting one.
  • alamocityalamocity Posts: 680
    That depends on the vehicle in question, I certainly don't see lower prices on vehicles.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    That's one thing I think we will probably see a lot less of- low interest rate promos on purchases from the automakers - if what I am reading in the papers is true.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • grbeckgrbeck Posts: 2,361
    It's my understanding that loans are still available for customers with good credit.

    From what I've read, the problem is twofold. One, customers with bad credit, or who are upside-down on their vehicles, are having trouble getting a loan. Unfortunately, more than a few auto makers depended on these customers to prop up sales.

    Two, recent economic news, plus this year's spikes in gasoline prices, have made even customers with good credit wary of buying a new vehicle.

    I think this market may just take down one of the domestics, and maybe one or two of the foreign luxury marques.
  • Does anyone know anybody who has managed to take advantage of the credit crisis and negotiate a great deal on a car? People with cash must be in a strong position at the moment.
  • lemkolemko Posts: 15,193
    When I bought my DTS last November, I came armed with three things: a stellar credit rating, a significant down payment, and a paid-off trade. The only thing better would've been a briefcase full of cash. If things were as bad then as they are now, I don't think I would've bothered going through with it at all.
  • fintailfintail Posts: 33,859
    The higher end used market in Puget Sound has collapsed...I have noticed several dealers with the same inventory for months.

    Used cars have always cost a little more here, but IMO the quality/condition is often a little better too.
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,762
    Not sure what you mean?

    I do most of the MSFT deals here and that certainly isn't the case!
  • volvomaxvolvomax Posts: 5,274
    last two car loans were at 5% or less. I wouldn't buy a car at a higher interest rate than that. Does that mean I am out of the car market for the next decade?

    Probably. Unless you want to buy a domestic.
    Or you belong to a really aggressive credit union.
  • bumpybumpy Posts: 4,435
    I've always paid cash anyway with no trade-ins, as that cuts about 95% of the potential BS out of the car-buying experience.
  • volvomaxvolvomax Posts: 5,274
    You represent a tiny minority of the car buying public.
  • joebertjoebert Posts: 22
    I am definitely more tentative to buy. It is interesting to watch the minivan market as some companies have been aggressive, and now have the 09s out, while some have been slow in dropping prices and have a large amount of 08s out.
  • I wouldn't say you're out of the market for the next decade, however if you're considering a newer auto to the household, I would suggest doing it rather soon. Rate hikes are believed to be right around the corner and the vehicles themselves are as low as they can possibly get. If I can help further... let me know. Cheers! -Jeremy- Kirkland Honda, WA
  • With rebates available and many dealers out there hurting for customer traffic, aggessive pricing is everywhere. I would still encourage use your better judgement. Don't let price be your ONLY buying motive. Resale, safety, and reliability should still be strong factors. The honda odyssey hits the mark time and time again. Now, there is "Dealer Cash" being offered and so as dealers we can become aggressive on the 2008's. As the # 2 dealer in the northwest, we have a very attractive inventory. If you need a friend on the inside, just let me know. Cheers- Jeremy. Honda of Kirkland, WA :D
  • nippononlynippononly SF Bay AreaPosts: 12,693
    I DO belong to a really aggressive credit union, so maybe there is yet a new car in my future! :-P

    I wasn't planning to be in the market for a few years anyway.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • isellhondasisellhondas Issaquah WashingtonPosts: 17,762
    A"friend" ?

    Can't advertise in these forums according to the rules.

    How about # 1 in the NW? :)
  • mattandimattandi Posts: 588
    Selling during the credit crunch

    actually they call it the credit crisis

    Local news ran a story about this a couple of weeks ago. A local BHPH magnate claimed that if they did not have their own financing available, he was certain his business would be off probably 60%. Another local new car dealer said that traffic was down a little, but sales remained strong. Claimed they were having no problems getting folks financed. :confuse:

    A BHPH lot opened up about 6 - 7 months ago near me. They loaded up their lot with SUV's and trucks. Talk about bad timing and less than sterling business acumen. I drove by yesterday and they were loading all the inventory onto trucks and a For Lease sign was out by the road.
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,762
    Andre, people like yourself that have good credit will have no problem getting a car loan today. I'm really surprised that Shell turned you down.

    Actually a 4.9% car loan is an excellent rate. You and many others got hooked by those artificial rates. When we see a zero percent rate or a rate close to that, there is always a REASON. These cars aren't selling well so they throw dollars at the interest rates to make the cars attractive.

    The caution here is the fact that cars that are unpopular as new cars typically have horrible resale down the road so the dollars you "save" during the course of the loan you will lose later when you sell or trade the car in.
  • exb0exb0 Posts: 539
    So, friend, how much “dealer cash” do you have on 08 Odysseys? :)
  • dave8697dave8697 Posts: 1,498
    do you know abpout the new federal program for first time home buyers? It went into effect July 1st and gives you a 15 year $7500 interest free loan towards a down payment.
  • duke23duke23 Posts: 488
    isellhonda wrote:
    "Actually a 4.9% car loan is an excellent rate. You and many others got hooked by those artificial rates. When we see a zero percent rate or a rate close to that, there is always a REASON. These cars aren't selling well so they throw dollars at the interest rates to make the cars attractive. "
    It really is, historically it is cheap Every word of isells's post is truth. Ot, but not really, we all have 529's, Ira's and 401-k's so the Wall St. vs Main St argument is rather lame. Was Wall St . guilty ? Yes. Can they make you wish you gave them the money ? Yes again. Hank Paulson was the former ceo of Goldman Sachs. The plan is crappy, it will be porked up, they cannot help themselves, but lest consumer confidence hit the skids, pass and rescind at leisure.
    The preceding was a non-paid non-political endorsement from duke, duke agree's with his statements obviously since he wrote it.
  • graphicguygraphicguy SW OhioPosts: 7,275
    duke....this was a long time coming. 72 month loans...financing any warm body that walked into the showroom....rolling thousands of negative equity from an old car, into a new sled.

    Some of it is the consumer's fault. Some of it is the financial institutions fault. Some of it is the dealer's fault. I don't expect any dealer's sales person to be someone's "credit counselor". They're there to sell cars. Not to spoon feed a customer on the ill-advised transactions they're about to make.

    But, at some point, someone has to say...."hey, this is a risk we don't want to take".

    The credit institutions are finally saying that right now. It's a shame that someone has to be forced to see economic reality, but we're now at that point.

    The last stat I saw about the approval of new car loans has the dealerships saying they're getting approval for about 60% of applicants. That's down a whopping 30% from where they were a few months ago (90%). I expect that number to go even lower.
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