‘Buy the vehicle, not the deal’
Make sure to allow yourself enough time to make a decision without pressure, get enough information by doing eight to 12 hours of research online searching user groups for vehicles you are considering, and aim to put at least some of the money down right away, says Dennis DesRosiers, president of industry analysts DesRosiers Automotive Consultants.
“If you can’t afford something, you are going to pay more because you are desperate for money,” DesRosiers said. “The absolute cheapest way to buy a vehicle is to come in and write a cheque, the second-cheapest way is a short-term loan, the third is a long-term loan, and the most expensive is leasing.”
Leasing comes with low monthly payments, but ultimately a person doesn’t ever own a vehicle.
Financing of vehicle purchases has undergone a huge transformation since the economic crisis hit in 2008. Where 46 per cent of Canadian cars were leased in 2008, today less than 20 per cent are leased. Less that six per cent of Canadians in 2008 were taking out car loans for terms of 72 months, but today that figure is 41 per cent, said Brian Murphy, a senior manager at J.D. Power and Associates.
“For consumers who leased a few years ago, they could be in for a bit of a surprise if they’re trying to lease again,” Murphy said. “A lot of those impressive lease deals — they may still be out there — but they are a lot harder to find.”
With a longer-term loan, payments can be similar to what a lease cost five years ago.
“But if you’re financing a car for that period of time, you do have to be mindful that preventive maintenance becomes a lot more important,” Murphy said. In years past, “customers would drive a car for 36 months and then bring it back, but now they are responsible for that car for a lot longer, so they have to take care of it.”
DesRosiers said car owners keep their vehicles for an average of 8.5 years, and because the car will be in your life for a long time, you should make sure you buy a vehicle that serves your needs.
“The No. 1 piece of advice I give to consumers is that you should buy the vehicle, not the deal,” DesRosiers said. “Buy the vehicle that best suits your needs versus the vehicle that may be a good deal. Nothing is worse than realizing after you’ve been in your vehicle a few weeks, that you hate your vehicle and you still have to drive it for eight years.”
DesRosiers said the next decade could be the strongest ever for vehicle sales, so if a person is thinking about buying a car they should jump in sooner rather than later.
“We anticipate the market to be very strong until the end of the decade,” DesRosiers said. “The better the market is, the less likely it is that you’re going to get a deal.
“If you need a vehicle or anticipate the need for a vehicle in the next couple of years, I would move quicker rather than slower. That being said, we’ve proven time and time again that the consumer can out-wait the vehicle company.”
Doing so, however, might mean you don’t get the most popular vehicle in your favourite colour, or with the exact options that you want.
“We have an age-old problem in the industry, which is that companies can never (stock) enough of the vehicles that are selling well, and always get too many of the ones that aren’t,” DesRosiers said. “If you’re not fussy in terms of what you’re wanting, you can out-wait the vehicle company. The more discerning you are, you’re going to pay.”
Today, the most popular type of vehicle is the compact SUV, such as the Chevy Equinox, Toyota Rav4, or the Honda CRV. Other hot cars are at the luxury end, such as BMWs, Mercedes and Audis, which DesRosiers said are being bought up by baby boomers who can now afford them.
“(The luxury market) is growing like stink, and it’s going to continue to grow this entire decade,” DesRosiers said.
While vehicle manufacturers traditionally released their new models in the fall, today new models are released throughout the year, so there is not a specific season when deals are better, Murphy said.
“If the consumer is looking to save a little money, looking for a 2012 can help the consumer to save a lot of money on their auto purchase,” Murphy said. “If you’re looking to find a 2012, you may not get your first choice as far as the options and what colour. You may have to be less choosy.
“It’s a very large purchase for any household, so you obviously have to do your research and your homework.”
Even better is if you time your vehicle purchase for the end of a four- or eight-year end-of-model cycle, DesRosiers said. For example, he bought a Nissan Altima this summer, which was at the end of its model life and was a very good deal.
“It’s quite easy to identify these vehicles — it’s the stuff that’s advertised for sale at a discount,” DesRosiers said.
This year is looking like it will be a good one for manufacturers, who have seen some tough times recently, Murphy said. So far this year, sales are up 6.6 per cent.
In Canada, favourite vehicles remain pretty consistent: Ford F150 and Dodge Ram pickup trucks are the two biggest sellers, while the Honda Civic, Dodge Caravan and Hyundai Elantra make up the rest of the top five, Murphy said.
“Hyundai has had an aggressive value-oriented pricing strategy for several years and it’s really paying off for them. They’ve had excellent sales growth,” Murphy said.
“Both Hyundai and Kia have had quite impressive recent success in Canada. It’s made other manufacturers have to work that much harder to win consumers’ business.”
Both DesRosiers and Murphy said silver and grey are the most popular colours, and have been for quite some time.
Photograph by: Joe Raedle, Getty Images