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Buying a Car During the Credit Crunch
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.
Let's talk about purchasing decisions, financing, and finance rates as we navigate the current credit crisis.
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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.
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.
2019 Kia Soul+, 2015 Mustang GT, 2013 Ford F-150, 2000 Chrysler Sebring convertible
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...
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.
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.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
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.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
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.
Used cars have always cost a little more here, but IMO the quality/condition is often a little better too.
I do most of the MSFT deals here and that certainly isn't the case!
Probably. Unless you want to buy a domestic.
Or you belong to a really aggressive credit union.
I wasn't planning to be in the market for a few years anyway.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Can't advertise in these forums according to the rules.
How about # 1 in the NW?
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.
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.
"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.
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.
Other parts of the country are FAR worse off!
Upside down buyers. Ones without home equity who bought vehicles with the wrong gas mileage. These values dropped big when gas went up. They can't buy now because they owe too much. Ones who have a little equity are not going to lock in $15k of depreciation on a vehicle with 30k miles on it so they can get a better mileage car.
The potential future job losers. People will lose jobs due to to crunch and collapse. These folk are not in the new car market.
the american auto industry workers. These folk no longer exist. Living on unemployment doesn't sell cars.
There will be good car prices for the next few years due to lack of customers. How GM and Ford can survive I can't say. Most people no longer worry if a [non-permissible content removed] car is 1% better quality than the American model. They are worried about whether we are going into a depression and if buying the [non-permissible content removed] car could contribute to the fall. If the big 2 go under, will Japan have the market cornered and be able to double their profits when the recession ends?
These things happened to SOME people. Most people were smarter than that.
Also, it's Japanese cars, not the term you used that many people find offensive.
From an article recently in the NYT Credit crunch / auto industry
Quote
The squeeze is particularly severe for customers with less-than-stellar credit scores who need subprime loans at higher interest rates.
While 67 percent of those consumers were approved for loans in 2007, only 22 percent are getting them this year, according to CNW.
“The subprime market has, for all intents and purposes, dried up,” said Mr. Spinella.
Automakers have already experienced a drastic drop in sales of larger vehicles like pickups and sport utility vehicles because of gas prices that hit $4 a gallon this spring.
But Mark LaNeve, head of North American sales for General Motors, estimates that G.M. is losing 10,000 to 12,000 sales a month because of tighter lending practices.
“It’s a bigger problem than $4-a-gallon gas,” said James Press, a Chrysler vice chairman. “We have buyers coming in, but they can’t get a loan.” Unquote
OH REALLY? ... Mr. I-SELL-HONDAS. :P
I guess you'll be wanting to change your username then? How about jipmyhero?
Granted, that is in a part of the country where domestics haven't sold too well to begin with. Makes you wonder if the Detroit 3 (well, Detroit 2.8) aren't perhaps deliberately trying to reduce the number of dealerships. Or, at the very least, aren't shedding too many tears over the dealerships that are closing.
Of course, that puts lots of employees out of work. With all the scorn heaped upon the Bill Heard group for its shady practices, people worked at those dealerships. People with families, and mortgages, and health care issues, and other obligations - they are now all out of work, trying to make ends meet in a tough job market.
I know Chrysler just increased the floorplan charge for their dealers.
I think each Buick dealership sells less than 6 new cars per month on average. There just aren't enough Lemko's to go around!
I think it's gonna get worse before it gets better.
michaell wrote:
"I think it's gonna get worse before it gets better. " Well the Gallup poll agrees with you.
Despite not having yet the first declining quarter of lesser gnp, 33% believe we are in a depression, not the r word. 73% believe things will get worse before they get better. I hope your sales stay strong , but it's a severe credit crunch right now.Senator Harry Reid made a comment today that a large insurance company with a household name, is on the verge of bankruptcy. Every insurance company, even those that only sell life insurance took it badly today. Credit is frozen, commercial paper has broken down and tax free money market funds are yielding over 5% . Pass it, you idiot rebel Republicans. Your Newt Gingrich moment didn't even serve Newt very well. You know all those US dollars our foreign " friends " are holding ?
It's in US short term interest bearing debt. Let's get them scared that the US financial system is breaking down and after they dump it finance it ourselves. New Edmunds column, How do 15 %car loans affect you ? Wall St., Main street, I have deliberately mis-spelled disgustiated.
Angst= gone, disgust = unequivocal, congress = corrupt. Best of luck dealers .
You don't get out much, do you?
2019 Kia Soul+, 2015 Mustang GT, 2013 Ford F-150, 2000 Chrysler Sebring convertible
A RECESSION is when your neighbor loses his job...a DEPRESSION is when you lose yours.
2019 Kia Soul+, 2015 Mustang GT, 2013 Ford F-150, 2000 Chrysler Sebring convertible
Ain't that the truth! Actually, is there a "real" definition for a depression, as there is for a recession? For example, a recession is supposed to be two consecutive quarters of negative growth.
That's the textbook definition. Whether we're actually in one at any given time depends on how much faith you put in the government's economic numbers.
They say we're not in a recession. They also say that inflation is 4%. If you believe that, I have a trillion-dollar "rescue" bill to sell you.
http://online.wsj.com/article/SB122298565927399855.html?mod=googlenews_wsj
Those dollars have to come from somewhere.