Want to buying a car these days? It's hard to deny that it's a buyer's market. Automakers are offering record cash incentives and attractive financing deals of as low as 0%. However, as good as the deals on those '09 models may seem now, it may pay to wait for the automakers 2010 lineup to hit the lots.
Visting the New York International Auto Show — which opens to the public Friday — to see the automakers' latest lineup of low-priced, fuel-efficient vehicles, some of which carry price tags of below $14,000. But the low retail prices on these cars are just the beginning.
Thanks to the stimulus plan, car buyers can deduct state and local sales tax on vehicles worth up to $49,500, netting some consumers who buy a bargain ride as much as $600 in savings.
Then there are the individual savings. Ford's Fusion, for example, still qualifies for a hybrid tax credit of $1,700. And Kia is already offering 0% financing for up to 36 months on its 2010 Soul; while Nissan is offering recent graduates a $500 discount on its boxy-shaped Cube.
Here are some of the least expensive cars of the 2010 lineup and breakdown of the savings you could reap:
1) 2010 Toyota Prius: A New Twist on an Old Hybrid Favorite.
Base price: $23,500 (estimated*)
MPG: 51 city/ 48 highway
Arrival: Not disclosed. Analysts estimate April or May
Toyota added a little more power and several cutting-edge options to the latest version of its popular hybrid — without hiking the sticker price too much higher (the base price on last year's model was $22,000). You'll have to pay extra for the solar-paneled roof that runs interior cooling fans when the vehicle is parked in the sun and a park-assist feature that parks the car on its own. But you may be able to offset some of those extra costs with the money you'll save on gas (the Prius offers some of the best gas mileage around).
2) 2010 Kia Soul: Quirky Style, Bargain Price
Base price: $13,995
MPG: 26 city/ 31 highway
Arrival: Already available
Targeting young drivers, Kia's Soul is one of the least expensive cars in the auto industry's 2010 lineup. And for those who buy soon, the Soul will be even cheaper: Through May 4, buyers are eligible for promotional financing of as low as 0% for 36 months. The quirky design makes it look like a shrunken SUV, but luckily for drivers it doesn't guzzle gas like one. The Soul gets an average of 29 miles per gallon.
3) 2010 Hyundai Genesis: A Cheaper Coupe for Cash-Conscious Consumers
Base price: $22,000
MPG: 21 city/30 highway
Arrival: Already available
The Genesis sedan was a hit with car experts. (In January, it was named North American Car of the Year at the North American International Auto Show in Detoit.) Now Hyundai is hoping its sporty coupe version, which carries a price tag that's $10,000 cheaper than the sedan, will be just as popular with cash-strapped consumers. Another added bonus: Hyundai was the first automaker to offer a layoff protection plan, allowing buyers to return a leased or purchased vehicle should they get laid off. The plan covers up to $7,500 in money owed to the financing company.
4) 2010 Ford Fusion Hybrid: Last Call for a Hefty Hybrid Tax Break
Base price: $27,270
MPG: 41 city / 36 highway
Arrival: Already available
Ford's Fusion hybrid may be the last opportunity for car shoppers to take advantage of a federal tax credit on hybrid cars that has already been phased out entirely for other models like the Prius. Those who buy the Fusion before September 30 receive a $1,700 credit, bringing the Fusion's price tag to $25,000. Don't forget to tack on fuel savings — the company claims the Fusion can drive up to 700 miles on a single tank of gas.
5) 2010 Honda Insight LX: Looks Like a Prius, But Isn't Priced Like One
Base price: $19,800
MPG: 40 city / 43 highway
Arrival: Already available
Honda’s latest hybrid sedan looks very similar to the popular Prius, but there’s a big difference in price: The Insight’s base price is roughly $3,700 less. Of course, there are tradeoffs. At an average of 41 miles per gallon, the Insight is less fuel-efficient than the Prius. That's because its engine is always on, even when the car is running on electric power.
6) 2009 Nissan Cube: Giving Recent Grads a Helping Hand
Base price: $13,990
MPG: Not available
Arrival: May
Nissan is hoping this odd-looking boxy car will be a hit with young drivers much like Toyota's Scion xB before it. However, Nissan's latest offering is about $1,760 cheaper. Through June 30, recent graduates can get $500 in cash incentives. Nissan says it also plans to offer special financing deals after the Cube reaches dealerships later this spring.
Incentives Entice Car Buyers to Dealers
Auto manufacturers and dealers are promising you the world right now in an effort to restart the industry's engine.
They'll make your car payments if you lose your job. They'll give you an interest-free loan. Even the federal government is getting into the game with tax breaks and promises to cover repair warranties if automakers go bankrupt.
So is now a good time to throw caution to the recessionary winds and buy? Many consumer experts think so - as long as you can afford it and do your homework.
"It's a unique moment in time. There's a great selection, and the dealers are hungry to make deals," said Jeff Bartlett, deputy editor at ConsumerReports.org.
While Congress is reviewing several "cash for clunkers" proposals, which would give consumers credit for trading in their old ride for a new one, auto-industry expert Jesse Toprak warns those who wait for such a bill to pass might miss the on ramp.
"There's going to be a lot of activity and the new car you want may be gone," said Toprak, senior analyst with Edmunds.com, which compiles and publishes automotive information.
But even those bullish on buying warn that great deals don't always equal wise purchases. Special offers may carry heavy restrictions or be on poor-performing vehicles that will cost you more in the long run.
Both Edmunds.com and Consumer Reports offer "best value" rankings that plug in multiple factors over five years of ownership: purchase price, fuel economy, resale value, repair history and others. Financial incentives also may prove too paltry to warrant shouldering new car payments.
For example: Floridians, who pay no state income tax, for years have been able to take an income tax deduction for sales tax paid on vehicle purchases. Congress recently passed legislation granting a similar break to taxpayers nationwide, although the federal benefit applies only to new autos purchased between Feb. 16 and the end of the year.
Instead of being driven by deals, the experts advise first looking at your finances to determine if you comfortably can afford car payments.
If so, set a budget and determine exactly what kind of car will best fit your needs, said Eric Hoffman, spokesman for Americans Well-informed on Automobile Economics (AWARE), an industry group that educates consumers on auto financing.
Then thoroughly research top-rated models within your category, such as vans or compact cars, checking reliability and resale potential. Finally, narrow your hunt down to a few quality vehicles fitting your budget and lifestyle, and head to the dealerships.
You'll probably hear a lot of buzz about "incentives," or special rewards or rebates for consumers and dealers, when you arrive on the lot. With auto sales nationwide down about 40 percent so far this year over last, manufacturers spent a record amount on incentives last month, averaging $3,169 per vehicle, according to Edmunds.com.
Toprak said there are several general incentive categories: cash rebates for customers, cash payments to dealers, low interest financing programs and leasing deals. Toprak noted some dealerships are going further - offering new creative promotions that aim to assuage consumers' fears.
South Korean manufacturer Hyundai went first this year, rolling out a program that allows customers to return their vehicles, or offering to cover up to three months of car payments, if they lose their jobs.
Rick Case, of Fort Lauderdale-based Rick Case Auto Group, with Hyundai dealerships in Florida and two other states, credits the program and other in-house incentives with driving sales up 32 percent for the first quarter of 2009 over last year. GM and Ford, along with retail giant AutoNation of Fort Lauderdale, have followed with similar plans. And GM now is offering to absorb some negative equity if consumers want to trade in before their loan is paid off.
President Obama's recent announcement, that the federal government would cover warranties on GM and Chrysler products if the automakers go into bankruptcy, also was aimed at restoring confidence in shaky brands.
But the experts said that resale values could drop and obtaining service or parts could be difficult if companies go under.
How to Buy a Car in 2009?
No matter what your budget, there is a new or used car out there for you. It's finding the right model, however, that can be tricky. Kelli Grant, Sr. Consumer Reporter for SmartMoney.com, has some tips for finding your new ride.
If you're on a tight budget, common knowledge would tell you to look at used cars as apposed to new models. However, Grant says buying used isn't always the best option.
"Now, demand for used cars has pushed up prices at the same time that new cars are seeing record incentives, 0% financing - even a sales tax reduction," says Grant. Weigh your options before you sign on the dotted line. That new car may not be out of reach.
If you can help it, though, do your best to avoid buying '08 models. Grant advises that with the New York Auto Show going on, '08 models are now almost two model years old.
"Any 2008 models you buy, they're really not going to resell very well. You're better off spending a little bit more for the '09's or the 2010's," says Grant.
If you're hunting for a new car, it's also important to buy to keep. That means to buy a vehicle for the long term - not just because it's the hot new car right now. Depreciation is your enemy here; Grant says some models lose up to 20% of their value just by driving them off the lot.
If you sell that new car within 2-3 years, you're not getting the best resale value for your money. "If you're keeping a car longer than that... when you go to sell a car that's more than five model years old, it's more about how well you've taken care of the car what you initially purchased it for," says Grant.
In addition to resale value, pay attention to the brand of car you're buying. Detroit's Big Three auto makers - General Motors, Ford and DaimlerChrysler - are in financial trouble right now, which could create problems down the road for car owners who have vehicles from those companies. Warranties, however, should be okay.
"President Obama has promised that the Federal government is going to step in and cover warranties for either GM or Chrysler if either of those auto makers is unable to do so itself," says Grant.
In addition, certain companies are considering shutting down some of their brands. For example, if GM doesn't find a buyer, it's going to have to shut down some of its brands like Hummer and Saturn. "Resale values for what they call an 'orphan' brand are going to drop by about 5%," says Grant.
Buy Car Tips As New Car Incentives Abound
Automotive manufacturers last month spent record amounts on new car "incentives" — perks ranging from the traditional extended warranties and rebates to new-style enticements like promises to make your car payments if you become unemployed.
Dealers are keeping their prices competitive, hoping to jump-start sales that are down about 40 percent nationwide so far this year.
That's why many consumer advocates say now is a good time to buy a new car, as long as you do your homework first and don't stretch your budget.
Here are a few things car-industry experts say you should consider.
#1: How do I find out about the new car manufacturer incentives?
Most auto manufacturer Web sites allow you to search for available specials by ZIP code. But vehicles with the most attractive incentives may ultimately cost you more if they aren't reliable cars with good resale value, so research carefully.
#2: What should I take: A cash rebate or low interest financing?
General rule: If you plan to keep your car for three years or less, take the cash. Otherwise, go with the low financing. But the best thing is to get your own pre-approved financing from your bank or credit union before car shopping, then use that rate to negotiate. Also, be aware that low-interest financing on a good value model may be a better deal in the long run than a 0 percent rate on a bad one.
#3 What about these dealers or manufacturers offering to make my payments if I lose my job?
GM, Ford, Hyundai and AutoNation are among those with these incentives. Some of these offers give you a choice of having your payments covered for a specific time or allow you to return the car. But read the fine print. Some won't cover you if you get severance or require you to have been employed for a certain amount of time. And in most cases, you will eat the depreciation if you bring back the car.
#4: Shouldn't I buy soon to take advantage of that one-time tax break passed by Congress recently?
Floridians have been able to take an income tax deduction for sales tax on all auto purchases for years, as we have no state income tax, so don't rush for that reason. And while the 2009 federal deduction applies only to new cars, the Florida version includes new, used and leased motor vehicles.
#5 Should I lease instead of buy new?
Leased vehicles are getting hard to come by, as their added fiscal risk prompted lease financiers to dump these programs. What few deals there are probably will be for luxury European-made vehicles. One option: Lease a used car.
#6: What would happen to my warranty if my vehicle's manufacturer went under?
Hard to say. President Barack Obama recently announced the federal government would guarantee warranties for GM and Chrysler autos if those companies go bankrupt, but the plan is short on details. Other dealers might pick up the repair work.
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