Can a slow auto market save you money?

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

When it comes to shopping for new cars, it’s a buyer’s market.

Consumers are shouldering shrinking equity, tightening credit, and rising prices on food, gas, power and other necessities. As a result, many are putting off car buying.

Vehicle sales this year are down about 10 percent over last year, according to estimates by

“And last year wasn’t that great, either,” says Jesse Toprak, executive director of industry analysis for the company. Many shoppers are sitting on the fence, but those who buy are choosing affordable models that go farther on a gallon of gas.

He projects that the industry will see its worst sales year since 1995.

“It’s been brutal out there,” says Jack Nerad, executive market analyst for Kelley Blue Book and The drop in sales from 2007 “is significant,” he says. “The car industry is definitely in a recession.”

While that’s bad news for automakers and dealers, it’s actually good news for consumers.

“It’s been brutal out there. The car industry is definitely in a recession.”

“It means dealers are more cooperative than ever,” says Nerad. “Also, makers are offering more incentives than ever.”

Buyers are likely to see discounts, actual cash back and more attractive financing agreements.

“We’re seeing all of the programs that have worked in the past coming back,” says Paul Taylor, chief economist for the National Automobile Dealers Association. Two well-known strategies are employee-level discounts for buyers and zero-percent loans.

“We’ve seen some amazing financing deals,” says Nerad. And a low- or no-interest loan “can save the typical buyer thousands of dollars,” he says.

Factory cash-to-customer deals are a big trend in incentives now, says Nerad. So when you sign the deal, you walk out with the vehicle as well as a check.

“What this speaks to is a lot of customers are upside down in their (current) cars,” he says. “This gets them out of that situation.”

Deals on popular cars
Along with taking their time, consumers are gathering more information before they buy.

At her two Texas dealerships, Annette Sykora has seen sales follow the national trend, dropping about 10 percent from last year. But she’s noticed another trend where consumers are making more conscious purchasing decisions, Sykora says. “They are asking a lot more questions,” often about fuel economy. And that translates into their buying habits. “We’re seeing a trend toward more fuel efficiency,” she says.

“Usually, that means smaller cars,” says Sykora.

Sales rates have stayed roughly the same as last year at Michelle Primm’s dealership in Cuyahoga Falls, Ohio. “But the mix has changed,” says Primm, managing partner of Cascade Auto Group and an at-large director with the dealers’ organization. “There’s definitely more attention to cars that are more efficient.”

Some cars are actually selling better this year. Compact cars, compact SUVs, luxury sports cars and exotic cars are all moving off the lots in greater numbers than they were last year.

While luxury car and sports car sales are down, sales of luxury sports cars are up almost 23 percent from last year. Exotic cars are also up almost 23 percent.

“In general, most luxury brands are not as impacted by the decline in demand as most mass-market vehicles,” says Toprak.

“It may be easier to get financing from the dealers. They can justify the risk.”

Compact car sales are up almost 9 percent. But buyers are still seeing cash, rebates and financing deals worth up to $1,579, according to figures from Consumers are looking for good gas mileage at a good price for a vehicle that will hold its resale value.

“I would be hard-pressed to say that a buyer couldn’t find an acceptable smaller car at a good price,” says Nerad.

Likewise, compact SUV sales are up almost 3 percent from last year, but makers are sweetening the deals an average of $2,632, according to Edmunds. “A lot of consumers used to have SUVs,” says Toprak. “When they trade down, they don’t necessarily want to get into a car.”

A model’s popularity will affect the deals and incentives. “Incentives are largely on models that aren’t selling,” says Taylor.

From past experience, “Automakers have learned how to get the most out of their incentives,” says Toprak. They tend to be greatest where demand is lowest.

At the same time, he says, “Most vehicles have some sort of incentive, unless there’s high demand.”

Regional variations
Deals also vary by region and metro area, as well as by manufacturer. Domestic automakers have been much more free about offering cash back incentives, rebates and financing deals than foreign auto manufacturers.

Of the six major automakers behind the 20 most popular cars, General Motors offers buyers the biggest incentives, with an average of $3,662 each, according to Toyota offers the least, with an average of $1,213. The industry average is about $2,445.

The best way to squeeze the most value from a deal is to go into the dealership pre-approved for a loan, but get a quote on dealer financing, too.

“Most vehicles have some sort of incentive, unless there’s a high demand.”

With the current credit crunch, “It may be easier to get financing from the dealers,” says Toprak. “They can justify the risk.” And domestic dealers and manufacturers tend to be a little more lenient, he says.

The best times to shop for a new car are at the end of the month, the end of the model year and at the end of the calendar year. These are the times when dealers often have a greater sense of urgency to move vehicles. But that tactic is now public knowledge. So if you want more time and attention to wheel and deal (and fewer customers competing), hit the lot early in the month, says Toprak.

To get the best price, “what we recommend is shop around,” says Nerad. Let the dealers know that, he says, “and you will get a pretty good sense of what’s out there.”

Dana Dratch is an Atlanta-based writer who covers personal finance and lifestyle issues for national publications.