If you’re buying a new vehicle, you’re likely going to pay more for it than you would have if you had bought it in recent months.
With an economy that continues to limp toward recovery, and sharply increased consumer demand for new vehicles, auto companies have started scaling back their cash incentives in favor of better deals on financing and leasing.
What does this mean for buyers? August is always a brisk time to buy a car, SUV or truck, as automakers run sales to try and clear out the last of their 2012 model-year inventory. But the reality is that the deals aren’t as good as they were a year ago.
According to TrueCar.com, some automakers– notably Volkswagen, Honda and Nissan — are, in fact, offering bigger incentives right now than they did in 2011. But, overall, the industry decreased incentive spending by 3.7%, which, of course, translates to higher final selling prices to consumers.
Why can most automakers afford to cut back on cash-back offers? Because so many buyers delayed their purchases between 2009 and 2011 after the great financial meltdown of 2008 and 2009 and so many jobs were lost, they have been coming back as their finances have stabilized and their cars have gotten older. The average age of cars and trucks on the road today is over ten years.
At the same time, when General Motors and Chrysler were going through bankruptcies in 2009, they closed some of their production lines. Ford did as well. So, while demand is up, the suply of vehicles is lower than it was. Without gluts of cars to sell, Detroit automakers especially don’t have to offer rebates as big as they used to move the metal.
A shortage of supply has helped Korean automakers Hyundai and Kia as well. Those companies vehicles are in big demand and they are having trouble building some of the popular vehicles fast enough. That’s a nice problem to have.
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There was nothing spectacular, to my eyes, about the damage.
My car, a 2003 Pontiac Vibe, seemed to have survived the initial furor of the tornado ripping through our neighborhood. Shingles and siding scraped the sides of my trusty all-wheel-drive hatchback, but it looked otherwise okay and ready to continue its march toward 200,000 miles.
Unfortunately, the car had been parked on the street that afternoon instead of its usual spot in our driveway. Minutes after the storm, a flash flood turned our street into a raging river. At the peak, the flood-waters surged above the tires and pooled inside the car.
It was only a matter of time, the insurance company said, before electrical systems went haywire. The Vibe was declared a total loss.
I hadn’t expected to be in the market for a vehicle any more than I had expected a tornado to strike Dexter, Michigan on March 15. Warning or not, though, we needed a car, preferably quickly. But that proved complicated.
My wife and I had divergent ideas on what direction the car search should go. I wanted something small and extremely fuel-efficient for my hour-long commute. She wanted another family hauler to pair with our ’03 Honda Odyssey– something that could fit all three children, so pick-up and drop-off duties at daycare could be shared.
Not a lot of middle ground there. Here’s how our car-shopping experience transpired:
Coming from two different places, our initial list included everything from the Honda Fit sub-compact to the Ford Flex crossover with three rows of seats. We had to narrow that down.
A review of our finances revealed that, through the first three months of 2012, we had averaged $364.91 in gasoline expenses per month, significantly more than the $250 allotted in our family budget. At least to me, that was an astounding figure.
We put an average number of annual miles on our cars–maybe 15,000 on each.
With gas prices likely to bounce between $3.75 and $5 per gallon for years to come, curbing our gasoline expenditure had to be our top priority. Another minivan would have exacerbated the drain on our budget. Minivans were eliminated. So was the Ford Flex.
Compromises, though, were made. For the most part, I would be driving the car alone, or perhaps with one child. Still, we wanted a vehicle that could accommodate car seats for the three kids, a daughter age 3 and twins who are 9 months. Maybe the prospective car didn’t need to provide them with tons of space, but it did need to at least be possible to fit them all inside.
Fuel efficient, spacious enough to fit three kids in a pinch: those were the two main criteria that moved us forward. We also hoped to avoid a car payment. We set a budget of no more than $20,000, using the $6,500 we got from the insurance on the Vibe and a dip into savings. So, both new and used cars were under consideration.
Here’s a look at our somewhat scatter-shot list of top contenders and, ultimately, the purchase we made:
MSRP: $15,995 – $19,495
MPG: 23 city/31 highway
Pros: In look and feel, it’s the car on the list that reminded me most of the one being replaced. This was a good thing. It was an updated, sportier version of the Vibe that promised slightly better gas mileage. A new model fit within our budget parameters.
Cons: With a 69.5-inch body width, it was the smallest that made our final five, and every inch counts when squeezing three car seats across one row. Beyond that, I intensely disliked a Hyundai Sonata hybrid that I drove earlier this year, so there was some guilt-by-carmaker-association in eliminating the Touring from contention.
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Hyundai Elantra Touring Photos & Information
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MSRP: $22,470 to $32,120
MPG: 23 city/28 highway
Pros: The powertrain possibilities. The V6 EcoBoost has proven popular and, should we consider a used model, my trusted mechanic in Ann Arbor, Mich. swears the base I-4 is the most bulletproof engine on the road today. The Escape’s 72.4-inch width tied for the widest among our finalists.
Cons: Unless we wanted to upgrade to a hybrid version at considerable cost, the gas mileage didn’t ballpark anywhere near my definition of “efficient.”
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MSRP: $39,145 – $39,145
MPG: 95 city/93 highway
Pros: The Volt was a wildcard on our list. Even with a tax rebate bringing its purchase price into the low $30,000’s, it was still more than we wanted to spend. But the extreme gas savings would negate worries over the higher-than-desired purchase price. My office will soon have a recharging parking place that would allow me to charge up during the day at no cost. So that was a draw. I could drive round-trip to the office, about 100 miles on about one gallon of gas, and have half my charging paid for.
And in terms of our monthly family budget, a car payment would bring cost certainty instead of fluctuations caused by volatile gas prices. Plus, it’s a flat-out fun car to drive, a game-changer for personal transportation.
Cons: It’s officially a four-seat car for, in our case, a five-person family. We couldn’t even try to squeeze the three car seats across the 70.4-inch body length, because of the battery split in the back seat. Even if we could, what happens when the kids get a little older and bigger?
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MSRP: $20,695 to $28,295.
MPG: 26 city/35 highway.
Pros: Truth be told, we liked a lot of the Mazdas. The Mazda3 hatchback, the Mazda5 and the CX-5 all received positive marks and serious consideration in our book.
The CX-5 stood out as the best among the CUVs we considered, largely for the superior gas mileage in its segment, produced by its SKYACTIV system, which includes technology like turbo-charging and direct injection. Its agile driving characteristics and price, in the base models, landed in our budget range.
Cons: Not many. Since the CX-5 is new this model year, there were no real used options we could deal down into. And, while its MPGs were stellar in segment, it ultimately didn’t produce the gas savings of the car that we did purchase.
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MSRP: $25,540
MPG: 30 city/42 highway
First, the negative– this was a hard used car to find. Volkswagen TDIs are known for great resale value, and owners that don’t like to give them up.
Using websites like AOL Autos and, admittedly, one or two others during the search, there were only about dozen of these turbo-diesels for sale across the entire country. It got to be discouraging when, every time I called on a potential target, I’d learn it had already been scooped up.
I should say, too, that I had gotten a solid recommendation of the TDI Sportwagen from AOL Autos Editor-in-Chief David Kiley who owns a 2010 model.
It took about three weeks for me to find exactly what I wanted, and to locate one still for sale. We settled on a certified pre-owned 2009 Jetta TDI SportWagen with 55,000 miles on the odometer and an automatic transmission, right at the top of our desired price range. The only complication: I had to go pick it up in St. Cloud, Minn.
Here’s how it performed on its drive home:
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I flew out of Detroit Metro on a recent Friday morning, flew into Minneapolis-St. Paul and made the hour-plus drive to St. Cloud in time to inspect the Jetta and sign the paperwork at Eich Motor Company.
The car itself was excellent. Not only did it fit our parameters of being wide enough to accommodate three car seats across the rear seats, it also provided a larger-than-anticipated amount of space between the front and rear rows– nice surprise.
Throughout the 12-hour drive home, all concerns I had ever heard from others about driving a diesel disappeared.
Without needing to pay a premium for a hybrid or electric vehicle, I had bought a car that achieved a combined average of 40.2 mpgs over the course of its homecoming. On the highway, I consistently hit 47 mpgs. Diesel prices are be marginally higher than regular gas on the front end, but with that sort of efficiency, we’re going to save money over the life of the car.
The highlight of a trip that started an hour west of the Twin Cities came during a conversation with my wife as I was crossing the Illinois-Indiana border on Interstate 94. In addition to asking how much sleep I had gotten during a pit-stop the night before, she asked how,”How many times have you filled up?”
The answer clinched all satisfaction with the purchase:”I haven’t yet.”
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Volkswagen Jetta TDI SportWagen Photos & Information
Volkswagen Jetta TDI SportWagen Specs
Volkswagen Jetta TDI SportWagen Local Dealer Price Quote
So, what are the numbers? TrueCar says the average rebate in July was $2,480. Meantime, the average price for a new vehicle was $30,369 last month. J.D. Power puts the average price of a new vehicle last year at $28,337. The higher price is due to not only smaller rebates, but also a surge in luxury car sales and people opting for pricier packages like those that connect your smart-phone to your car.
“Just because the prices are rising and the rebates are falling doesn’t mean there aren’t bargains to be had,” says AOL Autos editor-in-chief David Kiley. “For one thing, consumers will be surprised if they really start looking that vehicles and brands they might not have considered before are fantastic deals compared with the vehicle they might have been focused on.”
Examples? Kiley says if you were focused on a a mid-sized sedan such as a Toyota Camry or Ford Fusion, and the transaction prices are higher than you thought, you would do well to look at a Hyundai Elantra sedan, which is a few thousand less with hardly any real-world sacrifice on room. AOL Autos picked the 2012 Elantra as “Best Car Under $20,000.”
But while the numbers don’t seem to be in your favor right now for finding a bargain, we can help. Check out our innovative new car shopping tools to ensure that you’re getting the best deal on the car of your dreams. Click the link below to get started!