Considering a domestic car? My advice: wait.

Posted on by Michael

Unless you must have a car now, if you are considering a domestic car–or even any car that directly competes with a domestic car–I would wait. Many proposed measures to save the domestic auto industry would have the effect of cutting car prices by thousands of dollars. If you buy a car now, you could pay thousands more.

The most ambitious proposal was made today by retired execs Hal Sperlick and Don Runkle (Automotive News article, sub required): the U.S. goverment should provide a $3,000 incentive towards any purchase of a domestic car.

My initial reaction: such an incentive would be unfair in so many ways that it just won’t happen.

But it, or something like it, could happen anyway.

What is clear: for GM and Ford to survive (I wrote off Chrysler when Cerberus bought them), auto sales cannot continue at their current level. To boost auto sales in the current economy, actual purchase prices are going to have to come down. A lot. And if even one manufacturer cuts prices, the others will have to follow.

So, if you don’t want to pay too much, wait.

  • guyatherton

    Am I correct in thinking warranties would be honored?

    GM and Ford have been unfortunate that most people refuse to buy domestic cars because they ahd a bad experience 10 or 20 years ago and do not want to see the award winning cards now available. The Malibu, CTS and Acadia/Outlook models hold thier own against any comers but perception is king unfortunately.
    That is why I love True Delta because you have timely, unbiased data which shows domestics are doing OK in most cases.

  • Michael

    Warranties will most likely be honored even if these companies go through Chapter 11, because much of their remaining value is in their brands. Don’t honor a warranty, and the brand becomes worthless.

    I’m afraid all of the horror stories aren’t in the distant past. And, even if they’re equally distributed, it works kind of like this:

    1. Domestic owner with a horror story ==> buy an import

    2. Import owner with a horror story ==> buy a different import

  • guyatherton

    I do not see why the Government should not help GM and the other domestic manufacturers. They have become a large welfare state supporting hundreds of thousands of retirees which Honda/Toyota do not do and the Japanese companies have benefitted from favorable Japanese Government actions like trade barriers and currency manipulation.
    GM and Ford make mostly good vehicles and 2009/2010 has the promise of much more (Fusion Hybrid, Volt, Corsa, Cruze, Fiesta etc) which sould be given a chance.
    Also GM is successful in China, Europe, South America and elsewhere in the world. No company is making money with the US market dropping by 25% (even Toyota is predicted to lose $700 million in North America this year).