Insight by PenFed Credit Union

Coronavirus and Cars: Is now the right time to buy a car?

The economy has been a rollercoaster since the coronavirus pandemic took hold, but during all of the uncertainty is it a good time to buy a car?

Joe Leonard, Vice President of Indirect Auto Business Development, and Ivan McBride, Vice President of Auto Lending Products and Sales, at PenFed Credit Union say – yes.

“If you do your homework almost any time can be a good time to buy a car,” Leonard said during the discussion Smart Auto Shopping and Financing, sponsored by PenFed Credit Union. “As long as you’re prepared, you can buy a car the first of the month or the last of the month and you’ll basically get the same deal. There’s only so much profit in a car [for the dealer to cut].”

Preparing yourself to go into a dealership with the right information takes work though.

Leonard said it’s important to benchmark with a financial institution that gives you true data insights coming from dealerships. The information is out there for consumers to know what price a vehicle is truly selling at before they go into a dealer – usually less than MSRP.

“You have two different sets of data,” Leonard said. Companies like TrueCar can show you the price range a vehicle has sold at recently. Then, with financing rates as low as they are now, you can get pre-approved before you head into a dealership to boost your negotiating power.

From there Leonard said it is just a matter of getting a dealership to agree to the numbers you’ve brought in.

But once you have a car in mind there’s still the matter of paying for it and cars are getting more expensive.

“Average transaction prices are anywhere between, let’s say $30,000 to $35,000 for the average vehicle sold in the U.S., and that’s because there’s a lot of new technology on vehicles,” McBride said. “There’s a lot of new safety features. Vehicles from all manufacturers are pretty much loaded now with a lot of great equipment, so we’re seeing average transaction prices go up.”

Car buyers have lots of options for loans to pay for those cars. Leonard suggests not getting locked into longer loans.

“I would max out at 72 months, that’s probably the most I would ever want a car loan for,” he said.

There are also some unique ways to finance a car. Leonard said people can lease cars, put a certain mileage on it each year and then pay off the residual balance of the lease with a loan to own the car.

McBride said in a COVID-19 world that many people are now thinking about buying used cars as an option too. McBride said people are wary of going on subways and buses and getting in Ubers while coronavirus still infects people. He said a used car may be a good option for them.

“If it’s a two year old vehicle, it could have up to 30,000 miles and still be considered lower mileage vehicle. Those are great buying opportunities,” McBride said.

Of course, if you already own a car and things are too expensive there’s also the option to refinance. If your credit score has improved since you purchased your car, you can often refinance the loan on your car to bring down the interest rate and lower your monthly payment.

“A lot of people don’t even know is available to them,” Leonard said. “People who own a home think about refinancing their mortgage because they’re always looking to improve interest rates, reduced monthly payments, but a lot of people don’t know that you can do that very same thing on an automobile.”

Leonard and McBride both said it’s important to consistently check rates for better offers.

The Right Time to Buy a Car

If you do your homework almost any time can be a good time to buy a car.

What to Know Before Buying a Car

If it’s a two year old vehicle, it could have up to 30,000 miles and still be considered lower mileage vehicle. Those are great buying opportunities.

Financing a Vehicle and Post-Pandemic Considerations

People who own a home think about refinancing their mortgage because they’re always looking to improve interest rates, reduced monthly payments, but a lot of people don’t know that you can do that very same thing on an automobile.

Listen to the full show: