Car Buyer's Market?

If there were ever a time that could be considered a buyers' market in the domestic automobile industry, this would probably be it. This week, General Motors (NYSE: GM) announced that it would be increasing its cash rebates to buyers of its 2004 model cars to as much as $5,000 while GM truck and SUV buyers may be in line for as much as a $6,000 break.

The reasons are obvious. The 2005 models are starting to roll in, and the unsold inventory is becoming an even bigger problem now that Asian imports by the likes of Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan (Nasdaq: NSANY) are nibbling away at GM's market share.

Yes, GM sold more cars last month than it had during any other month of the year, but the results are also lower than last year's showing for July. While GM is promising to raise prices slightly on its 2005 models, we all know that that breed of optimism is just a future incentive, allowance, or rebate away from extinction.

The domestic carmakers have been struggling, and it's no surprise that leading auto retailer AutoNation (NYSE: AN) singled out its GM and Ford (NYSE: F) dealerships as its weakest performers last month.

With drivers trading in their chunky, gas-guzzling domestic SUVs for smaller fuel-efficient imports, it's clear that the higher prices at the pump have created a lasting impression on cost-conscious auto buyers. Higher allowances for GM truck buyers seem to all but confirm that assumption.

All of this matters greatly, because GM needs to move its cars -- and not just to clear the way for the 2005s. Even as GM has been giving itself away with consumer-friendly 0% financing, the company has been earning more from its financing arm than its flagship automaker business these days.

So GM's got some cars to move. Will you fall for the dangling set of keys?

Is it worth it to buy a 2004 model given the incentives, or is it better to hold out for the 2005 models? Are you leaning towards domestic or import for your next set of wheels? All this and more -- in the Buying and Maintaining a Car discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz is in love with his car. He's got a feel for his automobile. He does not own shares in any companies mentioned in this story.