This Week in Car Buying: Top Deals of the Month; Inventories steady; Lease study says read the fine print; Interest rates climb
The “official” start of the 2017 model year is just a couple of weeks away and manufacturers have shifted into high gear when it comes to clearing out stocks of 2016 models sitting on dealer lots. Cash rebates as high as $5,000 and monthly lease rates as low as $189 per month signal that the time is right to cut a deal on these closeout specials. As we have seen, manufacturers are also upping incentives on new 2017 models as well.
“September is a terrific month for car buyers because it offers end-of-the-model-year bargains and the first selections of the all-new vehicles of the upcoming model year,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book. “This September’s 10 Best New-Car Deals list reflects that, offering a wide variety of appealing offers on an array of vehicle types. As we wend our way to the official opening of the 2017 model year, this is a great time for new-car shoppers to strike a deal.”
If it’s a small economy car you’re looking for, Ford is offering rebates of $3,950 plus 0-percent financing on the 2016 Focus, while Toyota is offering up its fuel efficient 2016 Prius on a 3-year lease at $199 per month with just $1,999 down. Two other compacts are also offering generous incentives, Hyundai has a $3,500 rebate available on the 2016 Veloster hatchback, while the 2016 VW Golf is eligible for $1,500 cash back along with 0-percent financing.
In the luxury segment, Cadillac is offering $5,000 back and 0-percent financing on its full-size 2016 XTS, while Infiniti and Lexus have lease deals on some of their sedans—the 2016 Infiniti Q50 is available on a 39-month contract at $279 per month with $2,400 up front and the 2016 Lexus IS has a $329 per month deal for 3 years with $1,999 down.
Buick recently introduced its newest crossover SUV, the 2016 Envision, which will have an abbreviated model run before the 2017 models bow. These higher trim level 2016 Envisions, which start at $42,995 (and have a KBB Fair Purchase Price of $40,673), have a 39-month $299 per month lease deal requiring $4,039 down. Nissan’s compact crossover SUV, the 2016 Rogue, is being leased for $189 per month for 3 years with $1,899 down. Nissan recently introduced a facelifted 2017 model at the Miami Auto Show. The Japanese automaker is also offering strong incentives on its midsize 2016 Altima with $3,750 cash back. August sales of the sedan fell 39 percent over the previous year, a decline Nissan attributed to lower fleet sales.
Automakers are heading into the new model year with almost an ideal days’ supply of vehicles on hand as the number remains at 61, the same as August 1, according to Automotive News. Year-over-year, the number is up from 55 days, the number of days it would take at current sales rates to move all the cars in inventory. In all, the industry has about 3.5 million cars to sell.
While some makers, notably Fiat Chrysler Automobiles and Toyota, saw supplies tighten (81 to 74 days for the former, 46 to 42 days for the latter), General Motors saw its supply climb to 74 days from 66 days. That rising inventory is a reflection of GM’s strategy to reduce fleet shipments and to keep a rein on incentives in order to boost margins on retail sales. Again, the tightest supplies in the industry are held by Subaru, which continues to carry only a 21-day inventory of vehicles. Mitsubishi has the most stock on hand at 127 days, while among the major makes, Ford Motor Co. posted a 78 days’ supply.
Lease study: Read the fine print
A study of leases by website WalletHub said the auto industry deserves a transparency score of 4.68 out of 10 and prodded manufacturers to do more to educate buyers about the ins-and-outs of the practice. “Leasing offers are the most difficult type of car-purchasing arrangement for consumers to understand as they lack the equivalent of an annual percentage range (APR) that can be used for comparison purposes,” the report said. “As a result, the transparency of manufacturers about these deals is integral to a consumer’s ability to make informed decisions.”
Because lease rates are expressed in monthly payments with no or little money down, buyers can have a hard time figuring out what they are actually paying, since the contract covers only the use of the vehicle rather than its entire value. As a result, potential lessees should read the fine print to find out such factors as the residual or resale value of the car at the end of the lease, as well as any early termination or excess mileage fees that may be built into the contract. It also helps to know the capitalized cost of the vehicle on which the lease is based because that number is analogous to the real-world purchase price.
The study also found that buyers should closely look at the loan offers from manufacturers because more often than not, the makers can incorporate lower interest rates in their deals that those offered by competing financial institutions. In examining loan interest rates, as well as lease offers, from 22 car brands, 52 credit unions and 84 banks, WalletHub determined that loan rates offered by the manufacturers averaged 1.45 percent, much less than the 2.2 percent offered by credit unions, 2.9 percent from national banks and 4-4.2 percent from regional and community banks.
Interest rates tick up
It may be a good time to take advantage of those low manufacturer rates, as Bankrate.com reports that the average national rate on a 5-year new car loan is 3.3 percent, up 11 basis points from 3.19 percent a week ago. A 4-year loan is also up a tenth to 3.24 from 3.14 a week ago. At the current rate on the 5-year loan, the payment is $181 for every $10,000 borrowed.
On the used car side, the rate on 4-year loans is up only 0.04 percent to 2.98 percent, while 5-year used car loan rates dropped 0.01 percent to 2.95 percent.
Also jumping on the hybrid bandwagon, the 2017 Porsche Panamera E-Hybrid has been introduced by the German automaker.
Meanwhile, Chevrolet shakes up the electric vehicle market by promising a range of 238 miles between charges on its new 2017 Bolt EV. That tops the estimated 215 range projected for the Tesla Model 3.
In the market for a new car? Explore these useful tips on how to get the best deal: