Since the beginning of time, one aspect of business has always held true: cash is king. Without cash on hand, no business can survive for too long. Car dealerships are no exception to this rule, and as Coronavirus disrupts the lives of every person across the globe, consumers are faced with the question, “Is now a good time to buy a car?” We call this the Coronavirus car buying conundrum.

For many, the thought of buying a car right now is unfathomable (why leave the house?), but for others, there is good reason to wonder if now is the right time to buy a car. Regardless of whether your lease is up, your car broke down, or you simply want to take advantage of good deals, the question remains, “Is now a good time to buy a car?”

Buying a car during Coronavirus is unlike any other time in history. This isn’t a repeat of the Great Recession, and car dealerships weren’t around during the Spanish Flu. There’s no “playbook” for how this will turn out. What we do know however, is that there are some really compelling reasons to buy a car right now. Below we’ll discuss what they are, how you can take advantage of them, and what it means for you if you’re interesting in buying a car during Coronavirus.

Are car dealerships even open during Coronavirus?

One of the most challenging aspects of buying a car during the Coronavirus pandemic may simply be finding a dealer who will work with you to sell a car. In a few instances, for our customers, we’ve found it difficult to actually consummate a car deal. Stay at home orders, dealerships laying off sales staff, and myriad other reasons have made it harder than ever to actually go through the car buying process.

That being said, car dealerships are considered essential businesses by the federal government. Cybersecurity and Infrastructure Security Agency (CISA) Director, Christopher C. Krebs sent out a memo outlining which workers were deemed essential.

Workers critical to rental and leasing of vehicles and equipment that facilitate continuity of operations for essential workforces and other essential travel. And, Employees who repair and maintain vehicles, aircraft, rail equipment…

The memo is not explicit that car dealerships are to remain open, however it does make it clear that service departments should be accessible to the public. 

Service and parts departments (at most dealerships) are open like normal (many with limited hours however). Sales departments in many locations are operating on an appointment only basis.

Federal guidelines can be superseded by an individual state. For example, in Michigan their initial “shelter in place” order deemed sales departments at car dealerships to be non-essential, however a revision was put in place that determined that sales departments are essential, which has enabled remote transactions to take place.

Before you try and buy a car, you need to research your state’s guidelines to determine if sales departments are open. From our research we have found that in most states the sales departments of a car dealership are open, but only on an appointment only basis. That means you need to call the dealership and arrange an appointment to come in and meet with them. Or, if you prefer, nearly every dealer is now offering to bring vehicles to you for test drives and delivery as an option.

Should I buy a car right now?

Currently there are a slew of programs in place from manufacturers to try and sell more cars. Like we discussed in “How do car dealers make money?”, manufacturers desperately want to sell more cars so that they can impress their investors. As a result, from time to time, they will offer incentives to try and sell more cars.

Coronavirus car buying has led to manufacturers offering incentives that we haven’t seen since the Great Recession, in an attempt to sell more cars. For example there are currently programs that:

• Increase customer rebates;
• First responder benefits have been extended to healthcare professionals;
• If you lose your job due to COVID-19, the manufacturer will cover your payments (Hyundai Assurance);
• Delayed first payments; and
• Zero percent financing.

For a complete (and updated!) list of manufacturer incentives and programs, read our Coronavirus car deals coverage here.

Since manufacturers are offering incentives, does that mean you should buy a car right now? Not so fast… It depends where you live.

In most parts of the country, where there have been substantial limits placed on car dealerships, you should take advantage of current deals. Remember that dealerships incur carrying costs for each vehicle that sits on their lot. Everyday a car sits on their lot, they’re paying interest, and paying interest on a car they can’t sell gets very expensive very quickly.

With that in mind, dealers could go bankrupt in the near future, and the threat of running out of cash means dealers will grow more and more desperate to sell cars. If you’re in an area where restrictions have been severe, the odds are that now is as good a time as ever to buy a new car.

In other parts of the country, where restrictions are less severe (ie central and midwest USA), you may want to wait. In those areas of the country a lot of dealers are still operating like normal (or at least more closely to “normal”). With that being said, they aren’t “feeling the pinch” quite as bad as dealers in other parts of the country. If you’re in one of these locations you may want to wait a few weeks before buying a car.

For example, in North Dakota and Iowa there are currently no restrictions on car dealerships, whereas in Pennsylvania and Vermont dealers have seen virtually no sales over the past few weeks.

Most car dealerships, just like most small businesses, don’t have an emergency fund of cash that they can depend on when sales go south. As you’ve probably heard on the news, businesses of all shapes and sizes are looking for loans from the government to stay solvent. For car dealers that are in this precarious situation, they’ll be more than willing to make a deal with you to sell a car.

Remember, if you’re going to buy a new car, here are the documents you need to take with you. Oh, and always have a positive attitude!

What credit score do I need for 0 percent financing?

Among the many offers from manufacturers aimed at selling more cars, most are offering some sort of special financing option. Many are offering 0 percent financing for up to 84 months on the purchase of a new or certified pre-owned vehicle that is financed through their captive lender.

For example, if you were thinking about financing the purchase of a new Jeep Gladiator you could get a loan from your local credit union, a big bank, or through Chrysler Capital (Jeep’s captive lending company). The “0 percent financing” offers you keep hearing about? Those are only available if you finance through the captive lender. And, before you get your hopes up too high, know that not all vehicles are offered for this special financing. Chrysler Capital actually isn’t offering 0 percent financing for the Jeep Gladiator, for example.

Another consideration to qualify for 0 percent financing is that you need to have a certain credit score. Car dealers use special credit scores to determine your creditworthiness. In order to qualify for 0 percent financing you’ll need to have a credit score at least above 700, and in some circumstances that won’t even be enough. Although manufacturers are advertising these “great” financing options, the reality is you won’t know if you truly qualify for them until the dealer runs your credit application.

That being said, even the “second tier” offers, like .9 percent financing, are still available for those that don’t qualify.

How long of a loan should I take?

Don’t be tempted by 84 and 72 month loan offers. It’s wise to limit the length of the term you take on your loan, or else you’ll be buried in negative equity if/when you go to trade in your car. Even with 0 percent financing, you’d be wise to take a 5 year loan or shorter.

Buying a car during Coronavirus may seem like a daunting task, and it certainly is a lot different than it would have been just a few shorts weeks ago, but don’t let that stop you from taking advantage of good deals. And remember, if you want a professional to negotiate your car deal, get in touch, our team is here and happy to help!