Is now a good time to buy a car?
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Four questions to help you decide
If life is a highway, 2020 is the year the road signs blew down and your car’s navigation system started voicing directions in a foreign language.
In these COVID-complicated days, it can be difficult to gauge the simplest of decisions, let alone whether it’s a good time to buy a car. The answer may be yes, or it may be no. Addressing these four questions will help pave your pathway with clarity and confidence.
- Will car prices go down in 2020?
- What are the best car deals right now?
- Are you financing the purchase of the car?
- Can you afford to buy a car right now?
Will car prices go down in 2020?
There is a common presumption floating around that the pandemic has scared off buyers, forcing sellers to slash prices. Don’t believe it.
The auto market is actually humming along in the Spokane, North Idaho, Wenatchee, and Tri-Cities markets, said Numerica Credit Union AVP of Dealer Services Jeremy Wheeler.
That’s not to say 2020 hasn’t come with its unique fluctuations. The early weeks of COVID stalled business, but then stimulus checks and a reopening economy caused a buying frenzy that all but wiped out new car inventory. Manufacturers are ramping back up, but in the meantime used cars are trending toward a seller’s market.
“In some cases the value of used cars is going up right now because there’s low new car inventory,” Wheeler said. “When new cars come out that will change, but we don’t know when that’s going to be.”
While prices may not be going down across the board in 2020, promotions are likely as inventory is rebuilt.
What are the best car deals right now?
Now more than ever, the answer to this question is changing by the minute. The key: Stay informed, and be patient for the deal to surface.
Perhaps no corner of the industry has epitomized this as much in 2020 as RVs, motorcycles, and boats, which have benefitted from stimulus checks and a stay-close-to-home mentality.
“Toys are being purchased like crazy right now,” Wheeler said. “The RV business is through the roof. Since people aren’t flying somewhere for vacation, they are buying RVs and going camping. It’s shifting.”
While in some cases the inventory is tapped out, in others there are great deals. For example, people whose work was impacted by COVID are parting with toys as well as cars, often at discount prices. Your job is to know the ideal price point for both your budget and target vehicle and to be ready when opportunity arrives.
“There are deals out there,” Wheeler said. “It could be with a dealer; it could be with a private party. Take time to look for deals.”
Are you financing the purchase of the car?
Savings isn’t just about money off of a sticker price. With rates at near-historic lows, saving money on interest payments is a real consideration in 2020. The current market offers incredible opportunity for those looking to finance a vehicle purchase.
That said, it’s important to utilize tools like Numerica’s auto loan calculator to get a true sense of the best long-term solution for you. For instance, some dealerships are offering 0% deals in 2020, but a deal like that often means you are paying closer to sticker price.
“You may be getting that offer instead of a rebate,” Wheeler said. “It may be a good idea to take the money off and finance it at a low interest rate instead of taking the 0% deal.”
As a general rule, be cautious of structuring your loan to get the lowest monthly payments. Too much emphasis on lowering your monthly payment could cost you more in interest and often leads you to take out a longer loan. If you do choose lower payments but can afford more, use those savings to invest in something that will give you a good rate of return.
Can you afford to buy a car right now?
If 2020 had a middle name, it might be “uncertainty.” As much as ever, it’s important to evaluate both your level of — and tolerance for — risk. Is the industry you rely on for your income facing COVID-related hardships that could result in changes to your income or job loss?
“I keep going back to uncertainty,” Wheeler said. “What’s going to happen in six months or a year. We don’t know. Will you still be able to afford that payment? We recommend living within your means.”
This is not to say you should be paralyzed by pandemic ambiguity. On the contrary! There is power in clarity, and that can be achieved through an honest and organized review of your financial situation.
One of the things to know before buying a car is how your car payment — including principal, interest, and insurance — fits into your budget. (Hint: It shouldn’t gobble up more than 10 to 15% of your monthly income.)
Information like this is power — power to either drive home a car purchase today or prepare for when the time is right.