Vision Credit Education, Inc.

It may be hard to imagine thinking about buying a car in the current economic situation. That’s why it’s more than likely that 2009 will be a horrible year for car manufacturers because most consumers aren’t planning on a new car next year. Retail car sales were down 34% through the first three weeks of September compared to the same period last year.

While things are looking bleak for dealers, that should mean a huge advantage for buyers. Driven to offering extremely low prices and easy financing options, the dealers will stop at nothing to make their cars appealing to consumers, right? Demand has plummeted, and dealers need to find some way to get rid of their supply.

Unfortunately, the classic supply-demand scenario doesn’t play out this time because other factors are at work. Trade-ins are becoming less valuable, credit requirements are getting stricter, leasing deals are disappearing and the price of small used cars is rising.

First, one of the major reasons car buyers are at a disadvantage is that almost all car buyers will plan to trade in a vehicle they currently have against their new set of wheels. Since dealers have too many of certain cars, mostly large pickups and SUVs, they aren’t accepting those cars for a trade. Ask any SUV or pickup owner, and s/he is bound to tell you that, even if s/he were interested in trading in for a more gas-efficient vehicle, their pickup or SUV would be practically worthless or not even accepted by the dealership.

Those consumers driving pickups and SUVs and looking to unload them are better off selling the cars themselves. However, that requires much more work than a simple trade-in requires. The consumer must clean-up the car, make sure it’s up-to-standard and engage in some clever marketing. Everyone has been affected by rising gas prices, and it may be hard to convince someone s/he needs an SUV or pickup.

Secondly, especially in the current economy, very few consumers are able to pay for a new vehicle all at once and in cash, so they need a loan to pay for it. With the credit crunch, more car loans are going into default, and banks are protecting from future losses by tightening the requirements for car loans. Average credit won’t qualify you anymore. Say goodbye to zero-down, sign-and-drive deals and expect large down payments in exchange for more favorable credit terms.

In fact, a top executive at Autonation.com, the country’s largest dealer network, believes the credit crunch is costing automakers 20% in car sales every month. The consumers who actually are interested in a new car can’t get financed. Also, even those manufacturers who have their own finance arms are limiting the financing they offer to customers because they feel they need that money available for any future disasters.

Thirdly, many manufacturers are reducing their leasing options or getting rid of them altogether. In a lease, the finance company determines how much the car will be worth at the end of the lease, its residual value, and the monthly payment made by the consumer is set accordingly: the higher the residual value, the lower the monthly payment.

However, manufacturers and the finance companies have seen an incredible drop in residual values of certain vehicles, like SUVs and pickups, with expiring leases. If you are at the end of a lease of one of these less-attractive vehicles, it’s possible that the dealer may be willing to sell it to you at a much lower price than the residual value because they are eager to get the vehicle off their hands.

Those consumers who enjoy leasing luxury cars because they’d never be able to afford to actually buy them will find that their options are quite limited. Some dealers may offer this kind of deal to those who pay a large down payment in the beginning, but the consumer must realize that s/he will never benefit from that payment because s/he doesn’t actually own the car.

When it comes to leasing, it’s best to really shop around and expand the range of vehicles you’re considering. Apparently, Japanese and European manufacturers have been slower to eliminate leases unlike their American counterparts. However, don’t count on a Toyota Prius being available for anything but an almost impossible dream.

Finally, those consumers who can’t afford a new, small car but don’t want a big gas-guzzler are turning to more efficient, used cars. Thus, demand has spiked due to seemingly ever-increasing gas prices, and the prices of these cars are increasing to mirror the increased demand. So, make sure the money you are saving at the pump covers the premium you pay for that small, fuel-efficient car. Perhaps a larger car at a ridiculously low price might be worth it if you don’t plan on filling up all the time.