Time to buy a VW!

Something is rotten in the city of Wolfsburg. But there may never be a better time to buy a car from the auto giant that’s based there.

Volkswagen, the world’s biggest automaker, suddenly needs a tow truck as it lurches through a surreal case of corporate cheating. The German car manufacturer apparently installed software on 11 million diesel-powered vehicles worldwide that disables pollution controls during ordinary driving, allowing toxic emissions far above allowable standards. The only time the pollution controls work is when the engine is hooked up to an emission-testing machine, which is surely one of the more diabolical innovations in automotive history.

VW can correct the software, but that may reduce the fuel economy and degrade the sporty performance of vehicles such as the turbodiesel (or TDI) versions of the Beetle, Golf, Jetta and Passat, which enthusiasts love for their muscular pickup, high mileage and long hauls between fillups. So far, the scandal has slashed VW’s stock price by 32% and blown about $30 billion off its market value. CEO Martin Winkerkorn is gone and the obligatory class-action lawsuits have already begun. Meanwhile, VW is prohibited from selling diesels in the United States until the government gives the okay.

That makes it a grim time for VW—but maybe a happy time for buyers who want one of its cars. Buyers shouldn’t expect to find fire sales at VW showrooms, but there may be selective discounts as dealer inventory piles up, especially if shoppers stay away. There are early signs that is actually happening. Research firm YouGovBrandIndex finds that VW’s reputational “score” has fallen to the lowest level in at least 6 years. And car-shopping site TrueCar says consumer searches are down 4% during the last week for Volkswagen cars in general, and 29% for Volkswagen diesels (which aren't for sale at the moment, anyway).

Since the scandal is only a few days old, there’s not yet any data showing whether transaction prices for Volkswagen models have fallen. But VW dealers clearly have a problem. Diesels account for about 22% of all VW sales in the U.S. market, and with those models off the shelf, inventory will pile up at dealerships. That could force dealers to unload other models just to make space in their lots for the vehicles they’re not allowed to sell. VW has offered dealers some financial help to weather the crisis, but the longer it takes VW to address the problem, the more likely discounts will become.

Prices and market share often dip during an automaker scandal—but not for long. Most of the big automakers have endured safety controversies or bouts of bad publicity during recent years—General Motors for defective ignition switches, Honda for faulty Takata air bags, Toyota for unintended acceleration—with surprisingly similar results. “The majority of recalls don’t have any statistically significant impact on market share or pricing over the long term,” says Eric Lyman of TrueCar. Car buyers tend to have short memories, and once a problem is solved, buyers return to showrooms.

VW’s cheating scandal may be different, for two reasons. First, it appears to be a deliberate attempt to deceive regulators and consumers, rather than an engineering or manufacturing mistake, which is much more common. “This is an unprecedented scandal in that there was manipulation and intent,” says Lyman. “That would seem to lend itself to negative consumer sentiment.”

Second, the diesels in question, once they’re modified, could basically end up as different cars, with less appealing fuel economy and performance. If so, many buyers will undoubtedly feel ripped off. Lemon laws in many states allow buyers to return cars that are defective in some way, but that often entails arbitration or a battle with the dealer. VW may consider measures making it easier for buyers to bring their car back and get a refund.

The most likely discounts will apply to VW’s new diesels, once they go back on sale, and to used diesels affected by the recall. Eric Ibara of car-shopping site Kelley Blue Book doesn’t think any price cuts will last for long. “It wouldn’t surprise me if there was initial softness in turbodiesels,” he says. “But it would be quite unusual if VW’s TDI values were to drop and stay down.”

VW’s gas-powered models aren’t affected by the stop-sale order on diesels. But if dealers have to discount those models to get buyers in the door, the best deals will probably be on the Tiguan and Touareg SUVs and on the CC sedan, which are older models already being discounted at many dealers. Web sites such as TrueCar, KBB and Edmunds typically monitor deals and track fair transaction prices based on make, model, trim line and options. If you finagle a price below the average for your ZIP code, mission accomplished.

A few VW models are still considered hot properties. The Golf and its forthcoming variant, the Golf SportWagen (it sounds more German if you pronounce the “w” like a “v”), are new for 2015 and widely praised as fun, refined and economical runabouts. And the feisty GTI remains a gearhead favorite. If the diesel controversy helps you save a couple thousand on one of those models, that may be a silver lining. At least for consumers.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.