Buying a Car During the Recession
The car customers were caught between the hammer and the anvil, because the money available to them for buying a vehicle have decreased, while the car manufacturers and dealers got into the “less costs, more profit” mode. From this black tunnel of negativity induced by the current economic situation comes a bright ray of light that hasn't been noticed by many. All the “evil” brought upon car buyers by the recession translates into two major conclusions. First, car dealers have to get rid of their inventory and increase profitability while people in the market for a car are trying to spend less. In other words, this might actually be the best time to get a good deal on the car you always wanted.
New or used?
Of course, this question will be asked no matter what kind of economic situation we live in. Truth is, the used car-market is also a little bit different in these “fewer bucks in your pocket” times. For example, let's say that you're a buyer in the look for a brand new Volkswagen Passat, but your bank credit isn't quite easy on you. You have two choices, either go for a less-costing Jetta or search for a used late-model Passat instead. OK, so we've taken care of the demand, but what about the offers?
First thing to know during an economic slowdown is that you'll find less selection on car lots. Less selection at the dealership means that you're going to be stuck with less or even no personalization on your brand new car and just get what you're being offered. Considering the “personalization factor” was the main reason you wanted to buy a new car in the first place, this advantage is somewhat decreased, so why not look for a much cheaper used one instead? Certified Pre-Owned (CPO) vehicles cost a bit more than a regular second hand car but they come with a trouble-free warranty feature and are still cheaper than a new one.
Econoboxes or gas-guzzlers?
The majority thinks this is a no-brainer. In these MadMax times of high gas prices, most people tend to look away from the big cars and focus on smaller and more fuel-efficient compacts and/or hybrids. The thing is, car manufacturers know this and most dealerships are now practically giving fullsize gas-guzzling SUVs for free just to get them off their car lot. This also means that the much more in demand fuel-sipping hybrids and the likes will get no incentives and no deals whatsoever, hence people really WANT to buy them.
In other words, you should think what's more expensive on the long run, a cheaper car known to drink more fuel or a costlier one that uses less fuel? Do your math depending on the ratio between the average number of kilometers/miles you do in a year, the sticker price and how many years do you intend to keep the car. Considering the recent explosion in discount deals on gas-guzzlers, it might actually be cheaper to buy and consequently to run a normal sedan on the cheap side than its hybrid and subsequently costlier counterpart.
Credit, leasing or cash upfront?
During an economic crisis, just about every bank or credit institution there is will overhaul its credit availability and requirements, therefore constricting the buyers' options. Most people with below-average credit will either not get the money they request or get into trouble on the long term, since they might not afford the payments.
In the case which your credit is good you can go for a longer lease but you should be careful nevertheless. The best options when buying a car during an economic slowdown might be with the cash upfront, a very short lease or with a very high down payment on a longer one. In the end, there's always the option of just using public transportation or keeping your old car until the crisis is over.