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If you must buy a car now, here's what to do

May 22, 2011|By Jerry Hirsch, Los Angeles Times

Rising prices and a looming vehicle shortage make this summer one of the worst times in years to go car shopping. But if your vehicle is on its last leg or your lease is about to come due, here are some tips on how to navigate through a difficult market.

• Consider cars with incentives: Manufacturers still offer some incentives, especially for cars that are near the end of their model cycle or are slow sellers. Most of the big auto information companies, including Edmunds.com, TrueCar.Com and kbb.com (Kelley Blue Book), offer incentive data on their websites.

• Check supply: While inventories are tightening across the board, some manufacturers will have ample inventory for some vehicles, and these will have the better deals. TrueCar's TrueTrends report offers a monthly listing of new vehicles with the shortest and longest days' inventory. This month's report, for example, will tell you that Hyundai dealers have only an eight-day supply of their hot-selling Elantra sedan. It's also tough to find a Ford Explorer — only a nine-day inventory. But if you want a BMW Z4, start shopping. The Z4 is about to be replaced with a new-generation model, and BMW dealers have a fat 161-day supply — more than five months' worth. Similarly, Hyundai dealers are sitting on a 133-day inventory of the automaker's Azera sedan.

• Be a contrarian: For now, that means bigger. With many buyers gravitating to smaller, fuel-efficient vehicles, consider buying something that drinks a bit more gas. Yes, it will cost you more each time you go to the pump, but with small-car prices going up rapidly you might find that the price gap between a compact vehicle and something larger has narrowed considerably. Large cars and trucks have the biggest discounts this month, and that's likely to be the case throughout the summer.

• Don't be wedded to a brand: The domestic makes, as well as Hyundai and Kia and the German manufacturers, have not suffered the supply disruptions incurred by the Japanese brands. Ford, GM and the South Korean makers all have models that drive well and are as fuel efficient as the popular Japanese nameplates. You might not get as good a deal as a year ago, but you'll still have a nice new vehicle to drive. The Germans dominate the luxury category, and there are still scattered lease deals and other incentives around.

• Consider leasing: When interest rates are low and projected resale values are high — as we are seeing in the current market — manufacturers can offer attractive lease deals. Many people don't like leases because they amount to long-term rentals and you don't have a car to drive at the end of the contract. But with the market so confused, it might make sense to lease a car and figure you can purchase a vehicle 36 months from now when things will be more settled.

• Get an extension: If your lease is running out, ask for a six-month extension. Some of the Japanese automakers are beginning to offer extensions just to keep you out of the market until they have a better supply. They want to keep you from defecting to a rival automaker.

• Don't assume used cars are a better deal: The market is seeing prices jump for used cars. There's a shortage dating back to industry events of two and three years ago. (See accompanying story.) Dealers are bidding up the price of used cars as they try to build their inventories to have vehicles to sell as the supply of new cars shrinks. This could turn into a bubble. It's possible that later this summer dealers will find they have purchased too many used cars and have to lower prices. But for now it's tough. A 3-year-old mid-size passenger car averages $13,700, according to Kelley Blue Book. That's up $4,500 from the $9,200 a 3-year-old mid-size passenger car sold for in 2007. Compact cars are up $3,500 to $11,200. Carefully research models and pricing at used-car information sites such as AutoTrader.com. You might be better off buying a slower-selling new vehicle than a late-model used car that's a hot seller.

For an interesting take on this, check out the new-versus-used vehicle comparison chart

on Edmunds.com.

• Shop for cars owned by seniors: Check around the neighborhood for a used car that an elderly driver might be selling. He or she could be giving up a driver's license or cutting back to one car. These cars can be older but are often good deals and can last you for several years until you want to dip back into the new-car market.

• Hold on to what you are driving: People usually can drive their cars for many more miles than they expect. There might be some extra expenses, such as new tires or a timing belt, but those often amount to just a month or two of new-car payments and would be worth it if that keeps you in wheels and out of the new-car market until early next year.

jerry.hirsch@latimes.com

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