How to Get the Best Deal on a New Car in 2016
Whether you're buying a hot new crossover or a serviceable sedan, our strategies will help you trim the sticker price.
Visit a car dealership and you'll probably see a gleaming SUV hogging center stage. It may not be the priciest car on the showroom floor or the one that quickens your pulse with excitement. But crossovers and other SUVs are such a hit that they now account for more than one-third of new-vehicle sales, up from about one-fourth a decade ago. America, in short, has gone crossover crazy. And the trend is accelerating as carmakers roll out more compact and even subcompact models, hoping to entice young, urban buyers to the SUV fold. Even Tesla has rolled out an all-electric crossover, the Model X.
If a crossover isn't on your shopping list, you have plenty of other choices in the class of 2016, from fuel-sipping hybrids to luxurious sedans. More than 360 models now populate the market, up from 332 in the 2010 model year, a fallow period when brands such as Pontiac and Saturn faded into oblivion after General Motors' bankruptcy filing. The bounty of new cars reflects the industry's ongoing revival. Low gas prices, cheap financing and a healthier economy are fueling banner sales. Overall, automakers sold 17.5 million cars in 2015—the highest level ever.
For buyers, the profusion of new models opens the door to all sorts of possibilities in terms of body style, technology and safety features. "The beauty of high sales means there's something for everyone," says Jessica Caldwell, an industry analyst with car shopping site Edmunds.com. Nowhere are the choices more abundant than in the bustling SUV marketplace. Advanced manufacturing techniques enable carmakers to crank out more variations of a vehicle on a single global platform, so the framework of a small car can also be used in a high-riding SUV. The upshot: scores of small SUVs, some of which are so compact they resemble hatchbacks on stilts.
Mini-Me models now squeezing into this category include the Buick Encore, Fiat 500X, Nissan Juke and Jeep Renegade, all priced in the low to mid $20,000s when you include a midrange package of options. Luxury brands are getting a piece of the action, too, with pint-size editions of bigger models, such as the Audi Q3 ($34,625), Mercedes-Benz GLA-Class ($33,425) and Range Rover Evoque (starting at a lofty $42,470).
Many shoppers now view these models as attractive alternatives to the traditional family sedan. Moreover, the fuel-economy gap between cars and SUVs is shrinking. Engineered with more-efficient engines and ransmissions, the new fleet of SUVs trounces the fuel economy of the previous generation. Recently launched models such as the Honda HR-V ($19,995) and Mazda CX-3 ($20,840) earn EPA ratings of 35 miles per gallon in highway driving. A handful of crossovers, such as the Volvo XC60 ($37,395), can also be equipped with stop-start technology—the engine automatically shuts off when the vehicle comes to a stop—which improves gas mileage in stop-and-go traffic.
New tech and safety features
Regardless of body style, carmakers are spending billions of dollars to stuff vehicles with more high-tech safety systems and comfort and convenience features—even on some of their lowest-priced models. The Honda Civic sedan ($19,475), redesigned for 2016, can be equipped with a full suite of high-tech safety gadgetry, such as adaptive cruise control, forward-collision warning and lane-keeping "assist." Touchscreens are the new dashboard norm; Dodge, for example, offers a large, 8.4-inch display in its Dart compact model ($19,240). And backup cameras aren't just a bonus on luxury vehicles anymore. They're available in more than 250 models. By 2018, all passenger vehicles will have to include a backup camera to meet new safety rules.
Granted, some of the gadgetry seems superfluous. According to surveys by J.D. Power, many car owners find the new "infotainment" technologies cumbersome or less user-friendly than smartphone applications. More than 30% of drivers "never use" automatic parking systems, car-based apps or "concierge" services that can locate a gas station or restaurant. Navigation systems receive poor marks, too, with nearly half of drivers preferring to use a smartphone map app. For many consumers, a smartphone is simply easier to use, says Renee Stephens, vice president of U.S. Auto Quality at J.D. Power. Indeed, software programs such as Apple CarPlay and Android Auto—which transfer smartphone apps to a dashboard screen—are gaining popularity. Automakers such as General Motors, Honda and Hyundai plan to offer them in more models.
In the safety arena, cars overall have become more protective thanks to improved body structures, advances in airbag design and placement, and front-crash prevention systems. About 50 models now earn the highest ranking of "Top Safety Pick +" from the Insurance Institute for Highway Safety, an industry-sponsored group that rates 187 models. The number of cars that make the cut has increased in recent years, even as the agency has raised the bar, requiring that vehicles earn a "good" score (rather than just "acceptable") on a front-crash test. Federal regulators are also planning an overhaul of their safety rankings, which appear as star ratings on car window stickers. By the 2019 model year, the feds will add a new crash test and plan to evaluate crash-avoidance technologies.
Still, if you pony up for high-tech safety, be selective. Technologies such as adaptive headlights (which swivel with the car's direction so you can see around bends), automatic braking and forward-collision warning are all beneficial in preventing or mitigating accidents, says Adrian Lund, president of the IIHS. But some other "active" safety technologies may be overkill. For example, lane-departure warning systems—which alert the driver of lane drifting and may slightly adjust the car's steering—have had mixed results. "They've been a disappointment," says Lund, partly because many drivers find the warnings annoying and disable them. Such technologies are rapidly advancing, however, and are laying the groundwork for self-driving cars.
A bumper crop of green machines
Cheap gas is making eco-friendly cars tougher to sell these days. But automakers must meet rising fuel-economy standards, and that's spurring every major carmaker to develop alternative-powertrain models, such as hybrids, plug-in hybrids and electric vehicles. With dozens of models available, green machines span the spectrum in shape, size and price. Hybrids now range from the pip-squeak Toyota Prius c ($20,395) to the regal Mercedes-Benz S-Class plug-in hybrid ($96,575). Carmakers are also ramping up production of electric models, such as the Audi A3 e-tron ($38,825) and Kia Soul EV ($32,775). For sheer style, though, it may be hard to beat the electrifying Tesla Model S ($71,070).
Meanwhile, two groundbreaking green cars, the Chevrolet Volt and Toyota Prius, have undergone makeovers. Aiming to charge up the Volt’s sluggish sales, Chevy reinvented the plug-in hybrid for the 2016 model year, reshaping it into more of a traditional sedan with a spiffier cabin, new safety technologies and a big bump in the car's electric-motor driving range, from 38 miles to 53 (after which the gas engine kicks in). For its part, Toyota slightly enlarged the Prius, spruced up its cabin, and boosted gas mileage by about 10%; the ultralight Two Eco hatchback, which debuted in January, tops the hybrid mileage charts with an EPA rating of 56 miles per gallon in combined city/highway driving.
Of course, with gas so cheap, it could take ages to recoup green cars' extra costs with savings at the pump. A Ford Fusion Hybrid SE ($25,990) costs $2,310 more than a comparably equipped conventional model—a price premium that would take at least five years to recoup if gas stays at current prices, according to estimates by the U.S. Department of Energy. Still, the Fusion beats hybrid versions of the Honda Accord EX ($30,125) and Toyota Camry LE ($27,625), both of which have payback periods of more than 10 years.
To ease the sting of higher prices, carmakers are slathering discounts on some models. Ford's C-Max hybrid ($25,045) on average recently carried a whopping $6,400 in incentives, according to car shopping and research site Kelley Blue Book (KBB.com). Lexus wasn't far behind, with $5,000 in discounts on its CT 200h hybrid hatchback ($32,190). Both look like bargains compared with the $2,475 in average incentives on compact cars overall.
Where the deals are
The average transaction price of a new vehicle in 2015 was $33,188, up slightly from the previous year and up 20% from 2005, reports Edmunds.com. Part of the reason for the jump is that consumers are paying for the higher levels of technology and comfort features being built (and priced) into more models. It's also becoming tougher to haggle over sticker prices for SUVs because demand is running so high.
You can still find some SUVs in the bargain bin. Even though Volkswagen's Tiguan S 4Motion, for example, has been selling quickly, it is going for way below its sticker price of $27,730, and often less than the invoice price of $26,655, according to Edmunds.com. The downside: Resale values of Volkswagen vehicles have slid due to fallout from the company's diesel emissions scandal, eroding savings on the initial sale price. (Resale prices are an important component of value if you plan to trade in your vehicle after a few years; see the table on the previous page for resale value winners in 13 categories for three and five years.)
In general, shoppers will find more wiggle room on sedans, especially if they've been gathering dust on dealer lots. Midsize cars are sitting for an average of 68 days before being sold, compared with 46 days for compact SUVs, according to Edmunds.com. Luxury models are slow movers, too, sitting on dealers’ lots an average of 73 days. The longer a car languishes, the more eager a dealer will be to sell it, even at a loss (to cut the financing and inventory costs that pile up). Unless you’re in the market for a hot new model, "you'll have more negotiating power on a car than an SUV," says Caldwell, of Edmunds.
Many shoppers are skipping a purchase in favor of leasing as a way to trim monthly payments (take our quiz Should You Buy or Lease Your Next Car?). Lease payments are almost always lower than financing a purchase because you must return the vehicle after the lease expires, typically in three years (you'll then have the option to buy it). A record 29% of new vehicles were leased in 2015, according to Edmunds.com. Leasing lowers the monthly payment on a new car by an average of $84 compared with a loan, according to credit-reporting agency Experian.
Lease payments hinge not only on a vehicle's price but also on its resale value, which fluctuates with market conditions and demand for the model. With gas prices so low, SUVs are holding more of their value than cars. That could make SUV lease payments a bit less than you'd pay for a comparably priced car (because the SUV is expected to be worth more at the end of the lease, reducing your monthly payments).
Luxury cars also look compelling to lease, thanks in part to manufacturer subsidies that hold down monthly payments. The average luxury lease payment is more than $160 a month lower than the average luxury car loan payment, says Experian. You'll still pay a bundle, though: Luxury leases average $592, compared with $398 for lease payments on all new vehicles.
Haggling pays off
Whatever you buy, don't forget that a dealer can make money even if you negotiate a price at or below invoice (see our slide show 6 Things Car Dealers Never Want to Hear You Say). Manufacturers are setting their suggested retail prices closer to invoice in order to exert more control over the sale process, says Todd Milbury, director of industry relations for the National Automobile Dealers Association. The gap could be as meager as $100 for a popular vehicle, pushing profit margins on the sale down to 1% or less.
But that doesn't mean a dealer can't make a profit if you drive a hard bargain. Dealers now earn most of their money from add-on products, such as paint protection and extended warranties, along with financing, parts and service. Carmakers also provide bonuses and financial incentives to dealers if they hit sales and customer-satisfaction targets, and maintain showrooms in tip-top shape.
Shop for the same model with the same options from at least three dealers, and use a price offered by one dealer as leverage against the others. The upshot when you negotiate? Stand firm with a reasonable price and the dealer will likely agree in order to close the sale, says Karl Brauer, senior editor at KBB.com. "You're the one with thousands of dollars to spend, and you decide who gets your money." When you fall in love with a new car, remember that there’s probably an identical one at another dealer—-or you can order it from the factory. If one dealer won't play ball, move on to the next one.
Hate to haggle? You're in good company. Some car shoppers equate a trip to the showroom with an appointment with the dentist. For $250, Car Bargains will use its professional negotiators to solicit and lock in bids from at least five dealers in your area.