July Fourth car shopping comes with some deals but less of a selection. Here's what to expect

July 03, 2020

If you're hoping to score a good deal on a new car during July Fourth sales events, it will be a mixed bag.

While manufacturers and dealerships are offering special deals on some models to prop up sales amid the pandemic, inventory is down due to coronavirus-related disruptions in manufacturing.

"We've seen incentives continue to move up across the industry in recent weeks, despite the fact that inventory is falling," said Kelsey Mays, senior consumer affairs editor of Cars.com.

New-car inventory at the beginning of June was down by a third, compared to the same time last year, according to research from Edmunds.com. At the same time, June auto sales climbed about 3.3% from May, although they are down by 30% compared to a year earlier, according to estimates from Cox Automotive.

"People will still see deals … but we can all be very specific about what we want — the color, the options — and that's harder to find for a lot of cars," said Jessica Caldwell, executive director of insights at Edmunds.

"New car sales have not been great throughout the pandemic, but pretty decent, and some dealers are running out of inventory," Caldwell said.

Among consumers planning to buy over the Fourth of July weekend, 69% plan to purchase a new car, according to a Cars.com survey done in June. Another 23% said they'd buy a used car (including certified pre-owned) and 8% were undecided.

Shoppers should also be prepared for a different buying experience.

In a business known for its personal interaction, the pandemic forced many dealerships to move much of the process online in March and April amid shutdowns and stay-at-home orders.

"We've seen 50% of dealers and 70% of inventory on Cars.com presented as digital sales with a home delivery and virtual appointment," Mays said. "In many cases, the documents can be signed online, but it depends on the location."

And while many dealerships have re-opened their showrooms as local regulations have permitted, it's worth calling ahead if you want to go there because you may need to schedule an appointment.

"Even if the dealership is open, they don't want swarms of people," Caldwell said.

As for deals, it will depend on the manufacturer and model. Nissan, for instance, is offering $6,000 off certain versions of its Murano, a crossover SUV with a starting price of $31,530. The 2020 Ram 1500, a full-size truck with an asking price of $32,145, comes with up to $6,300 off on certain models. In the sedan category, the discount on the Ford Fusion (starting price of $23,170) is $2,500.

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You also may be able to score a good financing deal. While the average annual percentage rate on new-car loans is 4.2%, consumers with great credit could get a 0% rate. In June, these deals constituted 19.4% of all new financed deals, according to Edmunds.

Some of those loans stretch for as much as seven years, which could put buyers in a tricky situation down the road if they end up wanting to sell or trade in the car and owe more than it's worth — i.e., having so-called negative equity.

"At 0% financing, a six- or seven-year loan could make sense for a responsible buyer," Caldwell said. "But for many Americans, relying on longer loan terms to justify their bigger vehicle purchases could put them at greater risk for negative equity in the future."

The share of new sales with a trade-in involving negative equity was 44% in April, up from below 35% a year earlier, Edmunds research shows. The average amount of negative equity was $5,571.

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Auto lenders also appear to be tightening credit. Caldwell said that the share of people paying 10% or more on their loans — generally those who are less credit-worthy — is dropping.

"That says to me they are either getting denied the purchase, or there are less folks in that category that are attempting to buy a car," Caldwell said.

Also, make sure you compare dealerships. While they all generally give you the manufacturer's discount, one may give you a better deal on a trade-in, a lower interest rate on your loan or some other perk.

Even once you find the best deal, Mays said, there's another number that you should focus on: the "out-the-door" price.

"That amount includes all taxes and fees and you should negotiate that number," he said.

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