If you’re in the market for a new ride or might be later in 2018: You’ll find better deals on popular SUVs and crossovers…new or used…if you wait a bit. Manufacturers continue to ramp up SUV and crossover production, so that supply of these popular vehicles may soon outstrip demand. Also, while vehicle sales are off to a good start so far this year, they’re likely to slow later, forcing automakers to rely more on discounting and other buyer incentives. These should approach $5,000 per vehicle, on average.
Given the popularity of SUVs and crossovers, manufacturers are offering more models than ever before, including luxury models. Car-based crossover SUVs are especially prized for their blend of size and practicality. Plus they’re relatively fuel-efficient, so the return of $3 gas won’t ding their popularity. As a result, manufacturers are cutting back on their car models. The Chevy Impala is likely to be cut, and Ford has already announced that it will abandon most of its car models in the next few years to focus on SUV/crossover/pickup truck production. (The Ford F-150 pickup truck is the best-selling model of any vehicle.) Even sedan perennial best sellers Toyota Camry, Honda Accord and Nissan Altima have required incentives to bolster demand. This means that there are likely to be some good deals on car models as the shift occurs, especially full-size and mid-size sedans. Demand for compact cars has ticked up recently as the cost-conscious buyer segment finds fewer low-cost options.
Interest rates are rising, with the rate of the average new car loan expected to jump from 5.0% to 5.5% by the end of the year. However, this is likely to increase the average monthly payment by only $7 over the life of a five-year loan.
For those interested in electric vehicles, hybrids with plug-in capability (called PHEVs) will be the most in demand, according to Jessica Caldwell, executive director of industry analysis at Edmunds. These vehicles have the most flexibility and range, currently. The Toyota Prius Prime, Chevy Volt, Honda Clarity and Ford Fusion Energi are examples. Caldwell expects electrics will account for 4.4% of total sales in 2018. Tax credits of up to $7,500 per vehicle, depending on the size of the battery, make these attractive. But buyers should be aware that the government program may be ending for GM and Tesla electric vehicles this year, unless Congress extends it.
You might want to consider a late-model used car instead of buying new. Jonathan Smoke, chief economist at Cox Automotive, points to record lease returns expected in 2018 and 2019, including more SUVs and crossovers than had previously been the case, so there will be more of these popular vehicles to choose from.
Also consider buying used from rental fleets: Former rental vehicles typically cost 5% to 15% less than the same model sold by used-car dealerships.
Car subscription services are getting attention. Participants can reserve vehicles for shorter periods of time than in leases, allowing members to try many different types and models. However, these plans are still quite pricey.