How to Get the Best Deal on a New Car

Detroit could be on the cusp of an upswing, and that could mean big changes for car buyers.

This week, Ford Motor (F) reported its first profitable quarter in North America in more than four years, and new monthly sales suggest the firm is not only benefiting from cost cutting but also a pickup in demand for its cars and trucks. The auto maker said October sales rose 3% over the year-ago period.

The most optimistic interpretation of Ford’s results is that the beleaguered auto industry has finally found its way. But the scope of the rebound remains to be seen. Ford, which posted a third-quarter profit of $997 million, is the only auto maker of the Big Three that didn’t file for bankruptcy protection this year, and its turnaround plan has shown more signs of success than those of Chrysler and General Motors.

One thing is certain: The auto industry is changing, and those changes will have a real effect on the decisions consumers make when buying a car. For example, if Ford’s sales continue to rise, the company could end up raising its prices, as well, says Efraim Levy, an equity analyst who covers Ford at Standard & Poor’s.

More broadly, the retail car market has grown less consumer-friendly in the past few months. The cash for clunkers program helped remove excess inventory from dealers, and financing remains tricky as credit is still tight.

Still, savvy consumers have some options. Here are five tips to get the best deal on a car right now.

Unless you’re in a rush to buy a car, you’re better off waiting until the last month of the year, when dealerships will try to unload their old inventory with new incentives.

Right now, dealers have some breathing room because the government’s cash for clunkers program boosted sales and reduced inventory. Auto makers also scaled back production by almost 50% during the first half of the year as consumers stopped buying cars, says Sophia Koropeckyj, a managing director at Moody’s Economy who follows the auto industry. (They are now increasing their inventory again, albeit slowly.)

The upshot for consumers: Dealerships are now offering fewer incentives, like discounting and cash back. (One of the factors that lifted Ford’s third-quarter earnings was that the company relied less on incentives, which erode profits, says Koropeckyj.)

By December, dealerships will be under more pressure to make room on their lots for new models, so they’ll be more likely to offer incentives to push out the old ones.

To get approved for the most affordable car loan, borrowers will need a FICO credit score of at least 750, says Koropeckyj.

Of those with near prime credit – a FICO score between 620 and 750 – around 70% will be approved for a car loan. But just 20% of consumers with a FICO score lower than 620 will qualify. Consumers who have less than prime credit are typically required to make a larger down payment and end up with a higher interest rate on their loan.

Car loans were hardest to get at the end of 2008, when the credit crunch was in full effect, says Koropeckyj. Since the summer, loans are starting to become more accessible as the credit market has loosened a bit. JPMorgan Chase (JPM) auto originations rose 30% in the third quarter from the second quarter and 82% from the year-ago period.