Sure there are more economical options out there. Using public transportation, carpooling or moving closer to where you work are all cheaper than buying a new car and greener besides. But if you really need a new car, there has rarely been a better time than right now. As a consumer in the midst of a recession at a time when automakers are struggling to survive and move vehicles, the deck is stacked in your favor. Why is right now such a good time to buy?
Buying a new car and the virtues of sound personal finance practice don’t often go hand-in-hand. Therefore, we feel obligated to mention that there are other options
For those who rarely travel great distances and have a short commute you can always use public transportation (if available), carpool with others, zip around on an electric scooter, or burn some calories on a bike or with your feet. Have further to travel now and then? Try ZipCar or Enterprise (they pick you up, after all). Have a longer daily commute? Carpool with others, find a reliable used vehicle, or abandon suburbia in favor of the city. Okay we’ve said it and we feel better. But if, for whatever reason, you still need to buy a new vehicle, you’ll want to consider the following factors.
The Real Factors Behind Today’s Vehicle Buyer’s Market
Sales Tax Deduction: If you live in a locality or state that taxes on the purchase of goods, as part of the Stimulus package, you can write-off the sales tax on your 2009 tax return. This can be done whether or not you itemize your deductions or take the standard deduction like the majority of taxpayers. This break was enacted to stimulate the purchase of new vehicles. The vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction. As always, restrictions may apply.
What does this mean for you? Let’s say that you would pay 6% in taxes on the purchase of a $20,000 vehicle, for a total of $1,200 in taxes. You would then be able to deduct that $1,200 from your taxable income. If you’re in the 25% tax bracket, this would equate to a savings of $300.
Huge Rebates: Many auto companies are offering employing pricing or huge rebates. Some, like Chrysler, are even offering both. Shop around, because the lure of employee discounts may not necessarily equate to the best deal. This kind of generosity surely won’t last. Post restructuring and adjustment of production levels, automakers won’t need to unload inventory at the expense of profit, like they are right now. You’ll find domestic automakers offering much larger discounts than foreign at this time because they are finding it more difficult to deplete their excess inventory.
Zero-Percent Financing: Ford and a few other automakers have started offering 0% financing, if your credit is good enough. Consider 0% financing as a great way to limit the risk of a vehicle purchase in this economy. Why pay for everything up front and potentially deplete your emergency savings in this economy when you can borrow for free and spread the risk out over years?
Government Backed Warranties: Chrysler and GM warranties are now being backed through the TARP on vehicles purchased starting in April of this year. This will continue as the companies are restructuring. Domestic automakers, including Ford, are eligible for this plan, but foreign automakers are not.
Payment Protection: Hyundai’s ‘Assurance’ and GM’s ‘Total Confidence’ payment protection plans promise to limit the potential loss that may come from those who are laid off from their jobs. It wouldn’t be a surprise to see other automakers follow suit. As always, read the fine details before buying.
Future Inflation: With the breakneck speed in which the government is printing cash, it’s easy to speculate that future inflation will most likely be significantly higher than it is today. This means your cash today is worth more than it will be in a few years. Combine future inflation with locked in zero-percent financing, and it becomes much easier to justify a vehicle purchase.
Stimulate the Economy: Sure, it may not do much for your personal finances, but at least you can take solace in knowing that you are part of the solution to our economic woes when you purchase a new car. Of course, when you buy local, more of your money stays local.
Are all of these incentives enough to sway you into purchasing a new vehicle if you weren’t previously in the market?