The economy is certain to take a precipitous downturn over the course of the next few months. If you’ve been weighing up the pros and cons of a major purchase, then all of the uncertainty might give you pause before pulling the trigger. And there are few purchases more major than that of a new car, especially one that’s being financed through borrowing.
While there is good reason to be cautious, there are also several marked advantages to buying during an economic downturn. Let’s take a look at a few of them.
Demand is low
Simple economics determines that, during a downturn, where demand slumps, prices must come down to meet it. Thus, with so few of us willing (or able) to head out to make purchases, those of us that can will find ourselves with greater leverage. Dealerships will be more eager – or even desperate – to close sales, and sellers on the used market will find fewer buyers. In other words, it’s a buyer’s market, and there are sure to be plenty of bargains to be found. Pressure on the auto industry caused by lack of travel, however, will likely also see the cost of personal car leasing take a downward turn.
Interest is low
In order to stimulate demand, the Bank of England slashed interest rates from 0.75% down to 0.25%. They then did the same thing again, slashing them all the way down to a record low of 0.1%. This was done in order to encourage us to borrow (and to spend) more, and thereby keep business ticking over during the downturn. This means that lenders will be able to offer more favourable rates. When the situation improves, the interest rates are likely to be put back to where they were – which means that the window of opportunity is fairly narrow. Take advantage now and
What about my job?
If your earnings are 80% of what they were, because you’ve signed up to the government’s furlough scheme and your employer hasn’t chipped in the remaining 20%, then your spending power might well be limited. Similarly, if you worry that your job isn’t secure, as many of us do, then it might be wise to hold off on a purchase as major as a car.
But if you’re in a reasonably secure position financially, there’s never been a better time to make that significant purchase.