This is a tumultuous time in the automotive industry, with the national economy, gasoline prices, and the model-year change over all affecting car shoppers. Vehicle choices and consumer priorities are much different now than they were just a year or two ago. But one thing that has remained constant is heavily marketed sales signaling the end of the summer, with zero-percent interest, employee discounts, and even buy-one-get-one-free pitches competing for your attention and money. Consumer Reports Auto Price Service's analysis shows that looking beyond the hype, some deals are compelling, while others attempt to distract you from the true potential savings and long-term owner costs.


THE LATEST INCENTIVE TRENDS

In August, we tracked 2,014 national incentives across all vehicle variations. Clearly, there is a lot of money up for grabs on the hoods this month. With large SUV and truck sales hurting, it's no surprise that Hummer has the highest average combined customer and dealer incentives per model at $5,400, followed by Lincoln at $4,500, and Land Rover and Mercedes-Benz at $4,100. As expected, incentive availability and scale vary by category, with premium and gas-guzzling models having the grandest offers in general.

The size of the incentives often varies in direct proportion to the size of the vehicle. The big money is with SUVs and pickup trucks, and, to a lesser degree, minivans. Fuel-efficient and affordable small cars are attracting more buyers with fewer and lower incentives.

The chart below highlights the average incentives, combining manufacturer-to-customer and hidden dealer incentives. As not every vehicle in a class carries an incentive, the right column highlights how common incentives may be. In the case of hatchbacks and wagons, a few models might have significant incentives, though most cars will carry relatively meager promotional dollars. The unadvertised dealer incentives integrated into these overall figures can be significant bargaining chips in negotiating a lower price.

Segments with a much lower amount in the right column might have incentives on fewer models, while those with similar numbers in each column have incentives on most entries.

Narrowing our analysis to just those models with incentives, the average figures increase dramatically (center column). Across all classes, customer cash rises to about a $2,600 average per vehicle. Less common, special direct-to-dealer incentives climb to about $1,300. A well-informed buyer could in some cases negotiate about $4,000 off and still leave the dealer with some profit. For the customer, $2,600 off is good, but negotiating $4,000 off is better.

The important lesson here is discovering what incentives are available for the buyer and the dealer in order to negotiate effectively, no matter what vehicle type you are considering. This key information is available in the Consumer Reports Auto Price Reports to help you get a great deal on a new or used car purchase.


DESPERATE TIMES, DESPERATE MEASURES

As car sales have slowed in many segments, automakers and car dealers have become more aggressive in their marketing tactics. Zero-percent financing and customer rebates of $1,000 or more have become commonplace. Now, it takes a sensational deal to attract showroom traffic at a time when consumers are watching each dollar closely.

Chrysler led the charge in early summer with its $2.99 Gas Guarantee, pledging to limit fuel costs for the first three years. At the same time, Suzuki offered a less-comprehensive gas-card program, along with traditional rebates, to sell its wares. Others such as Volkswagen have followed with less-conventional deals: a $1,500 college-fund offer to Routan minivan buyers.

At the extreme, we have seen dealers offer a free lease with the purchase of a large SUV. Such promotions remind us of the profit potential full-sized SUVs have. (When they were selling for close to sticker price, there was a carload of profit in there!) The appeal of these deals is limited, as they depend on the buyer's spending near MSRP on the gas-guzzling SUV and on the same customer also wanting an extra car. Remember, there are no freebies—in the end, the customer is paying.


THE RETURN OF EMPLOYEE DISCOUNTS

Employee discount campaigns have proved to be quite successful at moving metal in recent years, and it is no surprise to see this marketing tool used again. We ran the numbers on several Consumer Reports-recommended models eligible for this program, comparing traditional incentives and negotiation against advertised employee pricing.

With the sample vehicles, including the Buick LaCrosse CX, Chevrolet Impala LTZ, and Saturn Outlook XR AWD, we found that the employee pricing was a good deal. In those instances, the employee pricing came in around 15 percent below MSRP. Compared against our traditional Bottom Line Price (which factors invoice price, rebates, and dealer holdback) plus a slim 2-percent dealer profit, the employee pricing offers were 3 to 4 percent lower than this total figure, marking them attractive deals. As we have seen in the past, many sensational offers do not measure up and it is important that any prospective buyer review all the numbers before making a commitment

The example below illustrates how the GM Employee Discount for Everyone pricing compares to traditional, aggressive negotiation.

 Includes destination charges

With an employee discount or another eye-catching offer, look beyond the incentive to understand what the long-term owner costs will really be. After all, it is only a good deal if it makes sense today and in the years that follow. Remember that vehicles are depreciating assets, losing about 46 percent of their value on average over five years of ownership. Heavily discounted models might see even more rapid depreciation; after all, there is a reason why they are less desirable and warrant the large incentives. Often mediocre or even poor fuel economy might be to blame, meaning that model could end up costing more at the pump and in depreciation, creating a one-two punch to your checkbook.


DON'T LEAVE THE HIDDEN CASH ON THE TABLE

Reviewing the 2008 incentives, we have found thousands of dollars in hidden dealer incentives. Car shoppers who claim their rebate, and perhaps even take advantage of reduced-rate financing, might be thrilled with their deal but they could be leaving significant money on the table.

Customer cash incentives come from the manufacturer, allowing the dealer to still earn money above their invoice price, plus a holdback fee that the manufacturer pays the dealer, and sometimes a manufacturer-to-dealer incentive. The holdback fee and manufacturer-to-dealer incentives are typically unadvertised. That means there could be even more room to negotiate.

For example, a $20,000 car with a $2,000 manufacturer-to-customer rebate means the buyer can easily drive it away for $18,000. Since that discount comes from the automaker, not from the dealer, the dealer profit isn't compromised. If that same car also has an additional $2,000 manufacturer-to-dealer incentive on it, the dealer would profit as if the car was sold for $22,000, or above the sticker price. Throw in the common 2-3 percent holdback that the manufacturer gives to the dealer to help cover base business costs, and the dealer would be sitting pretty in this scenario. As businesses, dealerships are entitled to earn a fair profit, but as the consumer, you deserve a fair deal. Understanding the numbers, being armed with the latest incentives, and having reviewed basic car-buying tips can prepare you to negotiate effectively throughout the process.


SHOULD YOU BUY LAST YEAR'S LEFTOVERS?

Closeout car deals can bring significant savings when compared with the sticker price, but remember that the vehicle will essentially depreciate a full year's worth once the new model hits showrooms. In some cases, the 2009s will be right there on the lot next to the discounted 2008s.

A 2008 leftover might not be such a good deal if you plan to sell or trade the car in just a couple of years. But long-distance drivers can spread their high annual mileage over more model years by purchasing a clearance model, possibly elevating resale value. If you plan to drive the car for more than five years, or until it wears out, a closeout deal can be a smart choice.


GETTING THE BEST DEAL

Driving a hard bargain is only one part of the equation. Remember, a great deal on a bad car is no deal at all. Especially if you plan to keep the car for a long time, you need to buy a model with the latest comfort and safety features, fuel economy, reliability, and performance. All that information is available at ConsumerReports.org, and will enable you to narrow your shopping list to a few key vehicles. Looking at our exclusive vehicle Ratings and evaluating the models with a test drive will help you to trim the list to the true contenders. If you can get a good deal on a great vehicle, that's terrific. But, don't let the incentives alone drive your purchase.

To make the buying process easier, Consumer Reports only recommends models that meet our stringent criteria for overall test performance, safety, and reliability. Those factors are reflected in our Best new car deals, where the latest incentives are presented, as well as throughout our publications and Web services.

Buying a car requires homework, but that research pays off when you find a good car at a relatively low price. For the full financial picture, be sure to review the detailed owner cost data presented on the model pages for each vehicle (available to online subscribers). To truly arm yourself for negotiation, a complete pricing and incentive breakdown is available in our new- and used-car price reports.

Learn more in our step-by-step guide to buying a new car.