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Year-End Wheeling And Dealing

Great deals on new vehicles don't come along every day. Personal Finance Adviser Ray Martin has tips for finding the best deal on a new car.


If you've been shopping for a new car, you might not believe your eyes. Automobile manufacturers and dealers are offering thousands of dollars in rebates and low-interest rate financing. In some cases, auto dealers are offering no payments for 12 months or no-interest financing for up to 60 months.

Indeed, auto makers are determined to set another car sales record this year. That means pulling out all the tricks to attract buyers by dangling too-good-to-be-true deals before consumers who may be reluctant to buy as the economy cools down. Some speculate that the auto makers figure it's cheaper to offer customer incentives than to shut down plants and lay off workers.

Attractive rebates and financing incentives and the lack of price increases make this the best time to buy a new car in 20 years, according to David Littmann, chief economist for Comerica Bank, in Detroit. And these deals are offered not just on leftover 2000 models, but also on new 2001 models.

If you're in the market for a new car, here's what you need to know about comparing these year-end deals:

Incentives and Rebates

Special rebate programs are offered by the manufacturers to increase the sales of slow-selling models or to reduce excess inventories. Rebates can take the form of either direct cash back or low-rate financing offers. If both financing and cash are offered for the same model, the buyer must choose which he or she would prefer.

While manufacturers' rebates and low financing are passed on directly to the buyer, dealer incentives are passed on only to the dealer, who may not elect to pass the savings on to the customer.

Frequently the salesperson will not even be aware of dealer incentive money, so buyers should speak to the sales manager about participating in dealer-incentive programs. Deduct the amount of the dealer incentive and customer rebate from the invoice price to determine the true dealer cost.

There may be additional incentives and rebates available in your area sponsored by the manufacturer or by regional dealers associations. Sometimes a national program may exclude certain regions, however. If a particular car is selling extremely well in your region, the rebates may not be available.

When an incentive or rebate program expires, manufacturers do not always renew or revise them immediately. Just as new car pricing is competitive, new rebate programs are extremely competitive, and carmakers often wait to see what their competitors will do before announcing new programs.

Pitfalls and Perks

Oldsmobile has a national program called the Deferred Payment Purchase Program: Pay nothing down, incur no interest charges and make no payments for 12 months. After that, you'll make payments as if you've just taken out the loan.

While it's enticinto take this deal, remember that a higher interest rate when the loan begins could wipe out the benefit of the deferred payments.

Also don't take this deal if you can't afford to make the payments but hope to be able to in a year. If the economy cools and you don't get that raise, bonus or promotion, those payments will still have to be made.

Compare the Total Cost: If you have a choice of either a cash rebate or low-rate financing, compare the total costs carefully before deciding. You may come out ahead by taking the rebate vs. the low rate financing. You'll save even more if you use a home equity loan or a line of credit to finance the purchase because the interest paid is generally tax deductible.

Negotiate the Purchase Price: As good as these incentives sound, nothing can save you money like good old-fashioned shopping around for the best deal on the price of the car. Don't be dazzled by the special incentive programs.

Limit the Length of Your Loan: It may sound like a no-brainer to take a 0 percent interest financing deal offered for 60 months, but reconsider carefully. The repayment terms should not be longer than the warranty on the auto being purchased.

Keep in mind that automobiles lose value, and you never want to be in a position where you owe more than the auto is worth. This is called being "upside-down." You'll call it "being stuck" if you need to trade in your car for something that's more suited to your needs in three or four years.

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