This past year has certainly brought about many challenges and changes for everyone, but one aspect that has changed substantially is the car buying environment. While we certainly understand that fewer people are considering such a large purchase now, let alone are in the position to make one, there’s still plenty of shoppers that need a new ride. Let’s take a look at how things may have changed since the last time you were in the market.
Let’s address the overall transaction and shopping experience first. If there’s any silver lining to the pandemic, it is that car dealers have been forced to adapt to a more hands off, remote way of doing business – something buyers have been pining for for years. While we have spoken to many people who are understandably reluctant to set foot in a dealership or take a test drive with a sales person, there’s good news here. There are many dealers offering test drives from your own home. You can arrange an appointment for the sales person to drop off the car at your house. You can take a pressure-free drive and not have to be around the general public. Even if you do go into the physical dealership, odds are you will be able to test drive alone anyway. Every one that we have done business with this year has a no-ride along policy for their sales team.
Additionally, dealers are finally more open to conducting all their paperwork and negotiation remotely. Getting quotes and doing all the document signing can be done either electronically, or via over night parcel services. We just completed our own personal purchase for the first time this way, and the only thing we were at the dealership for was the test drive, hand off paperwork, and to take delivery after the transaction was complete.
Now that the shopping experience is covered, we should take a look at pricing and financing. When the pandemic first started making waves, new and used car prices came down quick due to a lack of demand. Eventually, shoppers started cautiously coming back into the market and taking advantage of the lower prices (down about 3% overall during the summer). Individuals in larger cities who previously took public transit started looking for a more isolated way to get around, so they started to get into the market too. However, many parts suppliers and vehicle production lines shut down for an extended period or kept having to shut down due to worker illness, so new car inventory all of a sudden stopped accumulating. Combine this with increased sales volume and dealership lots were rapidly running out of inventory. There were several local dealers that were down to maybe 1-2 dozen vehicles in stock before they started receiving deliveries again. This lack of supply then drove up new and used vehicle prices. Now there are actually many cars selling for more than they would have pre-pandemic. Prices are starting to stabilize now, so it will be interesting to see where the market goes over the next few months.
On the financing side, there are actually many favorable rates to take advantage of. While loan applications may be receiving more scrutiny, many credit unions and automaker lending arms are offering new and used car loans for around 2% for well-qualified buyers. In fact, there’s quite a few automakers who are offering 0% loans, making buying a new car a more attractive possibility. If you don’t already have a relationship with your local credit union, it may make sense to start one before you get a loan; most banks wont offer less than 3.5-4% for even the best qualified buyers. In either case, make sure your down payment and loan length are appropriate so you don’t wind up underwater!
To sum up, the pandemic has changed the way people are buying cars – mostly for the better. Dealers are conducting more remote business, test drives are completely pressure-free or even delivered to you, and financing rates are rock bottom. On the downside, inventory may be lackluster and prices are overall higher than they were last year.