Americans who have been put off buying a new car amid the uncertainty created by the coronavirus pandemic are being tempted back into Ford showrooms with reassurances that they can return their vehicle if they lose their job.
According to the latest forecasts from Edmunds.com, sales of new cars and trucks in the U.S. in June will be some 28.7% lower than in the same month in 2019, while second quarter figures will be even worse, with a predicted 34.3% decrease year-over-year.
What have auto dealers been doing to counter coronavirus?
Frustratingly for auto dealers, the slump comes despite their best efforts to pique the interest of buyers in the face of the pandemic. Car dealers reacted quickly to compete for what potential business there was by slashing the cost of the best auto loans (opens in new tab) and enhancing their finance options.
At the same time, many dealers refocused their attention away from the showroom to online sales, fully aware that most of the car-buying process - from buying auto insurance (opens in new tab) to extended car warranties (opens in new tab) and the best roadside assistance services (opens in new tab) - can now all be done from the comfort of someone’s home. Even the potential hurdle of the test-drive was overcome by some dealerships who arranged home tests and drop-offs.
As with much of U.S. industry, however, what auto dealers have been unable to counter is the crippling hit the coronavirus has dealt to consumer confidence. A record increase in unemployment, the disruption of incomes caused by shutdown, and rising household debt (opens in new tab) have combined to leave most Americans, at worst, unable to make big-ticket purchases, and, at best, reluctant to commit to significant spending.
According to a survey (opens in new tab) by Cox Automotive, at least 32% of potential car buyers are delaying automotive purchases, due to market uncertainty and fears of unemployment.
The Ford Promise
Now, in an attempt to bolster the confidence of those who have the means to buy a car but are hesitant of purchasing in an unsettled economy, America’s second largest automaker has introduced (opens in new tab) the Ford Promise - a program that offers the option to return a new vehicle if a buyer loses their job within the first year.
“We feel like right now, the economy is at the stage of recovery where people want things to be back to normal, they want to buy, but they’re still a little nervous about what the future holds,” says Mark LaNeve, vice president, U.S. marketing, sales and service. “We want them to know we understand that, and we’re here to support them in their buying decisions.”
What does the Ford program involve?
Under the scheme, customers who lease or purchase a vehicle with Ford Credit financing and then lose their job within a year can return the vehicle. Ford Credit will value the vehicle using the National Automobile Dealers Association (NADA) average trade-in value, reduce the customer’s outstanding balance by that amount and waive up to an additional $15,000.
The buyer will be responsible for any difference remaining, and any late or deferred payments due and vehicle damage, if they apply. However, once the conditions are met, the account is reported as closed and paid.
The finer details of the Ford Promise
As with most offers, of course, reading the small print is a must. In this instance, the Ford Promise:
- only covers 2019, 2020 and 2021 purchased or leased new, used and certified pre-owned vehicles financed through Ford Credit.
- only covers vehicles that are for personal use; commercial use contracts are ineligible.
- begins 30 days after the vehicle is purchased or leased.
And to be eligible to return a vehicle under the program, customers must:
- have been involuntarily made redundant.
- apply and be approved for state unemployment benefits and notify the claims administrator within 30 days of losing their job.
- have worked at least 30 hours a week with a single employer for a minimum of 12 weeks within the most recent 17 consecutive weeks to qualify (12-months for self employed bankruptcy).
Should you buy a new car?
Buying a new car is a decision that should not be taken lightly at the best of times. So against the backdrop of a global pandemic, and the economic disruption it has already brought - and looks set to continue to bring - making a reasoned choice is all the more important.
First of all, do you really need a new car? For many people, car use will have plummeted in the past few months as shops and leisure activities have shut down and workplaces have closed. What the pandemic has also made many workers and businesses realize is that people can work from home - this might lead to a longer-term change in how you are expected to work and could see you avoid the commute to work altogether.
If you still think you will need a mode of transport going forward, and a new one at that, weighing up your financial situation is an absolute must. Do you have enough in rainy day savings (opens in new tab) to cover an emergency expense or job loss?
And what if your employer simply cuts your hours or asks you to take a pay cut - could you still afford the car then? The terms of the Ford Promise do not cover this - it is only if you lose your job and meet the other criteria that you have the option to send the car back. Even then, there could still be some costs to pay.
Also consider the additional costs that come with buying a new car. Yes, the best auto loans (opens in new tab) are extremely competitive at present (opens in new tab), but you will also need to find the best auto insurance (opens in new tab). If you’re buying a slightly older car, selecting from the best extended car warranties (opens in new tab) is probably also wise, as is arranging cover through the best roadside assistance plans (opens in new tab), if it is not included with your new car.