Herbert Watson began to toy with the idea of getting a new car earlier this year.
The Wilmington resident is almost 66, nearing retirement, and he and his wife no longer need two separate cars to commute to work. The couple, however, was certainly in no rush.
Then, car manufacturing plants shut down for almost two months to prevent the spread of COVID-19 and states like Pennsylvania and Delaware ordered car dealerships to close.
Though Watson’s dealer was only shuttered for a couple of days before the governor let car sales resume by appointment, it wasn’t long before he was flooded with buying and leasing incentives.
“Once we found out the deal they were getting on the [Chevrolet] Spark for the month of July and seeing what we would be saving and everything, it worked out to be a good deal, so that’s why we went with it,” said Watson, who was able to knock 12% off the sticker price of his shiny white 2020 model.
Watson left the dealership in his new car, thinking he got the best deal possible — a 100% satisfied customer.
Although that doesn’t mean cars are cheaper than they were this time last year. The most recent data from Kelley Blue Book found average new vehicle prices went up 3% in June compared to last year, largely driven by SUV and truck purchases.
But even as incentives continue to fall from record-breaking highs in April when sales plummeted, experts say consumers can still snag a well-priced car in the COVID-19 economy.
‘You can’t get better than zero’
Dealers and manufacturers rolled out the most generous incentives as states rolled out strict coronavirus mitigations efforts in March and sellers looked to clear out some of their inventory. Companies like Ford offered deals reminiscent of the Great Recession: buy a new car and get up to six months in deferred payments should your financial prospects change.
That same month, General Motors offered eligible customers 0% financing for seven years and let them defer their first four payments. Of course, buyers had to act fast, as the program was limited to a two-week run as dealerships tried to move inventory.
The deals have run the gamut and dipped since, as car sales continue to slowly rebound.
Until the first week of August, manufacturers like Hyundai are offering 0% financing for six years on certain cars, plus an additional 90 days until buyers need to make their first payment, or $2,000 in rebates.
“You can’t get better than zero,” said Rich Diver, owner of Diver Chevrolet in Wilmington where Watson got his new car.
And while low- or zero-interest financing has been around for years, Diver said he’s never seen loans applicable to so many different models for a loan life of more than four years.
Similarly, Diver said he’s never seen rebates for teachers so widely promoted. Companies like Honda have also extended $1,000 savings to first responders and health care professionals buying or leasing eligible newer models.
“All the manufacturers are very aware of what the competition is doing and they’re all very competitive with each other, which to me, the big winner in all that is the consumer,” Diver said. “There’s great products at great prices or great payments.”
According to car dealers and auto industry experts, the type of car you’re looking for, it’s popularity and whether it was (or will be) affected by shutdowns will determine your savings potential moving forward.
“I think looking at how many vehicles does a dealer have on a lot is typically an indication if you have some flexibility in negotiation,” said Goern Buss, an auto expert with Princeton-based consulting company Oliver Wyman.
Trucks, which were popular before the shutdowns as gas prices remained low and the vehicles became more fuel-efficient, could actually go for more than the manufacturer’s suggested retail price in some cases.
Tom McLaughlin and his wife Donna Lindsey weren’t shopping for a truck, but saw just how quickly certain cars were leaving the dealer firsthand.
Though they hadn’t planned to swap out their old car for at least another year, emails of low lease payments with zero down payments, and the desire to have room for their three granddaughters made them stop by the showroom last week and narrow down their picks for an SUV, which happen to be another popular category driving sales.
“This week, those two [cars] were sold,” Lindsey said. “So we knew we needed to come in if we were going to get what we wanted and get the deal we wanted by the end of the month. But we had to move quickly because the inventory is very low because of COVID.”
To deal with new car shortages, some dealers are promoting their certified pre-owned vehicles, according to Edmunds, a popular automotive research website. At the same time, the pandemic made it so people leasing cars opted to buy them, meaning fewer used cars were entering that market.
Dealerships say this means customers may be left with fewer choices. One silver lining is interest rates for used cars dropped to their lowest levels since January 2018 — an average annual rate of 7.8% this June, down from 8.6% the same time last year.
Still, while it may be tempting to buy a car right now, experts encourage people to think it through.
“I talked with a dealer yesterday who was telling me about consumers that are coming in, their credit scores are still intact … but at the end of the purchase process, they’ve described that they’re unemployed,” said Mark Gottfredson with consulting firm Bain & Company.
Gottfredson said if those customers remain unemployed, that vehicle will likely be repossessed.
A bright side not related to money
At the end of the day, all the market uncertainty will only add to your car-buying research. But one thing consumers seem to respond positively to is the way COVID-19 precautions have streamlined the process.
“It was very easy,” Lindsey said. “They did video calls with us, everything was online, we could see the cars. We could see the videos of the cars. We were able to pick out three and say, ‘Okay, these three. Let’s go take a look at them in the showroom.’”
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