“May you live in interesting times.”  With automobile sales down nearly 40%, tighter credit markets, and the Big Three American automakers on the verge of bankruptcy, this old Chinese proverb has never been more true.  (Even the almighty Toyota reported its first full-year loss in more than 70 years!)  The challenges facing the automotive industry today are unprecedented, and that can mean both challenges and advantages for the consumer.  Here are five things you need to know in order to successfully navigate today’s uncharted market:

 1.  Deals, deals and more deals!  For perhaps the first time in history, the supply of new automobiles far exceeds the demand.   Even after production cutbacks, there are still more cars than can fit onto already the overstocked dealer lots.  So, what do businesses do when they have too much inventory?  They have a REALLY BIG SALE!  The level of incentives, including rebates, financing specials and manufacturer-to-dealer bonuses, is astounding -  which is good news for you!  Even small, fuel efficient cars, which rarely need incentives to move, are being discounted.  Be sure to negotiate hard on the price of the car even before the incentives are applied.  The car dealers are hungry for your business, and they know they must compete to earn it.

2.  Beware of creative advertising!  When car dealers are desperate to make sales, they often get very creative with their advertising campaigns in order to entice you into their showrooms.  Offers such as “buy one, get one free” and “$12,000 minimum for your trade” may technically be valid, but they usually come with a stack of fine print that would make an attorney faint.  Be sure to weed through that fine print before signing on the dotted line.  And, remember the old adage, “if it sounds too good to be true, it usually is”.

3.  Credit is tighter, but still available.  Just six months ago, you could get a no-money-down auto loan with a credit score of just 650.  You will likely need at least a 720 credit score to get that same deal today.  The credit crunch has hit the automotive industry, with banks and manufacturer finance companies alike tightening the strings on subprime lending.  Rates on subprime car loans are higher and may require a 10-20% down payment.  You may have a hard time finding those longer 72 and 83 month loan terms, or you may pay a one to two point premium to get one.  However, if you have excellent credit, then you can take advantage of incredibly low rates for 36 to 60 month loans – under 5% at some credit unions!

4.  Fewer lease deals.  Over the past decade, insanely cheap lease deals have allowed Americans to drive far more expensive cars than they could otherwise afford.  Those days are over – at least for the foreseeable future.  The leasing companies are being killed by the number of vehicles coming off lease that have depreciated much more than expected.  Most manufacturers are raising lease rates or even suspending lease programs entirely.  Luxury car makers, like BMW, whose business depends heavily on leasing, will still have good lease programs – but probably not as good as they used to be.

5.  Watch what you buy.  Many cash-starved automakers are looking to cut costs by downsizing their lineups.  Manufacturers are canning poor selling vehicles, consolidating twinned models and even axing entire brands in order to stop the bleeding.  (See side bar for vehicles “on the chopping block”.)  So, is it still safe to buy American, even if it’s a steal?  Yes, it is.  Even in the event of a bankruptcy, the manufacturers will still do everything possible to honor your warranty, and mechanics will still be able to service and repair your vehicle.  (Heck, they still make parts for the Model-T!)  While there are no guarantees, vehicle makes and models always come and go.  It’s just part of the business.  However, the biggest risk is depreciation – orphaned vehicles typically lose their value faster than normal.

Truly, there has never been a better time to buy a car.  With great deals everywhere you turn, purchasing a new car can save you a ton of cash.  And, more importantly, it will also help revive our economy.