Car buying tips amid COVID-19: Used Cars, Trucks, SUVs

Can get a good deal on a loan?

 Although credit conditions have deteriorated for some buyers due to the hobbled economy, if you could afford a new vehicle before, you can probably still get a loan.

And interest rates have plummeted in recent months, hitting an average of 4.2% in June, down from 6% a year earlier, according to car-research site Edmunds.

Also, 0% financing offers are at “near-record levels,” representing 24% of sales in May and 19.4% in June, according to Edmunds.

Can get a good deal on a loan?

But Edmunds cautioned buyers to think hard before spreading out new-car payments over several years.

At 0% financing, a six- or seven-year loan could make sense for a responsible buyer, but for many Americans, relying on longer loan terms to justify their bigger vehicle purchases could put them at greater risk for negative equity in the future.

During the pandemic, used-car prices have been affected by several factors, including an influx of vehicles sold by car-rental firm Hertz, which filed for Chapter 11 bankruptcy protection. 

Over the last 90 days, used-car prices have fallen by 1.7%, according to car-buying site CarGurus. But over the last 30 days, prices have increased by  0.8%. 

For example, the 2018 BMW 3-series has dropped 28% since a year ago, but the 2018 Chevrolet Camaro has dropped only 3.7%, according to CarGurus. The 2018 Ford Mustang has fallen 10.2%, while the 2018 Chevrolet Corvette has declined only 6.6%. 

Those shoppers in the market for a used vehicle should be mindful that used vehicle prices are starting to increase as compared to the beginning of the year because dealers are trying to replenish supply for popular used vehicles.

Where are new-car deals popping up?

Are automakers increasing discounts?

Honda, which typically spurns incentives, increased discounts by 43.8% in June, compared with a year earlier, according to TrueCar. Volkswagen Group, which includes VW, Audi,  and Porsche, has ramped up incentives by 27.8%. And Daimler, which makes Mercedes-Benz, has increased them by 24.9%.

Instead, they are being used as part of a broader strategy and targeted for specific weak spots.”For example, during the first weekend of July, Audi discounted the A3 sedan by 11.7%, Chevrolet discounted the Malibu sedan by 13.9% and Ram discounted the Ram 1500 pickup by 10.9%.

Are automakers increasing discounts?

Sometimes automakers sell vehicles at a high sticker price but provide discounts, often referred to as incentives, to make the effective price much lower.

For now, discounts are up year over year, but down compared with earlier in the pandemic,  as dealers look to preserve profits. Incentives per vehicle averaged $4,121 in June, up from $3,773 in June 2019 but down from $4,142 in May. 

Clearing out last year’s models?

Are dealers trying to sell off 2020 models before the 2021 cars and trucks arrive? About two months of downtime at most manufacturing plants due to the pandemic means that dealers don’t have a surplus of vehicles.

In fact, automakers are delaying dozens of new models while they sell last year’s.

Are prices dropping?

Not so much. The average new vehicle sold for $36,332 in June, which was up 3.2% from a year earlier.