Meltdown 101: Why it's a good time to buy a car
Associated Press
Kimberly S. Johnson
February 26, 2009
DETROIT—
GM and Chrysler have received financial help from the government, and they're asking for more. But the only way car companies will be able to turn their fortunes around is by getting consumers to return to dealerships and purchase new cars.
What are the government, automakers and dealers doing to try to nudge weary customers back to showrooms?
Here are some questions and answers about buying a car during this tumultuous time for the auto industry.
Q: Is now a good time to buy a car? Can I get good deal?
A: Yes and Yes. Dealers are anxious to make sales to bring in cash and move inventory off their lots. Many automakers are offering employee pricing, which in some cases shaves as much as 10 percent off the price. There are also additional incentives and rebates buyers can take advantage of, varying from manufacturer to manufacturer and dealer to dealer.
Q: Is there aid in the stimulus bill if I decide to buy a new car? And would I have to purchase an American-made vehicle?
A: The stimulus bill gives consumers a state sales tax and excise tax deduction on new cars purchased before the end of 2009. This benefit does not apply to single filers making more than $150,000 or joint filers making more than $250,000.
A car buyer's savings will vary depending on financing terms, state and local sales tax rates and the buyer's income. All car makes and models are eligible for the savings.
Q: Are there additional tax rebates for hybrid car purchases?
A: Thanks to the stimulus, you can get a tax credit of up to $7,500 if you buy a plug-in hybrid vehicle or get some sort of electric vehicle before 2012.
Q: A German government program offers cash to consumers who scrap aging cars and buy new ones. Are there plans for a similar offer in the United States?
A: Earlier this week, GM division Adam Opel GmbH said it would introduce extra shifts at a German plant to meet a jump in demand for its Corsa model, which it attributed to the German government's offer of the euro2,500 ($3,200) bonus for new car buyers.
The effort to boost the ailing auto industry is part of Germany's euro50 billion economic stimulus package.
Legislation proposing a national "scrappage" program like this was introduced in the U.S. Senate in January and has since been referred to the Senate Energy and Natural Resources Committee, where it awaits action. Companion legislation also has been introduced in the U.S. House.
Under the Senate "Cash for Clunkers" proposal, drivers could receive credits of $2,500 to $4,500 for scrapping a vehicle that gets less than 18 mpg. The credits could be used toward a more fuel-efficient vehicle or public transit fares.
Q: I have enough money to buy a car; will I be able to get financing?
A: Even those with the most handsome credit scores might run into some difficulties.
"We have more customers in our showrooms than we can arrange credit for," said Mike Jackson, chief executive officer of AutoNation Inc., the country's largest chain of auto retailers. "We have prime customers who have excellent credit scores, good jobs and good down payments and can't get credit."
The Fort Lauderdale, Fla.- based company operates about 245 used and new car dealerships across 16 states, representing both U.S. and foreign automakers.
Jackson said banks have tightened the reins on the amount of money they're willing to lend. When credit flowed freely, dealers would have to contact two or three banks to secure financing for customers. "Today we have to approach six, seven or eight banks," he said.
It's unclear whether millions of dollars given to the financing arms of GM and Chrysler have helped make financing more readily available.
Credit unions are becoming a good option for consumers. Last month, the national credit union group CUcorp expanded its "Invest in America" program, which is expected to give 90 million members of nearly 8,000 credit unions potential access to low-interest loans for GM and Chrysler vehicles.
Q: Can I lease a car?
A: It depends on the brand. Leasing is virtually nonexistent now, Jackson said, with the exclusion of some foreign and luxury models.
Q: When will the auto market get better?
A: No one has a crystal ball. But automakers hope there will be a turnaround during the second half of the year, and that 2010 will be better.
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Associated Press Auto Writer Bree Fowler in New York and AP Writer Ken Thomas in Washington contributed to this report.
