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New Car Incentives May Complicate Auto Industry Recovery

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New Car Incentives May Complicate Auto Industry Recovery

Expect that 2011 will prove to be a terrific year to buy a new car. Incentives are up, automakers are competing for market share and financing has proven easier to get. The auto industry is far from returning to peak levels seen as recently as 2007, but the market has improved considerably. Importantly, major car manufacturers are confident and are working hard to put you behind the wheel of a new car.

All of this means one thing: when you’re shopping for a new car, do your homework to ensure you’re receiving the best deal possible. Even if you’re loyal to one brand, for instance Chevrolet, scout out what several dealers are offering in your area to find the best deal possible. Consider other discounts you may be able to claim including military, college and customer loyalty discounts. If in doubt about what you’re eligible for, ask the dealer.

Big Incentives

That automakers are offering discounts is a given. Figure that at any time of the year there are some incentives being offered although companies such as General Motors are generous and others, including Hyundai, are stingy. The latter company contends that its cars are already discounted when placed on dealer lots, something most analysts agree is true. Nevertheless, if you’re wanting to buy that slow selling Hyundai Azera, you have some negotiating room with the price.

Incentives going forward in 2011 will involve the usual: slow selling models and older inventory as well as the unusual: hot selling models where the manufacturer is trying to increase market share. An example of the former would be the aged Buick Lucerne. An example of the latter would be the Chevrolet Malibu. Both models are being discounted now and likely for the remainder of 2011.

Discounts currently being offered include financing, with GM now offering zero percent financing on some models and rebates, something you can find on select Ford, Toyota, Volkswagen, Dodge and other brands. In some cases, the dealer may offer you a fat incentive or cut rate financing and therein lies the dilemma: do you take the discount or agree to the financing? If you’re paying cash, then of course you’ll take the money. But, if you’re like most consumers who need an auto loan, then you’ll have to weigh the two options.

Calculated Savings

The best approach here is to get a calculator and figure out how much it would cost you to get a new car loan on your own (use an online one such as found at ). For example, if your credit union is charging 5 percent interest for 48 months on $20,000 borrowed, then you’ll pay $460.59 per month. However, if you go with zero percent financing, your payment is about $416.00 per month, a difference of $44. Over 48 months your savings would be $2,112 with dealer financing. If you’re being offered a $3,000 rebate, then take the rebate and arrange for financing with your credit union. The net savings here is $888.

Further savings can be realized by car shoppers who negotiate a lower price before incentives kick in. That $29,500 full size sedan might be had for $26,000. Take off the $3,000 rebate and your price is down to $23,000 – much lower than what it says on the sticker, but better for your wallet.