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Key incentive for car shoppers nearing an end

A new-vehicle tax break expires Friday. With dealers desperate and offering such additional inducements as fat rebates and cheap financing, now is seen as a great time to buy.

December 30, 2009|By Patrick May

San Jose — It's the most wonderful time of the year -- for buying a new car.

Savvy shoppers, desperate dealers and automotive analysts alike are singing that tune, thanks to fat rebates, cheap financing and an enticing federal tax break for buyers set to expire Friday.

"I know we dealers always seem to say it, but with the tax benefits you'll get and the strong used-car values for trade-ins, this really is a great time to buy," said Mark Normandin, owner and president of Normandin Chrysler Jeep on Capitol Expressway Auto Mall in San Jose. "Normally at this time we're all looking to close out the year as strong as we can. But it's been an especially difficult year, and dealers are willing to take some pretty thin deals to move inventory."

Experts say the car-lot deals are even better than last year, thanks largely to the tax break in the stimulus package approved by Congress in January. State and local sales and excise taxes on new vehicle purchases between last Feb. 16 and New Year's Day 2010 are deductible on 2009 federal income taxes. Buyers can write off the taxes paid on the first $49,500 spent for a new car, light truck, motorcycle or motor home, potentially saving thousands of dollars, depending on their tax bracket.

With visions of tax relief dancing in his head, Victor Tabunshchik grabbed his 13-month-old son Maximilian and headed for Capitol Volkswagen on Monday to engage in that time-honored tradition of price-haggling for a new car. The 27-year-old clean-tech consultant from San Jose was hoping to trade in his 2004 Touareg for a 2010 diesel Jetta, taking advantage of the soon-to-expire tax break as well as a $1,300 tax credit the government is offering on a handful of diesel-powered vehicles.

His decision, he said, was a no-brainer.

"If you're looking for a new car, this is the time," Tabunshchik said. "With dealers desperate to move cars and the government offering you tax relief, you'd be dumb not to do it."

Still, most of the car lots lining Capitol Expressway looked deserted Monday, partly because of the rain but also because word of the tax break may not have gotten out to everyone.

"I don't think consumers are aware of this," Normandin said. "We're trying to inform them in our ads that they only have a few more days to act and then it goes away."

John Moore, who owns Moore Buick-Pontiac-GMC Truck in Los Gatos, Calif., was hopeful foot traffic would pick up once word spread. He called the current confluence of deals and tax breaks "a unique time." Before the federal government ended a sales tax deduction on new cars about 15 years ago, dealer showrooms were buzzing with buyers the last week of the year, Moore recalled.

"We had phenomenal sales, and I'm assuming the same thing will happen this week," he said.

Even if the last-minute buyers show up for the tax advantages and the no-interest financing now available from many dealers, 2009 will remain a dreadful chapter in automotive history.

Jessica Caldwell, a senior analyst at Edmunds Inc., the clearinghouse for automotive information, said this month's sales should be healthier than December 2008's, thanks to "manufacturers desperate to move metal and dealers desperate to meet sales objectives. But for the year, we'll still be down compared to last year's 13.2 million total units sold."

Caldwell said sales "tanked in the last quarter of last year. And except for the 'cash for clunkers' program, which made August a strong month, this year has been pretty low."

Edmunds is predicting 10.4 million sales this year, far below the 16.5 million new vehicles sold in 2006. But despite fewer sales, spokesman Chintan Talati says, 2009 has provided better deals than 2008, pointing out that manufacturer incentives last spring were the highest Edmunds had seen since it started tracking the figures in 2002.

May writes for McClatchy newspapers.

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