It’s no surprise, the nation entered a recession while the coronavirus pandemic continues to impact pretty much every market in one way or another.
Though the economy all but shut down completely, this recession doesn’t feel like previous ones, as many markets that you’d expect to crash have remained strong.
While market volatility in the midst of the pandemic is almost guaranteed, most financial analysts agree many markets may have already made it out the other end, including the car market.
As with any big financial decision, when trying to time the market and decide if now is the right time to purchase a car, there are numerous pros and cons to consider, so here are some of those tips gathered from some of the Santa Clarita Valley’s financial analysts.
Low interest rates, incentives mean more opportunity
Interest rates are at historic lows, and most financial analysts expect them to stay that way for the months to come.
“Affordability has gone up, and with rates going down, people can actually afford more,” said Jerrod Ferguson, vice president at Vance Wealth.
Here in the SCV, dealers at the Valencia Auto Center collectively have reported higher weekend sales numbers in 2020 over sales volume in 2019 for each month May through August, according to the Santa Clarita Auto Dealers Association.
“All dealers are open and making great deals. We’ve had some really good months since reopening and I’m optimistic about the remainder of 2020 and the coming year,” said Don Fleming, president of the association. “Whether people are in the market to lease or buy a vehicle, this is a great time as manufacturers are offering great incentive money on cars and trade-in values are strong.”
These incentives are allowing some dealers to offer 0% financing options, deferred payments or large discounts, which Ferguson said is a great opportunity for those in the market for a new car.
While the coronavirus has led to supply chain disruptions and plant closures, causing shortages of some vehicles sold in America, those shortages have been offset by the monthslong closure.
“Manufacturers typically slow down production at this time of year — add the coronavirus pandemic on top of that, and it’s more pronounced — (but) new car inventories will begin to increase soon with the 2021 models on their way,” Fleming said.
Local dealers still have some 2020 models available, along with a strong supply of used vehicles, which Fleming expects to hold them over until new stock arrives. “All in all, we’re in pretty good shape.”
It all depends on how the pandemic progresses, according to financial analyst Peggy Williams, although she expects it’s likely to be hit-and-miss depending on the brand’s sourcing and production.
“There might be excellent deals on some models and shortages of others,” she said, adding that though the United States might be behind, production in Asian and European factories has already begun ramping up. “Further production and supply interruptions are not out of the question, though.”
At Frontier Toyota, General Manager Bob Corson said they’ve had far less in indventory than usual.
“Now that’s starting to get caught up,” Corson added. “The manufacturers have now been open for a couple months again, and they’re starting to get to get caught up, so product is starting to come in again.”
Changing the system
As with other industries, the pandemic has changed the car shopping experience, with dealers turning to online services as much as possible.
While Frontier Toyota had implemented online orders and deliveries, ahead of the pandemic, Corson said it was extremely useful in safety operating during the shutdown.
“They can actually go A to Z if they choose,” Corson said. “There are only one or two DMV documents that still have to have a wet signature on them, everything else can be done electronically.”
Even so, Corson was surprised it hadn’t continued to evolve when dealers were given the greenlight to reopen.
“The demand was there, and that’s been met,” Corson added. “We thought there’d be more demand by now, and I think in time there will be.”
Though the dealership now offers to deliver test drives to a customers home, for now, Corson believes the tool is being used as an information gathering method, allowing customers to thoroughly research their purchase before coming into the dealership to actually take the plunge.
“The majority of the people that have been using it go so far as to lock in the pricing, but the majority have wanted to come in and actually finish the process in the dealership,” he said.
Not too fast, though
Local financial adviser Erick Arndt is in a different camp, as someone who financially doesn’t believe a car payment is a good idea.
Instead, Arndt suggests those who want to purchase a car start putting away money into a “car fund,” only making the purchase when they have enough funds to do so.
“So there’s no car payment, there’s no financing,” he said. “Then as soon as they buy it, they start making that same payment to the fund again to build that account back up, so they’re paying themselves that money, rather than paying the auto company.”
Arndt believes only those who’ve shown they can afford the added car payment should take the plunge, asking themselves, “Where was that money yesterday?”
Each person’s financial situation is different, but all have to account for variables, such as emergencies or changes in employment, as car payments will continue regardless of your financial situation.
Williams agreed, adding, “Be sure to consider whether it’s a good idea to lock yourself into a car loan or lease, because you’ll be stuck with them for years, even if your financial situation changes down the line.”
Both Williams and Arndt suggest having at least a year’s car payments in savings at a minimum.
In any case, all three financial analysts suggest speaking to an expert about your personal situation.