Automotive Journal

The roiling economy has left indelible marks on the automotive industry. Automakers and dealerships, struggling to move their inventories, have been forced to deal with tighter credit terms, a smaller pool of prospective car buyers, and other difficult circumstances. For the savvy auto shopper, that can translate into a world of opportunity. As dealers become more motivated to extend generous terms to consumers, buyers can uncover surprisingly attractive bargains.

Below, we’ll explore 3 ways in which the auto industry is changing. I’ll describe how each of these changes affects the deals that are available to buyers who are alert, informed, and prepared.

#1 – Automakers Have Excess Inventories

Sales of new cars, trucks, and SUVs have been plummeting for the past year. Because of this, auto dealerships have a back lot of cars that are hard to sell. Further, ports are becoming stacked with inventory that the dealership lots are unable to accommodate.

The auto industry is similar to any market suffering from a glut of product: prices come down. If you are int he market for a new automobile, now it a great time to negotiate favorable loan terms. Generous rebates, low-interest financing, and other incentives are creating a rare buyer’s market.

#2 – Credit Is Tight, But Only For Some

One of the circumstances that has had a significant impact on the automotive industry is the tightening of credit. Banks are wary of extending auto loans to subprime borrowers. If your credit score is dismal, you’ll find it difficult to secure financing. However, if your score is above 700, many banks and dealerships will be happy to offer an auto loan with a competitive interest rate. 

In fact, the dwindling pool of prospective buyers with good credit has become more valuable than ever to automakers and car dealerships. Many of them are willing to offer fantastic incentives in addition to a low rate.

#3 – Lease Payments Are Increasing

The lease market has undergone a dramatic change over the past year. Long ago, you could lease a vehicle with monthly payments far below what you would pay to own the same model. Basically, you can purchase an much better vehicle for the same price as before. Today, most car manufacturers have forced a substantial increase in lease payments. 

The reason is due to the glut of inventory. When vehicles come off their leases, dealers are unable to move them off their lots at profitable prices. The increase in monthly lease payments compensate them for the lost revenue. An unexpected corollary is that you can uncover great used car bargains by shopping the vehicles which have recently come off their leases.

The automotive industry will continue adapting to the rough economic times ahead. For experienced shoppers, that means fantastic opportunities and deals when looking for a new or used car.

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