Buy a Car … Now?

Buckle up, kids. With the economy on the skids, and two out of the three American automakers facing bankruptcy, we’re in a paradox: this could be the best time ever to buy a new car. New car sales are in a deep tank and dealerships are desperate to unload their inventory before their doors close for good. We’ve never seen this level of discounting. Make no mistake about it, there are remarkable deals out there for car buyers who have the financial wherewithal to complete the transaction.

Updated 2/13: The US Senate has moved to sweeten the deals, by tacking on automotive purchase income-tax deductions onto the economic stimulus bill. The auto amendment was adopted with broad support (71-26) in the Senate. While the full stimulus measure has passed both the Senate and the House, there were reductions in the tax break.

The bottom line? Folks who buy a new car in 2009 will be eligible to deduct sales taxes on the purchase. The big if remains …whether funds will be available for those loans and whether prospective buyers will qualify.

To this point, automakers have been offering rebates and 0% financing deals to get people to open up their checkbooks and buy a car. If the House had chosen to follow the Senate’s lead in refunding auto loan interest, it would have given the automakers latitude to end their 0% financing offers, and instead, slash the delivery price (or increase the rebates) of their current inventory.

Unfortunately (for potential car buyers), the House chose to remove the tax-write off for loan interest, dulling the attractiveness of the offer. The bill does remain a valid source of revenue for individual states, through sales tax refunds.

Brave bargain-hunting car buyers are eligible for additional alternative fuel tax incentives on the purchase of a select group of fuel-efficient cars. These alternative fuel tax breaks range from $1,550 through $3,400. The group includes a select number of hybrid- and clean diesel-powered rides. Hybrid tax rebates include the 2010 Ford Fusion Hybrid and Mercury Milan Hybrid, and yes, even the 2009 Cadillac Escalade Hybrid. The popular Toyota Prius however, is not eligible. Clean diesel tax rebates are available for the 2009 Volkswagen Jetta TDI and Mercedes-Benz 320 BlueTECs, among others. You read that right … the United States Government will give you a tax credit for buying a Mercedes-Benz.

Two primary reasons to buy a car in this climate are peace of mind and the reduction of month-to-month expenses. If you’re driving a gas-guzzling clunker that’s in and out of the shop every other week, you just might be a prime candidate to buy a new car. By slashing your gasoline consumption and repair bills, you may be able to justify that monthly payment … with the sales tax paid by Uncle Sam.

While it appears that gas prices have bottomed out and are on the way up, you’ll need real-world data before you head out to buy a car. Do your homework before you hit the road and plug your numbers into the MPGomatic gas mileage calculator to justify that purchase … or not …

4 thoughts on “Buy a Car … Now?”

  1. Ah, welcome to the wonderful world of demand-side economics, or trickle-up economics, where the government creates demand for the things it wants you to buy… never mind the fact that it probably isn’t something you need. Used cars are still the best value.

    Also consider the unintended consequences of this action. If more people pay less for new cars, the resell value of those cars will be considerably less… resell value of new cars is already pretty crappy.

    Don’t forget that it was government intervention in trying to create demand for houses for people who couldn’t afford them by ‘influencing’ banks to make loans to these people.

Leave a Comment