Leaving used cars on the lot

MarketWatch (MCT) - In this slumping economy, Americans have rethought their spending habits by saving more than buying, dining out less, dumping lavish holiday travel plans and doing anything else to maximize their dollar. But there's one purchase cash-strapped consumers won't necessarily have to cut corners on: a new car.

It may not seem logical to buy a new car these days but there's good reason, according to a recent Edmunds.com's report.

Jessica Caldwell, an industry analyst with the online car shopping and Web site, said as automakers are struggling to sell new cars and compete with used ones priced higher than ever before, consumers can swoop up good deals.

What about the 2009 Honda EX sedan or BMW M6 convertible you've been eyeing? It could be $337 to $2,522, respectively, cheaper than last year's model.

The Edmunds.com report took into account typically lower finance rates being offered today for new cars versus used vehicles, which often charge higher annual percentage rates. The savings could be even more once incentives such as low interest rates (some are at zero), cash back and warranties are figured in.

And in the case of Hyundai, the company started a program to make three months of payments if you lose your job. That has now been followed by Ford and GM. Read more on the new-car buying incentives.

"If you have the money and you feel you can make the payments, it's a great time," Caldwell said. "So many people want your business."

More than a million vehicles are sold in a "typical, healthy month" but only about 687,000 vehicles were sold in February, a figure that dipped nearly 40 percent compared to a year ago, Caldwell said. March car-sale numbers, which came out Wednesday, were no better. Read more on March car sales.

The automotive industry, Caldwell said, was hit in three different waves: the spike in gas prices, the tightening credit market and now the recession.

"It's a lose-lose situation for automakers right now," she adds.

Used cars traditionally depreciate steeply but that hasn't always been the case in the past year. For used cars, the number of vehicles sold rose 3.1 percent in February from a year ago, according to CNW Marketing Research, an automotive marketing research company, and demand for many popular models has kept resale prices relatively high.

At Friendly Honda in Poughkeepsie, N.Y., which sells new and used cars, owner Eric Kahn said buyers are "more conservative and cautious about buying and shopping."

"People are looking for value. They have been really tight at spending money," Kahn said. "We even see people trading BMWs for Hondas."

At Friendly Honda, the largest dealership in Dutchess County, Kahn said he expects dealerships to sit on less inventory as factory production dips to even out the excess vehicles needed to be sold. He adds that business has seen some growth in spending in the past weeks compared to February sales.

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Will the deals get better?

Anitra Sims, 42, of Queens, N.Y., hopes so.

She recently moved out of Manhattan to take care of her parents in Woodside, about a 20 minute subway ride into Times Square. She decided she wanted to own a car for the first time in her life.

"I was definitely surprised at the deals," said Sims, who said she works as a nurse. "It's not like they were giving away cars but it's going to be a lot more affordable than I thought."

Sims' decision on which car to buy will depend on whether she can get financing for a new or used car, she said.

"People are interested. They're more interested than before but they're also more price conscious," Caldwell said. "I think that's the biggest concern right now: 'What's going to be a deal?'"

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