Don't Even Think Abut Buying a Vehicle Just Yet!
George Boelcke CCP
May 19, 2009
In January we talked about GM and Chrysler, and the possibility of bankruptcy. Right now, it´s one down and one to go, as I believe a GM bankruptcy is probably just weeks away. GM is working on a June 1st deadline to eliminate $27 billion of bondholder debt and come up with a new labor agreement or they´ll be pushed into bankruptcy.
For six months now, there´s been a cry that we can´t let them go bankrupt, because it would lose a gazillion jobs and end car manufacturing. I said then, and it´s obviously true, that the fear tactics were and are nonsense. Major changes were going to happen – with our without a bankruptcy.
Even GM has started to terminate dealers, shutting down production for months at a time, and laying off people. That has nothing to do with the possibility of bankruptcy. It has everything to do with a business model that´s not working! When the foundation of your house is collapsing is not the time to put in new windows, or paint the deck.
GM wants to close one out of every six dealers in the U.S., and get from 6,000 down to 3,600 by the end of next year. They call it dealer rationalization, and Chrysler is in the same position of closing around 30% of their dealerships.
If you have the cash to buy a new vehicle, it is critical that you hold off on your purchase for another month or so. If not, you may be losing out on a huge amount of money.
Right now, the U.S. House of Representatives has passed a junker rebate program, and it is now in the Senate for consideration. The program is designed to get old junkers off the road, and supply a rebate of up to $4,500 towards a new vehicle purchase that is more fuel efficient. Buying a new vehicle before the program becomes law would cost you the 20 to 30% first year depreciation, and you´d miss out on that huge rebate of up to $4,500.
The government claims this program is to promote fuel efficiency. Don´t believe that – it´s purely to boost car sales. For anyone trading a pickup, they only need to buy something that gets two more miles to the gallon to qualify for the maximum $4,500 rebate under the current proposal. Even Hummers just need to be traded for something that gets five miles per gallon more. That´s not fuel efficiency – that´s a sales promotion. At least the European model, on which this program is based, includes one-year old vehicles in a number of countries, and that would be the best program – but it won´t happen.
If you are in the market for a vehicle:
Hold off until this program is in place and you understand how it works and may apply to the vehicle you´re thinking of purchasing
Pay cash for your new vehicle, or better yet, buy a one or two year old that has some warranty left to avoid the new car depreciation. You won´t get the rebate, but you´ll still be way ahead, financially
If you´re going to ignore the "pay cash" advice, never finance a vehicle for more than four years
Never ever make the buying and financing decision on the same day. You´ll need to know the rebate that´s available and compare it to the low-rate finance offer. More times than not, you´ll be better off, financially, taking the cash rebate off the price, and financing it with the credit union
Hold off, too, if you´re considering a one or two year old model right now. When the new program becomes available, it not only drops the price of new vehicles, it also drops the value of one and two year olds about the same amount!
For six months now, there´s been a cry that we can´t let them go bankrupt, because it would lose a gazillion jobs and end car manufacturing. I said then, and it´s obviously true, that the fear tactics were and are nonsense. Major changes were going to happen – with our without a bankruptcy.
Even GM has started to terminate dealers, shutting down production for months at a time, and laying off people. That has nothing to do with the possibility of bankruptcy. It has everything to do with a business model that´s not working! When the foundation of your house is collapsing is not the time to put in new windows, or paint the deck.
GM wants to close one out of every six dealers in the U.S., and get from 6,000 down to 3,600 by the end of next year. They call it dealer rationalization, and Chrysler is in the same position of closing around 30% of their dealerships.
If you have the cash to buy a new vehicle, it is critical that you hold off on your purchase for another month or so. If not, you may be losing out on a huge amount of money.
Right now, the U.S. House of Representatives has passed a junker rebate program, and it is now in the Senate for consideration. The program is designed to get old junkers off the road, and supply a rebate of up to $4,500 towards a new vehicle purchase that is more fuel efficient. Buying a new vehicle before the program becomes law would cost you the 20 to 30% first year depreciation, and you´d miss out on that huge rebate of up to $4,500.
The government claims this program is to promote fuel efficiency. Don´t believe that – it´s purely to boost car sales. For anyone trading a pickup, they only need to buy something that gets two more miles to the gallon to qualify for the maximum $4,500 rebate under the current proposal. Even Hummers just need to be traded for something that gets five miles per gallon more. That´s not fuel efficiency – that´s a sales promotion. At least the European model, on which this program is based, includes one-year old vehicles in a number of countries, and that would be the best program – but it won´t happen.
If you are in the market for a vehicle:
Hold off until this program is in place and you understand how it works and may apply to the vehicle you´re thinking of purchasing
Pay cash for your new vehicle, or better yet, buy a one or two year old that has some warranty left to avoid the new car depreciation. You won´t get the rebate, but you´ll still be way ahead, financially
If you´re going to ignore the "pay cash" advice, never finance a vehicle for more than four years
Never ever make the buying and financing decision on the same day. You´ll need to know the rebate that´s available and compare it to the low-rate finance offer. More times than not, you´ll be better off, financially, taking the cash rebate off the price, and financing it with the credit union
Hold off, too, if you´re considering a one or two year old model right now. When the new program becomes available, it not only drops the price of new vehicles, it also drops the value of one and two year olds about the same amount!