Originally Posted by Friday, May 15, 2009

by The Wallstreet Journal

Plunging auto sales are making this one of the worst times ever to sell cars. But if you're one of the relatively rare consumers shopping for a new vehicle, you're already in the driver's seat.

Many dealers have unusually high inventories they want to sell in a hurry, so buyers willing to research price trends, visit numerous dealers and negotiate assertively can pick up a set of wheels at discounts unheard of just a few months ago.

Overall, the average transaction price for passenger vehicles has fallen 2.9% in the past six months, to $27,941, while the average cash-back incentive rose 2.3% in April from a year earlier, to $2,628, according to market research firm J.D. Power & Associates.

But for shoppers, the potential savings are substantially greater. Auto makers are offering generous deals, including cash-back offers and low financing rates, across a wide range of vehicles. Many that once sold at a markup are suddenly available for well below the sticker price -- and often less than dealer cost. Flashy new cars, even some 2010 models, already come with low lease rates and hundreds or thousands of dollars in rebates.

"There's no question that you should get a screaming deal," says Scott Painter, chief executive of TrueCar, an online service that tracks new-car purchases. He says the slump in sales has resulted in discounts so steep that new cars can sometimes be less expensive than comparable used ones.

According to data from TrueCar, in July 2008 dealers sold about 21% of 2009 model year vehicles for less than what they paid for them. By March this year, they were selling 25% of 2009 vehicles below cost.

Dealerships, meanwhile, have been closing at an alarming rate -- 960 in 2008 and an estimated 1,200 by the end of this year, according the National Automobile Dealers Association -- driven mainly by slack demand and tight credit. Now car makers General MotorsCorp. and Chrysler LLC are planning to close thousands more, opening the door for even better deals.

"With excess supply, it's going to get very aggressive out there," says Gary Dilts, a senior vice president at J.D. Power. "Dealers have to get rid of a lot of 2009 vehicles, so we think it's going to continue to be a consumer's market for the next three months."

Some of the best deals are available on once-hot models. Until recently, you could get $12,000 cash back on the purchase of a leftover 2008 Range Rover, for example. Just two years ago, this handsome luxury sport-utility vehicle was a popular rolling fashion statement.

It isn't just last year's models that are available at a discount. Cadillac's slick, sporty and reasonably practical new CTS sedan comes with $7,000 in incentives. Ford Motor Co. has barely begun selling its 2010 Transit Connect van, and is already offering $300 cash back.

Dealer Discounts

Eric Sample, a 42-year-old election official in Portland, Ore., says he bought a 2008 Mazda Miata roadster with a sticker price of $27,235 for about $18,000 three weeks ago. A combination of a $5,000 rebate from the manufacturer and more than $4,000 in dealer discounts was more than he could resist. "I didn't think it would get much better," says Mr. Sample, adding that he hadn't bought a new car since 1999.

Chevrolet's 2009 Tahoe hybrid, a large SUV that promises the fuel economy of a smaller vehicle, is in some cases selling for nearly $6,700 off its $51,405 sticker price. Hyundai's new 2009 Genesis luxury sedan can be had for $2,500 below sticker price, and even the long-awaited 2010 Honda Insight hybrid on average is selling at more than $500 below sticker price, according to TrueCar data.

Falling prices and rising rebates reflect the economic uncertainty that has kept many people away from auto showrooms since late last year. This forced car makers to cut production in an effort to keep inventories from growing too quickly. But in many cases demand has retreated even faster than supply, leaving dealers with a glut of unsold cars they are desperate to sell.

Selling at a Loss

Paul Taylor, chief economist at the National Automobile Dealers Association, says GM has 111 days' worth of inventory, Chrysler has 114 and Volkswagen AG has 115. With inventories so high, car makers are offering bigger incentives than usual, and dealers are sometimes willing to let cars go even at a loss.

Among the biggest price swings are those in categories that were popular last year even as the overall auto market sagged, driven by rising fuel prices and a general glut of new cars. Some models that were new at the time attracted buyers seeking the latest design, but mostly it was small cars and gasoline-electric hybrids that dealers couldn't keep on their lots.

Many people recall how hot the Toyota Prius hybrid was last summer when gasoline rose beyond $4 a gallon. People lined up for a chance to buy the fuel-frugal sedan, and many paid above sticker price. Dealerships nearly never had any on the lot because most were spoken for and snapped up as soon as they arrived. Trying to keep pace with rising demand, Toyota Motor Corp. increased production.

Today there are Priuses gathering dust in showrooms and dealer lots, largely because falling gas prices have made them less desirable. According to data from TrueCar, buyers have recently paid an average of $23,324 for the Prius Touring, the top-of-the-line model. It seems like a good deal because it is well below the $25,020 sticker price but less than $100 above the invoice price of $23,269. Yet several buyers have paid below the dealer cost of $22,784.

As Toyota launches a new Prius for 2010, today's price for 2009 models could be $8,000 lower than six or eight months ago, according to Jesse Toprak, an analyst with Edmunds.com, the car-shopping Web site. He says some people paid $3,000 or $4,000 above sticker price for the Prius when fuel prices were near their recent peak. Now prices have swung to the opposite extreme -- $3,000 to $4,000 below dealer cost -- in some cases.

Sites for Car Shoppers

The Internet continues to grow as an aid to shoppers looking for the best deals. TrueCar, which launched last month, uses dealer sales data to show how much people are actually paying for vehicles. The goal, the company says, is to give shoppers the most realistic starting point for negotiation. Eventually, says Mr. Painter, TrueCar hopes send car salesmen "the way of the travel agent."

Rival online service Edmunds.com is testing a formula that calculates what would-be buyers should offer a salesman to get the negotiation started. Several sites, including cars.com, MSN Autos and Edmunds, also list incentives like cash-back and discounts that dealers don't necessarily share with customers.

Jeremy Anwyl, president of Edmunds, says the company considered providing data on individual transactions years ago, but found when it tested the concept that the additional information overwhelmed customers. Its latest service it is testing in a few markets uses similar data to establish an initial offer price that consumers can use when they are ready to buy.

Originally Posted by DSM2GS400

#1 In Canada anyways, luxury manufacturers are doing to bad...Its the Honda's and Nissan dealerships that are hurting...

Originally Posted by mikez

Our family picked up an new RX400h loaded at 52k for 37k out the door at the beginning of this month

Originally Posted by Faymester

I never seem to like the cars you can actually get an amazing deal on.

Originally Posted by IS-SV

That's why the deal is not always as amazing as it seems at first glance. Some of the less desirable and heavily discounted cars will be very costly to own over a typical span of 3-4 years due to horrible depreciation.