Gary North

April 28, 2008

The new car market has hit a brick wall. The recession is taking its toll.

In March, sales were down over 10% from a year earlier, according to Edmunds, an auto industry news service.

"March was tough and virtually no automaker was spared," commented Michelle Krebs, Senior Editor of Edmunds' AutoObserver.com. "Unfortunately, the industry is still on track to have the worst year in recent memory."

Next year is going to be a lot worse for the auto industry than this year. People can't easily borrow on their home equity for consumer purchases.

The car loan market is suffering equivalent woes to the subprime mortgage loan market. People need better credit scores to qualify for a $30,000 loan. People who buy used cars often don't have good credit. They are out of the market.

This is good news if you are planning to buy a recent model used car: less competition. A three-year-old car with under 40,000 miles on it is not going to find a ready buyer for cash. A seller may be desperate to sell. The next 12 months will see an increase in such sellers.

Now is the time to begin thinking about buying a replacement used car. Use these services to price them:

Monitor classified ads locally. Monitor Craigslist. Maybe your newspaper has an automatic email alert service. See what prices are for the model you're interested in. See if they begin to fall.

Monitor an ad that keeps reappearing. The seller has a problem: no buyers. Call. See the car. Then tell him you will buy it for 20% less than he is asking. Tell him this for an immediate sale -- no loan application, no waiting. No deal? Write down your first name and phone number. Tell him to call; you may still be in the market for a couple of days. Then drive away. Be patient. Someone will call.

For more tips on buying a used car, see my 2003 articles,

Keep your old car as a back-up in case your newer car needs to go into the shop. Don't buy collision insurance for it.

P.S. On Saturday, April 26, I received this letter from entrepreneur Bill Myers (www.bmyers.com). Bill is a wealthy man, but he abides by this rule: "Avoid paying retail."

I just bought a used car this week. I did all the research, and the car that was highly rated at Edmunds for safety, reliability, fuel mileage and space was the Toyota Sienna mini van.

I went to a local Honda dealer who had a Toyota certified used Sienna with 50,000 miles on it.

It was listed for $13,995.

After negotiating - I got it for $8,895.

I never thought I'd be driving a mini-van, but this is now my favorite car. And Sonya loves the ride, the interior space, and the automatic sliding doors.

As you pointed out, now is a good time to buy a used car - if you know what you want, and know how to negotiate a deal.

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