Spring is traditionally the big automotive buying season but with sales sharply down as a result of the coronavirus pandemic, U.S. dealers will be counting more than ever on using the Memorial Day holiday as a way to make up for some of their lost business.
And to lure buyers back into showrooms – or to get them to buy online – dealers and manufacturers are teaming up to deliver record levels of incentives which will come in a variety of forms: cash back deals, sharp discounts and zero-interest loans. Some customers may also find payment deferment options letting them wait out the current economic uncertainties before having to make their first payment.
“We’re optimistic that sales could improve after the record lows we saw in April,” said Jessica Caldwell, Edmunds’ executive director of insights. There’s “still a layer of uncertainty,” she cautioned, at a time when nearly 40 million Americans are out of work. Nonetheless, “We’re seeing far more generous incentives and deals out there than we typically would for Memorial Day weekend, and since more consumers might be looking at vehicles for summer road trips instead of airline travel, things might look up a bit for the industry.”
Since early March, as much of the country went into lockdown and auto sales started to tumble, the industry has had to scramble. Among other things, that meant rolling out not only record levels of incentives – averaging as much as $5,000 a vehicle and topping $7,000 on some models – but also introducing creative new come-ons.
That includes zero-interest loans stretching as long as 72 to 84 months. Some automakers are also offering forgiveness plans for buyers who might unexpectedly lose their jobs, others delaying first payments for as much as 120 days.
Buyers need to be aware of several factors when they go looking for deals:
- Many incentive programs are regional. A lavish program in New York may not be available in Los Angeles, or might cover a different product from the same manufacturer;
- With U.S. assembly plants just reopening after a two-month shutdown, there may be shortages of some products in parts of the country, such as pickups in truck-centric Texas;
- Retailers still have a sizable inventory of 2019 leftovers and are likely to offer blow-away deals to get them off showroom lots;
- Not all deals are advertised. Manufacturers often give dealers extra cash to play with in order to close a deal – but only if necessary – so be ready to bargain.
Zero-interest loans of up to 84 months currently account for a quarter of all new vehicle sales, and you’ll see such deals on a variety of different products this coming weekend, according to the “Best Memorial Day Deals of 2020” list from U.S. News and World Report. These include the Buick Enclave SUV, Chrysler Pacifica minivan, GMC Canyon midsize pickup and Volkswagen GTI hatchback.
Be aware that not everyone will qualify. These no-interest deals are usually reserved for buyers with top-tier credit scores. But those who don’t – and even for those who do – there may be other options. On several models, including its Encore and Envision SUVs, as well as the Regal sedan, Buick is offering a choice of low-interest loans or cash-back deals running as high as $5,500.
Expect to find some of the biggest deals on slower selling products for which dealers have excess stock. And, in an SUV-centric market, your buying power is likely to be greatest if you’re open to a sedan or coupe, like that Buick Regal or the Kia Optima sedan which will be available during the holiday at a discount of as much as $4,000, as well as with zero-interest, 75-month financing and deferred payments of 120 days. Even the Toyota Corolla, one of the country’s best-selling passenger cars, will be offered for as little as $149 a month for 36 months.
SUVs are in shorter supply, sales having held up reasonably well in the last few months, but you’ll still find some special deals this holiday on some popular models like the Jeep Compass, GMC Terrain and Nissan Murano, the Japanese crossover carrying a discount of as much as $6,250 on more well-equipped trim levels.
Automakers have slightly pared back on deals for full-size pickups like the Ford F-150, Chevrolet Silverado and Ram 1500, but that means the incentives are down around the $7,000 level, according to those tracking the holiday deals.
But do be aware, these trucks remained in surprisingly strong demand during the past two months and inventories are shrinking fast, especially when it comes to the most popular body styles, colors and options, so you might need to settle for your second choice, said Tyson Jominy, a senior analyst with J.D. Power.
On average, Memorial Day should see pretty much everything on sale this year, rather than the spot deals traditionally found during the busy – for dealers – holiday, according to Edmunds.
On 2019 models, the tracking service said, “full-size trucks are seeing an average discount of 17%, midsize SUVs are seeing an average discount of 14.4%, and subcompact SUVs an average discount of 16.3% compared to the manufacturer’s suggested retail price (MSRP).”
As for 2020 models in dealer stock, Edmunds added, “full-size truck list prices are seeing an average discount of 13.4%, midsize SUVs a discount of 11%, and subcompact SUVs a discount of 13.5% compared to the MSRP.”
Meanwhile, passenger car discounts are running as much as 20% for leftover models and, in some cases, even more, according to various tracking services. Big deals are still available on 2020 offerings, too, according to TrueCar.com which points to vehicles like he Acura RLX Sport Hybrid with Advance Package. It carries an MSRP of $62,295 but TrueCar reports discounts are running around $7,746, one of the best deals on any vehicle you may find this weekend.
For her part, Wendy McMullin, the buying service’s head of research, expects a “huge number” of shoppers will drive home in a new vehicle this Memorial Day holiday. In some cases, expect the car to be driven to them. While most U.S. dealers will finally be open again this weekend after many were shuttered by the pandemic, “There are going to be some” who will continue to prefer purchasing online, added Nick Woolard, TrueCar’s head of analytics. That was a rare option before the pandemic but is likely to become much more the norm going forward.
By giving potential buyers the choice of how to shop, along with massive holiday discounts, the industry is hoping Memorial Day will help get the U.S. new car market back into gear.