Car Buyers: For Big Deals, Wait a Few Months

Last Updated Aug 11, 2011 5:01 PM EDT

Consumers watching the U.S. debt downgrade, the plummeting stock market and the faltering economy may think this is no time to buy a car. But if you are among those who need a new vehicle soon, you may be wondering: Can I get a loan? Will rates be higher? What will happen to prices?

The news is somewhat reassuring. Analysts believe that as inventories rise and dealers need to clear out 2011 models for the upcoming 2012s, buyers will get the best deals of the year from October through December. And the experts at automotive web site Edmunds.com think financing will remain stable and available as well: "All market factors suggest that credit will remain available, that interest rates will remain stable and that incentives may help keep car prices low in the immediate future," says Edmunds chief economist Lacey Plache.

Car sales already have slowed down since spring, although prices have remained high. Dealer inventories are likely to rise and prices fall as Japanese companies get back to full production after the earthquake and tsunami there and try to catch up for lost sales.

Here's a closer look at the factors affecting loans, rebates and other deals, as well as new- and used-car prices:

Car Loan Rates
If you have reasonably good credit (a FICO score above 660), you should be able to get a loan. But with a lower credit score -- say, below 620 -- you may have problems. Edmunds economist Plache predicts car loan rates will not rise because they are tied to U.S. Treasury rates, which have remained stable or fallen despite the debt downgrade by Standard and Poor's.

According to Yahoo Autos, recent rates were 5.73% for borrowers with FICO score above 720, 7.37% for scores between 690 and 719 and 9.40% in the 660-689 range. Be sure to check local banks and credit unions for rates lower than you may get at the dealership.

Rebates & Other Incentives
Special deals sponsored by the manufacturers may help you out on either price or loan interest rates. For instance, General Motors is offering a choice between those two on its 2011 Chevrolet Malibu midsize sedan (at right). List price starts at $21,975 before options, but it carries either a $2,500 rebate or 0% financing on loans up to five years.

The rebate goes to anyone buying the car. But to qualify for the 0% loan, you must be in the top credit tier (above 720). If you can get a good financing deal preapproved outside the dealership, your best deal often is to take the rebate.

GM is also offering financing deals -- but no rebate -- on its strong-selling new compact, the Chevrolet Cruze; buyers can now get 2.9% financing for up to five years.

New Car Pricing
The supply disruptions from the Japanese earthquake and tsunami cut the supplies of Japanese-made cars and even some U.S- brand cars that use Japanese parts. As a result of lower inventories, dealers have been discounting less and the average transaction price on cars has risen, according to TrueCar.com. (Prices have spiked especially for cars like the popular Japanese-made hybrid Toyota Prius.)

Now, Toyota and others say they will be back to full production in September. And analysts predict that likely incentives from these companies will help bring down overall prices, since GM, Ford and others likely will have to match the special deals.

Used Cars
Now, the bad news: Don't expect lower prices ahead if you are shopping for a used car. Kelley Blue Book notes that the average price for 1- to 3-year-old used cars has has risen by 16% a year since 2008 because of lower supply, as fewer cars have been traded in or returned from leases. "We expect used-car values to remain strong for the next two to three years," says Alec Gutierrez, manager of vehicle valuation for Kelley.

The upshot: If you need to buy a used car, go find the best deal you can from local ads or on web sites like AutoTrader.com. But if you are a new-car shopper, continue to be patient.

Photo courtesy of General Motors
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    View all articles by Jerry Edgerton on CBS MoneyWatch»
    Jerry Edgerton, author of Car Shopping Made Easy, has been covering the car beat since Detroit companies dominated the U.S. market. The former car columnist for Money magazine and Washington correspondent for Business Week, Edgerton specializes in finding the best deals on wheels and offering advice on making your car last.

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