Good Time to Buy a Car, as declining sales, production cutback, incentives.

Given the turmoil in the automotive industry, you wouldn’t think it’s a favorable time to buy a car, but industry experts say declining sales, production cutbacks and manufacturer incentives might make it a good time after all.

“The next 45 to 60 days are the big closeout days, not in the fall,” said Alan Rice, executive manager of Colonial Cadillac in Norfolk, Va. “That’s when you’re going to have your best selection as well.”

The cause: the historic slump in auto sales in the face of the economic recession, which has slowed the production of new vehicles. At the current sales rate, U.S. sales would come in at just more than 9 million for 2009, according to Automotive News. Compare that to 2007, when Americans bought 16.2 million new cars and trucks.

The falloff in demand has led automakers from Asia to Europe to slash output. And with cars and trucks piling up on dealer lots, manufacturers are boosting their incentives.

“Manufacturers have put a lot of cash on the hood to move the metal,” said Frederick Miller, president and chief operating officer of Hall Automotive. “New-car incentives are high, factories are closed and supplies of some models are dwindling.”

Although buyers may have their choice of most models now that might not be the case by the fall, the time of year many look for bargains. And with factories closed, Miller said that automakers might not be able to replenish the pipeline quickly.

“By July, we’re going to have a small amount of vehicles,” he said. “It’s going to be picked over by the end of summer.”

Everyone agrees this scenario could change if Congress passes a “Cash for Clunkers” bill, which would offer car buyers additional cash incentives to buy a new car. While that would stimulate demand for new cars in the short term, it could exacerbate shortages later this year. Even so, there’s a wild card: Chrysler LLC.

With Chrysler closing a quarter of its dealers nationwide, the market could become flooded with new Chrysler, Dodge and Jeep cars and trucks selling below cost as shuttered dealers try to dump their new vehicles at auction to raise cash.

“There’s going to be a sell-off,” said Miller, who runs a Chrysler, Dodge and Jeep franchise in Virginia Beach. “That could be the Wild West show.”

While surviving Chrysler dealers are trying to prevent that from happening, there are no guarantees. And with the looming closure of some General Motors franchises, shortages may not materialize.

“The variable will be dealer attrition,” Rice said. “If dealers go in masses, the inventory has to go somewhere.”

But while new-car prices are sliding, used-car prices are doing just the opposite.

“Used-car prices have been creeping up, and you will see a shrinking in the quality of the used-car market,” said John Linkov, automotive editor for Consumer Reports. “And because leasing isn’t as popular and because manufacturers like Chrysler aren’t leasing, there will be fewer 3-year-old cars with 36,000 miles available.”

Colonial’s Rice said that dealers are stocking up on used cars knowing that manufacturers are slicing new-car production. As new-car inventories thin out, dealers rely on used-car sales to tide them over until new models arrive. All of that comes as consumers are increasingly choosing used vehicles as a less-expensive alternative to new ones.

As an example, Rice said a 2- or 3-year-old Cadillac Escalade with a six-year, 100,000-mile warranty may cost $45,000, while a new one would cost at least 50 percent more. That price difference, along with the drop in gasoline prices over the past year, has increased demand for used SUVs.

Rice has seen it firsthand. His store’s new-car sales are down 40 percent this year, while used-car sales are up 56 percent.

“The used-car business is very strong,” he said. At a two-day tent sale held recently by Hall Automotive, the company sold 100 used trucks and SUVs, five times the normal sales rate.

“Used trucks and SUVs are very hot right now,” Miller said, adding that foreign cars are also bringing big money. “I’ve seen 1-year-old Honda Accords go at auction for what they’re going for new. That’s pretty common right now.”

Such anomalies in the marketplace make it essential that prospective buyers research their purchase decision before entering a showroom. While buyers may be tempted to wait to see if prices go lower, dealers think otherwise.

“There’s not going to be a lot of leftover inventory come fall,” Rice said. “Manufacturers will put the money on the hood that they need to move it, but they won’t have to put big money down.” Miller agreed.