You don’t have to know a piston ring from a brake caliper to know that it’s been a historic year for the car industry—and not in a good way. Back in the spring, Chrysler emerged from bankruptcy protection with an Italian last name. After its massive bailout, GM now stands for Government Motors, the joke goes. Hummer—that icon of American motoring machismo—may soon be owned by an obscure Chinese road-equipment maker. Even with the recent “cash for clunkers” program boosting sales, the market is still down 32 percent this year. And in a sure sign that times have changed, some Bentley dealers are quietly offering $36,000 off the sticker price of $180,000 Continentals.
Talk about needing to reinvent the wheel. The auto industry is working to make its wheels leaner, greener and more profitable as consumers steer away from the supersized, blinged-out vehicles of the boom years and move back to basics: practicality, safety and fuel efficiency. While nothing is exactly peeling off the lot these days, sales of compact cars are down slightly less than the industry average. And in the luxury sector, compact premium crossovers are up 18 percent—the only segment of the industry that’s higher. These statistics, says Jeff Schuster, head of global forecasting at J.D. Power, suggest that drivers may be “trading down.” Indeed, slowed by unemployment worries and a drop-off in cheap, heavily subsidized leases, American car buyers are looking for value above all else. “There’s no shame in buying a smaller, gas-efficient car anymore,” says Jesse Toprak, a longtime industry analyst now with Truecar.com.
Not that we’ll all be driving stripped-down econoboxes. Many unsold cars languishing on the lots are heavily equipped with high-tech and luxury options—think GPS navigation, premium audio and leather seats. Those features tend to come in packages that are a hangover from the days when dealers could count on an easy $2,000 up-sell. Now they may heavily discount those packages just to seal a deal, says Ed Kim, head of industry research for automotive consultancy AutoPacific. And it’s not uncommon to find even $23,000 sedans loaded with a full suite of optional gear—not to mention generous cash rebates that make it easier to ante up for your favorite extras.
But while dealers have been rolling out the red carpet this year, experts caution buyers not to expect the bargains to last. Carmakers, which have been shutting factories, slashing production and selling off excess inventory, have just begun ramping back up, a sign that the window on this incentive-heavy buyer’s market may be closing. To see which cars are worth opening your wallet for, we consulted industry experts and evaluated and test-drove dozens of models in four categories: green machines, family haulers, luxury coupes and value sedans. Ahead, our picks for our annual car-buying guide.