Now, A Good Time to Buy

By Jeremy Anwyl March 17, 2011

Now Good Time to Buy lead -- CREDIT -- iStock.jpg

USA Today ran a piece this week that quoted our chief economist, Lacey Plache. It echoes conversations we have been having internally about how the crisis in Japan will possibly play out in terms of the US economy, and specifically in terms of overall vehicle sales, the mix of vehicle sold, and vehicle prices.

Plache makes a good point about how supply chain disruptions may cause shortages of some models, but any drop in sales is likely to be short-lived. Buyers will be back as soon as supply is restored. From a consumer perspective, there are some important points to consider: The first is that over the next weeks, and possibly months, it may be harder to find exactly the model with options you want. This is a clear risk with Japanese built vehicles from plants that have been shut down, and for other models that use parts sourced from Japanese suppliers.

Toyota has gone on record as saying it has a "normal" supply of inventory. This is probably true, but when consumers fear shortages, they can quickly create one. Judging by dealer comments this week, many consumers have already figured much of this out, as shopping activity seems strong.

Availability is just one side of the story. The other is pricing. Any reduction in supply, and/or an uptick in demand, will quickly push up dealer pricing. But think about this from a manufacturer's perspective. Dealers raising prices on Japanese sourced models will push less brand-committed shoppers to other vehicles. For example, if prices on the Toyota Camry firm up, some buyers will shop Hyundai Sonata, Chevrolet Malibu or Ford Fusion.

In the short-term, these supplies are fixed. Depending on parts issues, there could also be shortages of those as well. Under either scenario, there is not much reason for the current incentives -- many of which expire at the end of March -- to be continued at current levels into April.

So our advice to consumers -- and many are asking for it -- is that if you had any notion about buying a vehicle in the next few months, there is no downside to buying now, though plenty of possible upside. This means that March sales, which were tracking a bit behind February's pace might actually finish higher. April sales could drop; how much really depends on supply.

Over the course of the year, however, we would expect any buyers who defer a purchase to have come into the market and the impact on the final sales tally for the year will be muted. Barring any more exceptional events, that is.

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