Traditionally, August has been the month when manufacturers are looking to clear out current model year stocks in anticipation for the next model year, which officially begins October 1. As a result, there's no shortage of "sales events," rebates and lease deals throughout the dog days of summer. All this sales activity reaches a crescendo over the Labor Day weekend, more so this year because the holiday arrives on Monday, September 1, coinciding almost precisely with the date most auto manufacturers consider the close of the August sales period. So there will be a tremendous effort over this long weekend to get people in the showrooms and sell a lot of vehicles. If you visit your local dealers, you're likely to see Mardi Gras-like parties in the showrooms, a blitz of TV advertising rivaling Super Sunday levels and door buster deals that could remind you of a post-Thanksgiving Black Friday. Behind all the hoopla great deals await...if you know how to recognize them.
The upside...and downside
The scope of incentives is breathtaking this time of year. Virtually all manufacturers have a program of one sort or another: cash rebates, low- or no-percentage financing and lease deals with eye-popping low monthly rates. Some of the deals also offer no payments for up to 90 days, while Volvo will make the first payment for you. These aren't simple come-ons either. Real bargains are there for the taking this weekend. At the same time you should keep in mind that while you can get a significant bargain on a new car, these deals can come at a price that you might not see until later in the ownership experience.
The good includes special financing deals, low- or no-down payment deals and subsidized leasing that lowers your payments throughout the course of the lease. The potential pitfall is a failure to pay attention to depreciation, which can be your biggest cost over the first few years of ownership. At this time of year you will be wowed by deals that promise thousands of dollars off the Manufacturer's Suggested Retail Price (MSRP.) They are tantalizing and can represent genuine bargains, but remember that when you buy your new 2014 model over Labor Day weekend, within a month when the 2015 versions arrive, your car will be saddled with a year's worth of depreciation. That's not much of a factor if you're planning to hang onto your car for 4 or 5 years, but can be an issue if you turn your cars over every two years or so.
You should also see how your financial situation and personal needs match up to the current special financing programs. In the past low- or no-annual interest-rate programs were on loans of relatively short duration, typically 24 months. While some consumers were able to take advantage of these special offers, many could not simply because the monthly payments were too high even with the added benefit of low or no interest. These days the special financing offers can be found on longer-term loans that are much more palatable for most people. Most of them are for 60 months and some deals call for 72-month installments. Those long terms keep the monthly payments appealingly low, but the tradeoff is you will be making monthly payments for a long time. That monthly payment might appear to be a bargain, but you might ask yourself if you will still consider it a bargain five years from now when you're making the same monthly payment to own a five-year-old car?
The same goes for leases. Some may be as short as 24 months, but others, like the current $299 per month deal on the Infiniti Q60, can stretch as long as 39 months. With a lease you must also factor in the effect of the initial payment. Unlike a down payment on a purchase, the initial payment on a lease does not net you equity in the vehicle, so a big initial payment on a lease should be viewed differently than a down payment. If you gain equity (ownership stake) in a vehicle you have the ability to recover that when you sell the vehicle. In a lease you never gain equity, so you don't have this opportunity. The major positives in leasing a vehicle are the typically lower monthly payment and the largely hassle-free nature of vehicle disposal. When the lease is over you take it back to the dealership and turn it in. If you have kept the vehicle in good shape and you haven't exceeded the mileage limit, you are done.
So what are the best deals right now?
It really depends on what you are looking for, how long you plan to keep the vehicle you are acquiring and whether or not it matters whether you get the latest model. Some of the biggest rebates, like the $6,000 on the 2014 Ford Expedition, are available to help dealers to clear out stock before the face-lifted 2015 model comes out. On the other hand, Chevrolet and GMC, which still offer money on the remaining 2014 models of its respective Silverado and Sierra pickups, also offers deals on the all-new 2015 models. Based on the fact that 2015 models offer all-new styling and upgraded technology, they are probably the better values. Also looking to stay competitive in the hotly contested full-size truck market is Ram, which has $3,500 or 1.9-percent financing on its 1500 Quad Cab pickup.
In the mid-size sedan market, car buyers might want to shop the Toyota Camry as long as they are comfortable with the knowledge a heavily revamped version due this fall. The current (2014) Camry is being offered on a $229 lease with $999 down for 36 months or, if you prefer to purchase, with a $1,500 rebate or $1,000 rebate plus 0-percent-interest financing. Among full-size cars, the Ford Taurus is offered with a $5,500 cash rebate or $2,000 cash back with 0-percent financing. Nissan's Maxima isn't far behind with $4,000 cash or a $259 lease deal requiring $2,999 up front.
With gas prices moderating as summer ends, manufacturers are also keen to move their hybrid models, which they desperately need to sell to raise their fleet fuel economy averages. Ford's C-MAX Energi plug-in hybrid carries a $3,000 rebate plus 0-percent financing and a $219 per month 36-month lease requiring a $3,169 initial payment. The Chevrolet Volt is being offered with either a $1,000 rebate or a $269 per month 36-month lease requiring $2,679 up front. And Toyota's Prius Plug-in carries a $3,000 rebate or $2,000 with 0-percent financing.
The deepest discounts frequently are available on discontinued models. Typically these older designs not only have lower MSRPs but also some pretty hefty incentives. The 2014 Dodge Avenger, which goes away after this model year has a $3,000 cash rebate. The KBB Fair Purchase Price for the Avenger is $20,726. The 2014 Acura TL and TSX, which are being supplanted by a single model, the 2015 Acura TLX, have, respectively, 1.9- and 0.9-percent finance deals as well as 36-month lease deals of $359 and $279. Both leases require initial payments of about $2,500.
All these incentives are set to expire Tuesday, September 2. Whether or not the programs are extended will depend on how big a dent these Labor Day sales promotions have put into inventory levels. With manufacturers keeping a tighter lid on supplies, there may be fewer programs extended as the industry rolls into the 2015 model year. Check back next week to see what develops.
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