Car Buying in a Credit Crunch

LATE SUMMER IS supposed to be the best time to buy a new car, but savvy shoppers may actually find the best deals well before Labor Day.

Incentives typically peak in July, according to Jesse Toprak, executive director of industry analysis at Edmunds.com. And with new car sales at their lowest level in over a decade, dealers are getting desperate to move the metal before the 2009 models hit showrooms.

Here are some tips to score a good deal:

To help you land favorable terms, shop around online and get pre-approved for a loan first. Then, see if the model you want comes with any incentives, such as 0% financing. "It's hard for a bank to beat that," says Nerad.

Another incentives trap: buying a car just before an all-new version comes out. Mercedes-Benz, for example, is offering 0.9% financing, plus $4,000 in manufacturer-to-dealer cash, on its E-Class sedan through the end of July. Once the redesigned model comes out this fall, however, this older version is likely to shed 10% to 15% of its value. "There's always a reason something's on sale," says Toprak. Instead, buy a high-quality model in the middle of its life cycle (most models are redesigned every four years). The upfront cost will be higher, but so will the resale.

Visit Edmunds.com or Kelley Blue Book's kbb.com site to find out which models come with the biggest discounts in your area. For luxury brands, the best deals are usually tucked into leases, and if you're willing to compromise on body style you can save a few extra bucks, too. BMW's 328xi wagon isn't as popular as its X3 crossover, though they're basically the same vehicle. Lease the wagon and you can save $50 a month.

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