Crowded car lots drive good deals

It's the old dealer come-on: "We have too many cars, so we're slashing prices." But these days, it could be true.

Climbing gas prices and changing consumer tastes are leaving auto manufacturers and dealers with an overload of certain models. In addition, automakers were expecting more traffic. While 2004 numbers were up from 2003, the difference was only 300,000 vehicles. And 2005 is expected to be flat.

So how does that stack up? Most vehicle makers and marketers like to keep a 35-day supply on the lots, while about a 60-day supply is seen as standard, says Melissa Moore, a research assistant with WardsAuto.

The surplus is most apparent for domestic models. "Part of the problem was production," says John Thomas, an industry analyst with the National Automobile Dealers Association. "They didn't cut back on production until very late in the year."

Adding to the surplus: Some buyers are saving their money for redesigns that will come out in the next couple of years.

"In general, car sales are down," says Jack Gillis, author of "The Ultimate Car Book." "That's good news for the buyer."

So how do you know if the vehicle you have your heart set on might be in oversupply? You do a little detective work.

First, find out if the auto maker is offering any special financing or rebates for the car you want. "When cars are discounted it's because they are not selling or they made too many of them," says Philip Reed, consumer advice editor for Edmunds.com. "Supply and demand. If a car is popular and there are not enough of them, dealers immediately perceive this and price accordingly."

So if you see special deals for a particular make and model, chances are it isn't moving as well as the dealers and manufacturers might have hoped.

Check out prices at Kelley Blue Book and Edmunds.com.

You can also look at manufacturers' Web sites. Some will give information on deals and rebates. Others will let you browse inventories at local dealerships. "There's much more flexibility and convenience and ability to check dealer inventories," says Reed. "And it does give you an indication.

"GM has a pretty amazing Web site," Reed says. One advantage is that it lets you search an entire metro area for a particular model, which makes comparison shopping easier and more realistic.

One piece of information you want is the invoice price. "They are relatively easy to find," says Gillis. "They are available on the Internet or in pricing guides in the library -- keeping in mind that while it's called the 'invoice price' or 'dealer cost,' it rarely is the invoice price or true dealer cost."

There may be financial arrangements or incentives "between the manufacturer and the dealer that we may not know about," says Gillis, also director of public affairs for the Consumer Federation of America. "It's rare that that's what the dealer actually paid for the car. None the less, that's the number you want to start negotiating from, not the MSRP (manufacturer's suggested retail price)."