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This Week in Car Buying: Top deals of the month; GM's inventory struggle; Best, worst states for car ownership; Fed hikes interest rates

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Low monthly lease payments and large rebates on a wide cross section of vehicles highlight Kelley Blue Book’s December deals as the annual holiday sales events go into their final weeks. Sedans continue to offer the best prospects for deals as crossover SUVs continue to be hot, although two of the latter have made it into the Top 10 list for the month.

“December’s list points out holiday deals on new vehicles that include SUVs, compact cars, luxury models and sedans, as well as a best-selling hybrid car,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book’s KBB.com. “For those interested in getting into a spacious, refined midsize sedan and one of KBB.com’s most awarded cars for 2016, our top deal for the month on the Hyundai Sonata is a compelling choice.”

The Korean brand is offering 2016 models of this midsize sedan on a 3-year lease for just $179 per month with $1,449 up front. KBB estimates a Fair Purchase Price of $20,957 on this model that stickers for $22,585. Other family cars with generous deals include Toyota’s full-size Avalon. On 2016 models, expect to pay $269 per month over 3 years with just $1,999 down. Nissan’s midsize 2016 Altima carries a $1,000 rebate and 0-percent financing.

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In the luxury segment, Infiniti has a 39-month lease on its 2016 Q50 sedan for $279 per month with $2,499 down, while Acura has its brand-new 2017 entry level ILX sedan at $219 per month also with $2,499 up front for 39 months.

The two SUVs on the list include the 2017 Buick Envision, which is available on a 3-year lease for $299 per month with $3,259 due at signing, along with the 2016 Jeep Cherokee which is eligible for $5,000 cash back. That model caries a $24,720 KBB Fair Purchase Price on a $26,290 sticker.

A pair of entry level hatchbacks, both with sizeable rebates, also made the list. The 2016 Hyundai Veloster is eligible for $4,000 cash back, while the 2016 Ford Focus has $3,000 on it. Toyota’s 2016 Prius Hybrid features a $229 per month 3-year lease with $1,999 down.

GM’s inventory struggle

As General Motors cuts production and fleet sales to concentrate on more profitable retail sales, a market that favors crossover SUVs at the expense of sedans is resulting in rising inventories of these more difficult-to-turn models, according to Automotive News. The trade journal reports that GM’s Dec. 1 inventory of 873,200 units is the largest since February 2008. Its days’ supply moved up to 86 from 84 a month earlier while overall industry supplies were at 73 days.

The highest inventories include Chevrolet Camaro and Cruze, Cadillac ATS, CTS and CT6, Buick Regal, LaCrosse and Cascada. All these models have in excess of 100 days’ supply. Analysts expect either further production cutbacks or a new round of incentives to clear out the stocks.

Meanwhile, Ford saw its inventory drop on a month-over-month basis from a 90 days’ supply to just 83 as it stuck with its strategy to continue supplying vehicles to rental fleets even as GM has so far cut 75,000 units to those operations. Ford’s rental deliveries currently account for 11 percent of its sales, while overall fleet sales are up 2 percent this year to a 30 percent share of total sales.

Also: Kelley Blue Book Best Buy Awards of 2017

Best and worst states for drivers

If you love driving, then Iowa is the place to be…California, not so much. Bankrate.com has pulled together factors that contribute to making car ownership and operation a living heaven or hell. In this year’s study, Iowa comes out on top as the car-friendliest state in the union, thanks to an average commute time of 19 minutes, annual insurance costs of $648 and an annual gas bill of $1,118. Rounding out the top five for best places to drive are Ohio, Maine, Wisconsin and Vermont.

The most populous state, California, is at the bottom of the list. Average drivers can count on a 28.9-minute average commute, annual insurance costs of $895 and fuel costs of $1,260. It also has one of the highest vehicle theft rates in the country. Next to last was New Mexico, followed by Nevada, Louisiana and Wyoming.

“Transportation is the second highest cost many households face, but that burden doesn’t fall equally across states,” says Claes Bell, CFA, an analyst with Bankrate.com. “Americans should take into account their costs for insurance, gas and other factors, as well as safety concerns, when considering their daily travel options.” More on the Bankrate.com study can be found here.

Fed hikes interest rates

A rallying stock market is being cited as one of the reasons why the Federal Reserve announced that it is raising interest rates a quarter point. It’s a signal that the nation’s central bank believes the economy is poised for higher growth rates. A preliminary estimate of Gross Domestic Product shows an expansion of more than 3 percent, which is outpacing the 1-2 percent range that the economy had been operating in since the downturn of 2008-09.

It is the first increase in the rate in over a year and will move the short-term rates to between 0.50 and 0.75 percent. It’s also expected that the Fed could raise rates at least twice more in 2017. This slight bump up in rates will also push auto loan rates higher, perhaps as soon as 90 days out. On an average new car loan, each quarter point would amount to about a $5 increase in monthly payments.

"To save money during the car-buying process, negotiate the price of the car, negotiate the price of your trade, and shop around to get the best rate you can," says Greg McBride, CFA, Bankrate's chief financial analyst. Since not all lenders will raise rates, comparison-shopping still pays dividends, McBride says. "But don’t lose sleep over the Fed raising rates."

He adds: "To put things in context, the auto loan rates that are available at banks and credit unions are the lowest we've ever seen, and car shoppers don't need to worry that those great rates are going to disappear overnight."

The rundown

Check out the This Week in Car Buying Podcast here.

An all-new 2017 Subaru Impreza is now on sale. The redesigned compact features crisper styling and road manners thanks to a new platform. We get behind the wheel in this First Review.

Hot on the heels of the $17,845, 2017 Hyundai Accent Value Edition, the Korean automaker offers a similar take on the 2017 Hyundai Elantra Value Edition. This model starts at $21,085.

Ford continues making mechanical improvements to its sales leading pickup truck, including a new 10-speed automatic transmission. Check out the 2017 Ford F-150 Video Review and Road Test here.

In the market for a new car? Explore these useful tips on how to get the best deal:

Kelley Blue Book’s Complete Guide to Incentives

All you need to know about leasing

Which dealer services are right for you?

What to look for in your next economy car

Ten insider tips for new car buying


 

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