New car buyers will have to ante up an average $1,000
more in 2004, but auto dealers may throw in that satellite radio you
have always wanted to sweeten the deal.
Experts say the best deals for the 2004 models will
be found in large cars and compact pickups, while luxury cars and
luxury sport utility vehicles are expected to hold steady at or near
last year's prices.
"Just looking at the MSRPs [manufacturer's suggested
retail price] from August 2003 to August 2004, you will see about
a $1,100 average increase," says Jesse Toprak, director of pricing
and market analysis for Edmunds.com, a Santa Monica, Calif.-based
auto price-tracking service.
New cars for the 2004 model year, including typical
incentives, options and finance charges, are expected to cost an average
of about $25,000.
While prices have inched upward, automakers are handing
out more gadgets and features as standard equipment.
Many models, including the Ford F-150 pickup, now come
standard with equipment that was once an upgrade -- partly accounting
for the price increase.
"Cars are better equipped than ever," says
Charlie Vogelheim, executive editor for Irvine, Calif.-based Kelley
Blue Book. "Used to be, you would upgrade your Ford Taurus to
include power doors and windows, tilt and cruise. Now you will have
a hard time finding a standard model without all that."
Most manufacturers refuse to talk specifically about
how pricing decisions are made.
"We had a modest price increase for the introduction
of 2004 models," says Deborah Silverman, a spokeswoman for
General Motors, which increased prices across the board less than
1 percent over last year's price.
Manufacturers make pricing recommendations for their
dealers, who are then free to negotiate the end price with each
individual buyer. That manufacturer's suggested retail price is
consistent throughout the nation.
Extras balance price hikes
National price increases are traditionally accompanied by rebates,
Vogelheim adds.
So, for example, if Pontiac wanted to raise the price
of its Sunfire from $18,000 to $20,000, it would also offer a $2,000
rebate. That way, buyers would not initially feel the sting.
"They do this because there is a certain amount
of elasticity," Vogelheim says. "It is easier to eliminate
the $2,000 rebate after several months than it would be to release
the car at $18,000 and then raise the price mid-year."
If a car is selling well, however, dealers don't rule
out quietly raising the price four, five, even six times throughout
the year, Toprak confides. "Each increase will be a small $150
bump or so, but they add up."
With the likelihood of mid-year increases, the best
time to grab the new model-year vehicle usually is right as it hits
the lot -- August through October. A large caveat to that is if
the new model has been recently redesigned or is flying off the
lot, then dealers will have less motivation to haggle.
Best times to buy
If getting the newest and hottest is not a driving factor for you,
shopping for the expiring model-year in autumn tends to be the best
move. The cars, technically, still are new, but dealers are more
anxious to make room for the newer incoming models and often are
willing to cut a better deal.
"The downside is that you will see a much smaller
selection," Toprak adds.
Even as sticker prices trend upward, Vogelheim maintains,
cars are not necessarily getting more expensive in terms of affordability.
If you compare the typical payment with the typical paycheck and
consider how many weeks it takes to pay off a car, he says, "Vehicles
have not been this affordable in decades."
Optional equipment is evolving with the times. Now,
rather than dashboard compasses and map lights, the newest and hottest
options include DVD players, game systems and satellite
radio.
"I wouldn't buy a luxury SUV without an onboard
navigation
system," Toprak advises. "There are so many vehicles
being equipped with them, that if you don't have it when you go
to sell four or five years down the road, you will be at a big disadvantage."
To make up for the cost of throwing in more standard
equipment, manufacturers are hunting for more cost-corners to cut.
"We are seeing some 'de-contenting' -- trimming
costs by leaving out small things people might not notice, such
as not lining the entire trunk," Vogelheim says.
What's hot, what's not
This year's hottest models include Buick's new Rainier SUV, Jaguar's
XJ-Series and Land Rover's Range Rover. Each spends less than a
week on car lots before they are sold. Mitsubishi's Montero, Chrysler's
Voyager and Mitsubishi's Diamante all are taking the longest to
sell, spending an average of seven months on the lot. The industry
goal is to sell a car in 60 days, but right now dealers are hanging
on to cars for about 74 days. That delay can mean an opportunity
for some bargains if you are willing to forgo the hottest movers.
Right now is a good time to negotiate
for domestic cars, especially large domestic cars, domestic minivans
and small trucks. But even the most prepared buyer will lose out
in negotiations if they let their hearts pick out their car.
"People want to know where the bargains
are, but when they get to the dealer all the preparation often goes
out the window and emotions take hold," says Vogelheim. "They
fall in love with a model and that's it. They will pay any price,
and dealers count on that."
Michael Giusti is a freelance writer
based in Louisiana.
-- Posted: Dec. 9, 2003
