Why 2012 is a good year to buy
By Jim Gorzelany
New-vehicle sales could rise by as much as six to seven percent during 2012 according to Automotive News, due largely to the effects of a stabilizing economy and pent-up consumer demand. Here’s a breakdown of why the upcoming months could be the best time in years to buy a new car or truck.
1. Low Interest Rates: Those looking to finance a new-car purchase should continue to enjoy record-low rates over the coming year. As of this writing, the average rate for a 60-month new-car loan in Chicago was 4.9 percent, according to Bank Rate Monitor, with the lowest posted rate at 3.25 percent. Many automakers continue to offer cut-rate loans as low as zero percent for up to 72 months on select models, though these don’t usually include in-demand cars and are restricted to those with pristine credit ratings.
2. High Trade-In Values: Used-car prices should remain at all-time highs during 2012, which in turn means equally steep trade-in values that can be used as larger down payments on new models. Due largely to a shortage of used cars, the average value of a one- to three-year-old vehicle increased from $15,000 in 2008 to more than $23,000 in 2011, according to Kelley Blue Book, which amounts to an average boost of nearly 16 percent per year. KBB predicts used-car values may further increase from four to six percent during 2012.
3. Generous Leasing Deals: Bargain-hunting consumers have been able to take advantage of excellent leasing deals in recent months thanks to an ideal convergence of market forces. “High resale values and low interest rates are contributing to some of the most attractive lease deals we’ve seen in years,” says Jesse Toprak, vice-president of industry trends for TrueCar.com. That’s because lease payments are based on a car’s negotiated transaction price minus its projected value at the end of the lease term, financed at the going interest rate. Analysts say leasing deals should remain attractive throughout 2012 and well into 2013 as interest rates continue to be low and used-car inventories remain slim.
4. Competitive Pricing: While new-car sales are on the rise, analysts say sticker prices should remain steady over the ensuing months. Some predict it could become a buyers’ market at some dealerships.
Japanese brands, which saw sales plummet during the second half of 2011 because of parts shortages caused by last spring’s earthquake and tsunami, will look to rebound this year. "Automakers based in Japan will likely increase incentives to boost lost market share after the production disruptions from the earthquake and tsunami in March," says Jonathan Banks, senior analyst with the National Automobile Dealers Association Used Car Guide. The experts at Kelley Blue Book believe domestic automakers will likely counter with equally healthy rebates and incentives on all but their top-selling models to keep from losing ground gained at the expense of Honda, Nissan and Toyota.
5. Improved Products: New and redesigned models are bringing buyers back into dealers’ showrooms in virtually all car and truck classes. The latest models are far more stylish, perform better and have better fuel economy than their predecessors.
Cars are becoming safer, with a record 66 vehicles garnering the Insurance Institute for Highway Safety’s “Top Safety Pick” ratings for model-year 2012. Many mainstream sedans are now offering high-tech gear that can help avoid accidents altogether, including blind-spot and lane-departure warning systems and collision mitigation systems that can both alert the driver if a crash is imminent and automatically apply the brakes if he or she isn’t reacting quickly enough.