More Autos Stories
Great articles from CNN Money:
You've seen the headlines: automakers on the brink, sales slowing to a crawl, credit tighter than ever. Yet amid all of this gloom there's a silver lining: deals of a lifetime. But to snag one, you have to learn how to navigate today's uncharted market.
Rule 1 - You Can Find a Deal Anywhere,
and We Mean Anywhere
You can hardly escape the grim news surrounding the car industry: an 11th-hour federal loan package to help General Motors and Chrysler survive to the new year, frugal consumers shying away from big-ticket purchases - especially four-wheeled ones - and tighter credit making it tougher for the few willing buyers to borrow. November auto sales plunged 37% from a year earlier, according to Autodata, a sales tracking firm. Even after production cutbacks, ports are stacked high with new cars that can't fit on dealer lots.
Where there's an inventory glut, there's a fire sale, and that's great news for you. Desperate car makers are begging you to buy with extraordinary deals, from 0% loans to more than $7,000 cash back. "The level of incentives is unprecedented," says Jack Nerad, a market analyst at car-price publisher Kelley Blue Book. "It is almost mind boggling."
Rebates and low-interest loans are nothing new, of course. What's different today is how large they are - and how widespread. Last summer, with gas at $4 a gallon, the incentives were limited mainly to gas-guzzling SUVs and trucks. Now you'll find deals on small cars too.
Even foreign car makers that rarely, if ever, offer such sweeteners have jumped in, although their discounts aren't as deep as Detroit's. You could recently get $1,750 cash back on a Nissan Altima and 1% financing on virtually any Acura. "Toyota just hasn't had to use incentives, but in November they had record incentives," says Philip Reed of Edmunds.com, a car information website. Want a fuel-efficient Corolla, one of the best-selling cars in America? Toyota has been knocking as much as $1,500 off the price.
Today's deals aren't limited merely to incentives. You can and should negotiate hard. Before you shop, research the car's market price to see what the car is really going for. And find out what loan rate you qualify for at a bank or credit union. With good credit you wield vast power in the negotiations, says analyst Tom Libby of J.D. Power & Associates.
Finally, when deciding between cash back or a low-rate loan, consider your time frame. Cash will usually beat cheap interest if you plan to get rid of the car or pay off the loan within three years. To do the math, use the calculator on Walletpop.
Top 20 Selling Vehicles
Sales data shown is of top 20 selling cars and trucks as compiled by Autodata Corporation.
Rule 2 - Lenders Are Playing Tough, But Only With Some Borrowers (hint: not you)
The credit crisis has hit auto loans too. "The availability of credit is worse than it was six months ago," says Libby. GMAC, for example, no longer lends to borrowers with subprime credit.
But as long as you have good credit, you can still borrow to buy a car. Today's median credit score is 720, and the auto-loan world looks different depending on which side of that line you're on. With a score below 720, you'll find that no-money-down deals are hard to come by. You'll likely need to pony up at least 10% to 20% of the price, says Jesse Toprak of Edmunds.com.
But with a score above 720, tighter lending rules simply mean that you could end up in a shorter loan than you might have a year ago. Lenders are pushing loans no longer than five years. Six- and seven-year loans are now tougher for all borrowers to find - and more expensive if you do get one (you'll pay as much as a percentage point more vs. the five-year rate). The upside: You'll pay less interest overall, and you're less likely to owe more than the car is worth when you sell.
Finally, as a good credit risk, you'll qualify for an interest rate as low as 6% on a five-year bank loan and less than 5% at some credit unions.
