Sunday, July 27, 2003

Cheap money fuels sale of used cars

Buyers' market: Let's make a deal

By Randy Tucker
The Cincinnati Enquirer

Jim Ackerman, sales manager at Glenway Chevrolet, stands amid the lot of used cars available.
(Steven M. Herppich photo)
| ZOOM |
Now might be the best time in almost a decade to shop for a used car, auto experts say.

Interest rates and prices are lower than they have been since 1995, and the selection is great because of the influx of trade-ins and vehicles being returned as their leases expire.

It used to be that buyers sought the cheapest prices instead of the best car, said Chuck O'Leary, used car manager at Borcherding Automotive at Kings Automall.

Not anymore.

"Now, money is so cheap, they're really getting what they want," O'Leary said.

Tom Bayles is in the market for a used Chevrolet Silverado.

The 37-year-old Cheviot resident, who was kicking the tires on used vehicles at Terry Lee Chevrolet recently, said he has test-driven several Silverados from dealerships in and around Cincinnati.

He's leaning toward a black, 1995 Sliverado 1500 at a price of $8,650.

But he has his heart set on a teal color and thinks that he can find the color and get a better price if he keeps looking.

"There are so many cars on the lots these days, I'm confident I can find the right truck at the right price," he said.

He's not alone.

Interest rates as low as 4.9 percent on used vehicles has made the decision to buy used more attractive than ever.

Also, rebates, zero-percent financing and other incentives have lowered the cost of new cars so much that used-car dealers have been forced to keep their prices well below new-car prices, or nobody would buy used.

Faced with huge inventories of new cars and soft demand, the Big Three automakers - General Motors Corp., Ford Motor Co. and DaimlerChrysler - have extended their zero-percent financing contracts for up to six years and are offering cash rebates from $3,000 to $4,500 on many models.

That has led to robust sales of new cars even in a down economy.

The nation's new car and truck dealers overcame a weak economy to sell 16.8 million vehicles last year - the fourth strongest sales year on record, according National Automobile Dealers Association.

NADA chief economist Paul Taylor attributes the strong sales gains to five main factors: customer incentives; low interest rates; product quality; more efficient dealership management; and dealer improvements in the car-buying process.

And Taylor expects the trend to continue through at least 2004, which means the used-car market should remain a buyers' market for months to come.

"We expect a fifth consecutive year of sales above 16 million units," Taylor said. "That's remarkable during this period of economic weakness and global uncertainty."

The strong new-car sales trend has flooded the lots of dealers, forcing them to offer sweet deals on used cars to move inventory.

"The used-car business has definitely picked up as a direct result of the rebates and zero-percent financing on new cars,'' said Jim Ackerman, sales manager at Glenway Chevrolet in Cincinnati. "We've got a big selection, and we don't like to keep cars longer than 60 days. Now is a great time to buy used.''

And there is no end in sight for the sweet deals.

A shaky stock market, high unemployment and low consumer confidence have made consumers so reluctant to part with their cash that even zero-percent financing isn't attracting as many new-car buyers as automakers would like.

Consequently, the overall uncertainty about the economy is likely to keep new car prices and incentives high and used-car prices low for the foreseeable future.



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