The American Automobile

I don't feel the need to discuss or debate the merits of the decision to buy an American made versus a foreign made vehicle. The purchasing process of the American individual has never been a rational thing. The point I do want to make is the rare opportunity that this economic situation has afforded to people who might be in the market to buy a new car.

Prior to the financial meltdown that started at the end of 2008, one of the major selling points for people who purchased American was that some sort of incentive would make the price of a new car incredibly attractive when compared to a foreign alternative. The much sought after "Employee Discount" offered by the BIG 3 reduced prices down 10-15% but this was not available to everyone. Currently even offers of an Employee Discount do not seem to impress car buyers. Manufacturers have been offering "Employee Plus" discounts, cash back offers and 0% financing but that still fails to make a serious improvement in sales.

It is difficult to pinpoint the precise reason for the hesitation to purchase. Some claim it is the break down in credit markets and banks which hurts financing - since no one really buys a car fully in cash. Others claim that the fear of bankruptcy adds uncertainty to the validity of warranties. If you are an otherwise responsible consumer neither of those reasons should be a deterrent to buying.

In yesterday's announcement by President Obama, he stated the administration would back US Manufacturer's warranties. In any other situation, I would not be in favor of the government taking this position, but I cannot ignore this huge plus to consumer confidence. Additionally the administration re-iterated a point in its February 2009 Stimulus Package that stated that local and state taxes on a new car will be a deduction.

If you were or are considering a new car, do seriously think of the value of an American Automobile. With incentives some cars have dropped well below "fair" prices in 2008. If you know someone in the US automobile industry I'm sure they would help you get an Employee Discount or some other comparable reduction. (Ask around, I'm sure you can find someone who knows somone.) For savvy consumers it is not impossible to walk away paying 25% less than MSRP for a brand new 2009 vehicle.

And for more frugal buyers who would typically buy used cars: used car prices have actually risen. In some cases 2008 used cars can cost more than the "incentiv-ized" 2009 same models. Also consider the limiting (or non existing) warranties that come with used cars.

I should be very clear: I do not think people should buy a car just to support the US Automotive Industry. Don't be irresponsible, if you do not need a new car, simply do not buy one. However seriously consider if you wish to take advantage of some of the best values in US automobile purchasing in recent history. The math for once is completely in favor of the consumer.

Update: My mistake, I misinterpreted the tax deduction as a credit.

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