[March 6, 2009] Despite unprecedented car-buying incentives, more people are keeping their cars longer, either unable (or uncertain about their ability) to afford a new one, or sitting tight until the economic storm passes. Whether you’re buying or keeping, be sure to consider the following:
If you are in the market to buy a new car, this could very well be the best time ever to do so. But, you do still need to exercise what we’d consider to be “normal” levels of caution and you also need to be mindful of many new dangers that could be present. Here are some pointers you might be wise to consider:
Update [03|23|2009] See the Jalopnik article "New Cars Now Cheaper Than Used Cars" for more information about today's unusual & unprecedented pricing & value of some new & used models.
1. Great used cars, crossovers, SUVs and trucks are in relatively short supply. Those who are not buying new vehicles, are not providing the usual supply of used models that were, as recently as a year ago, in good supply.
2. Given today’s far more cautious approach to spending, make sure the new car, crossover, SUV or truck you buy is really what you need. There’s no point in locking yourself into something that might not serve you (and your needs) for a few years. Update [03|17|2009] See Car and Driver magazine's advice on new car selection by reading their "What's The Right New Vehicle For Me?" feature.
3. Don’t let “unbeatable” incentives draw you into buying a vehicle that’s worth even less than the great deal you thought you got. Incentives have always pushed vehicle values down. You’ll do yourself no favors taking advantage of, for example, a “$10,000 Off!” incentive, if the vehicle is worth $15,000 less the instant you drive it off the lot. Stick with reliable, trusted brands and models, ones that have always stood above the crowd, ones that will serve you well, and well into the future.
4. Don’t be influenced by “free maintenance” promotions either. Maintenance costs on most new vehicles are usually fairly low and reasonable. While it may sound like a good deal, you may find yourself – your vehicle – “in need” of “extra” work when it’s in for scheduled maintenance. (Service departments have always been big money-makers for most dealerships. Now that the sales departments are suffering, there’s even more pressure for service departments to produce more revenue.)
5. Stay clear of brands whose futures are uncertain, no matter how tempting their incentives might be. If nothing else, your vehicles resale value will certainly drop sharply if its nameplate disappears. Beyond that – since we’ve never experienced the sort of economic uncertainty present today – no one can be certain whether or not parts will be available long-term, or whether or not there will remain service departments able and open to perform (free) warranty work. Stick with brands that are not in jeopardy of disappearing.
6. Check with your accountant or tax-preparer to see if any of the tax breaks and incentives on new purchases can work to your advantage. It appears that sales tax paid on new vehicles (purchased through December 31, 2009) is now deductable, and there are larger tax breaks and credits available for certain vehicles, particularly high-efficiency models like hybrids.
7. Be mindful of fuel economy as well. Even though gas prices are relatively reasonable today, many predict that prices will eventually rise again (once the world’s economy begins to rebound, resulting in increased demand for a commodity in relatively short supply). It may not cost you much to fill up a gas-guzzler today, but it one day surely will (and may be difficult to sell when gas prices rise again).
Keeping your current car, crossover, SUV or truck may very well be a safe bet these days, but you should take an “active,” rather than “passive,” approach:
1. Make sure that you stay on top of all regularly scheduled maintenance. Not just the usual oil & filter changes, but everything. Many vehicles require more significant scheduled maintenance at intervals of every 15,000 to 20,000 miles or so. Make sure you stay current on these so that you can avoid the risk of voiding warranties and/or damage that could result in more costly repairs later or, even worse, a drop in value far more than what you’ve saved.
2. Think twice about keeping a brand in jeopardy. While we hate adding more uncertainty about any manufacturer’s future, risking pushing any manufacturer out of business, we just don’t know what will happen to existing products if their brands go away. If you simply cannot afford to trade, or are too uncertain about your own future, by all means, keep your vehicle until “better days.” But, if you’re “on the fence” – in a position to trade, but exercising caution until the economy settles – you may be better off “escaping” from a brand in jeopardy sooner, rather than later. It’s a tough call, but it’s better to be safe (today) than sorry (tomorrow)?