Auto Sales Slump Creates Savings Opportunity
Published October 18, 2016
Back in January, we predicted that 2016 auto sales would end up slightly below the record 17.47 million cars and light duty trucks that were sold in 2016. Many experts were predicting another record breaking year but we were not that confident.
Through the end of September, total sales were running about 0.5% ahead of 2015. However, September saw a year over year decline of about 0.5%. Some manufactures declined even more. For example, Ford sales were down 2.6% from last September.
Many industry reports indicate that the sales over the past few months have been supported by manufacturer incentives. Unfortunately for the industry, these incentives seem to be losing their grip on the market. Ford recently announced a production cut on the F-150 and several other models. Other manufacturers either have or are expected to follow suit.
Why Cut Production?
You may wonder why a manufacturer would cut production on their best selling model. The reason is that there are too many available on dealer lots. A report indicated that there is a 95 day inventory of F-150s on dealership lots. The inventory of other makes and models might not be that high, but are high enough that production cuts are necessary.
Why Sales Suddenly Weakened
On the surface, it doesn't make sense that sales were running ahead of the record 2015 pace and then all of a sudden manufacturers are needing to cut production. There haven't been any major economic changes throughout the year and the mess that is the Presidential Election has been going on for months.
Essentially, the automakers don't want to increase incentives to the level necessary to maintain the record sales pace. Even though production cuts reduce their efficiency and increase their cost per vehicle produced, they have determined that more incentives would be even more costly to their bottom line.
Additionally, due to the incentives of the past few months, some consumers may have decided to make their purchases sooner in order to take advantage of these deals. These actions would then lead to lagging demand in the latter part of the year.
Incentives Not that Impressive
Currently, when researching incentives and rebates, we have found that there aren't really many great incentive deals out there. This discovery makes a lot of sense because of the production cuts. If a manufacturer cut production and offered great incentives, it could be a recipe for disaster for their financial health.
We have noticed that many of the incentives that are available are expiring on October 31. My guess is that they will get better once November rolls around, especially on 2016 model year vehicles as their production year rolls to a close. In some cases, the 2017 models are already rolling off the assembly line.
When you do see incentives advertised, make sure to always read the fine print. If you look at this example for a 2016 Cadillac CT6 Sedan, you will notice quite a few restrictions. First and foremost, the deal expires on October 31. Additionally, you have to own a vehicle from another manufacturer (other GM brands don't qualify) that is a 1999 or newer model year. Pay attention to any restrictions before you get excited and run out to a dealership.
Use Dealer Inventory to Your Advantage
Since dealer inventory is building, they will be motivated to try and make sales. Cars sitting on the lot don't make them any money and actually cost them in floorplan financing.
This environment is the perfect storm for an educated car buyer that knows how to negotiate, especially on 2016 models. Everything you need to know is in our new car buying guide. We recommend using TrueCar to get an idea of the market pricing for the vehicle you are looking for. You can take their guaranteed price certificate to the certified dealer and use it as the starting point for negotiations.
Get more competition involved using sites like RydeShopper and Edmunds so that you can get dealers competing against each other for your business. Competition is important to maximize your negotiating power.
There may be secret incentives that are available. To try and help the dealers move inventory, manufacturers will sometimes offer factory to dealer incentives that they don't advertise to the public. To find out what secret incentives might be available for you, we recommend buying the Fighting Chance package.
In addition to the report on rebates and incentives, you will get a comprehensive report that includes invoice pricing for the base vehicle and all available options. We think it is a great deal for only $59.95 ($15 for additional vehicles). You'll be able to save a lot more than that using the information the package contains.
Let us know what kind of deal you are able to negotiate. Great deals are all about timing and right now the timing is perfect for you to buy a new car!
About The Author: Lyle Romer is a consumer advocate, Founding Contributor and Vice President of CarBuyingTips.com. A 20 years veteran of the auto industry with a high level of expertise, Lyle has been researching all aspects of the automotive sales industry.
Lyle's expertise and research played a vital role during the creation of CarBuyingTips.com in 1999 after years of industry research. He carefully observed every aspect of his own car buying experience as the internet began to take a foothold in the process. He also designed the site to make sure that consumers had easy access to the best consumer advocate education.
Lyle has been an auto industry insider since 1999. He also has worked with other automotive websites to help improve their offerings based upon feedback from CarBuyingTips.com users. He covers important industry events and gathers off the record sources while attending industry conventions.
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