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New cars - should you buy in 2020?

19th May, 2020

If you’re considering a new car, 2020 could be a good time to buy one.

That’s because the Australian new car market has just experienced its weakest month in 26 years. Official figures reported 38,926 new vehicles sold in April versus 75,550 for April 2019. That’s a drop of 48.5%, which is bad enough, but it’s almost encouraging considering the debacle in overseas markets with sales declines of between 80% and 98%. 

According to a comprehensive report at https://www.caradvice.com.au/847671/vfacts-april-2020-new-car-sales-the-complete-report/ Toyota topped the rather dismal Australian sale charts again (for the 17th year in a row) with five models in the top 10. Hi-Lux (beloved of tradies and ADF members) was down 35.5%, RAV4 (up 54.4%), Corolla (down 50.8%), Prado (down 35.7%) and Landcruiser (down 21.2%), resulting in an overall decline of 31.8%.  

Here’s an extract from the complete list, indicating just how scarce new car buyers have become:

April 2020 Sales Change compared to April
Toyota (31.8%)
Mazda (60.5%)
Kia (44.9%)
Ford (65.3%)
Hyundai (65.3%)
Mitsubishi (63.2%)
Nissan (51.5%)
BMW (5.7%)
Mercedes Benz (54.4%)
Great Wall (28.7%)
Holden (56.9%)

Interestingly, sales of US-style Ram pick-ups increased in April 2020 by 14.1% (compared to April 2019). This is arguably related to the government’s instant business tax write-off which was introduced as a response to COVID-19. See: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/ 

Another remarkable fact (reported by caradvice.com.au) behind these generally dismal figures is that the ACT experienced growth in sales of 24.7% compared to April 2019. Some experts are attributing this to a large number of insurance claims from hail storms and gale force winds in January.  

So for a prospective buyer, having processed all of this bad news in the Australian new car market, a conclusion could be that now is a good time to buy. Anecdotal evidence would certainly indicate that substantial discounts, not seen since the global financial crisis, are being offered by dealers. 

However, as with every purchase (especially cars) there are several important rules, including:

Rule 1: Be patient, take your time, shop around for the best deal, including the length of the factory warranty and serving arrangements; 

Rule 2: Don’t buy unless you can afford and need the vehicle in the first place. It’s better to keep you money in the bank than spend it on a quickly depreciating asset you don’t really need;   

Rule 3: If you’re planning on financing the vehicle, shop around. Car yard finance is not necessarily the best deal available. There’s some great information about car finance at moneysmart.gov.au;  

Rule 4: Consider doing the deal near the end of the month as most dealers report sales figures monthly and will be keen to have you signed-up by month end (and especially by the end of the financial year, 30 June 2020); 

Rule 5: Make sure you take out comprehensive insurance. As always, seek competitive quotes before you buy the car. And if you can’t afford the insurance, don’t buy the car; and  

Rule 6: Consider salary sacrificing your purchase, but make sure you understand the costs and benefits of so doing. Salary sacrificing will often be to your advantage, but make sure you ask the service provider to demonstrate in writing why it works for you and why their deal is best. Also, understand what’s in it for them before committing to the contract.

Of course, the principal rule overarching all six above (known as the ‘golden rule of business’) is:

“If it looks too good to be true, it is too good to be true”.

This rule applies in any business transaction, not least the purchase of a motor vehicle in 2020. You may well get a genuine bargain during bad economic times, but it’s rare that a car dealer will willingly take a loss. We can’t blame them for that. 

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