Are Year-End Savings a Myth When Buying a Car?
There’s a school of thought among car aficionados that waiting to the end of the calendar year to buy a new vehicle is a good idea.
And, as NetQuote discovered, maybe with good reason.
According to data from iSeeCars, Black Friday, Thanksgiving, Christmas Eve, Christmas Day and New Year’s Day, are among the top holidays of the year to purchase a new car or truck, and all are near or at the end of the year. That’s the case mostly because of discounts and deals.
“It’s always nice to save money, and when you are buying something as expensive as a car, saving even five percent of your purchase, or $952 off the average price of $19,040, can really add up,’’ says Phong Ly, chief executive officer at iSeeCars. “But it’s hard to get the savings if you can’t find the car you want, so we assessed which times of the year had the greatest number of deals.’’
iSeeCars also says that November and December are the two best months to buy a new vehicle, with the former offering 26.9 percent more deals than average, and the latter offering 23.5 percent more deals than average.
“Between year-end promotions and dealers scrambling to take advantage of the last few months of the year to meet their sales quotas,” Ly adds, “the conventional wisdom of shopping for a car at the end of the year holds true.”
Year-end savings a result of tax deductions, incentives
For auto dealers, the end of the year is “do or die” time to close sales and make more room for newer vehicles.
“At year’s end, dealers are looking to sell off inventory to make room for new car models,” says Brian Moody, executive editor at Autotrader. “On top of that, certain dealers may be open to more aggressive price cuts to meet sales figures for the year.
“That means these deals weren't available last month, when the cars were easier to sell – and they might not be available next month, either.”
Keep in mind that the prime time to get the best deal is often the end of the weekend, month, quarter or year, Moody adds.
“If a lofty 'end of period' bonus is reachable, salespeople might be more willing to work with you on a deal if it helps them get an even bigger payout for beating quota,” he notes.
Jim Dykstra, founder of Vin Advisor, in Granite Bay, California, says the idea of buying of a new or used car at the end of year is based on financial benefits that have ebbed and flowed over time, and some of the buzz is based on myths.
“First, there are tax deductions,” Dykstra says. “Many states used to allow the deduction of sales tax, registration and license fees. This created a significant incentive to buy in December for many customers. Most states have long since eliminated these deductions.”
But dealers do offer more discounts at year-end, and should continue to do so.
“Incentives are a big issue,” he adds. “The reason December remains such a big retail sales month is twofold: (1) manufacturers increase incentives to maximize market share and (2) consumers have the three-to-five hours it takes to buy a car.”
Time is also a driver in new year-end vehicle sales – consumers simply have more of it during the holidays.
Auto retailing's latency in moving to an online purchase means the average consumer, after spending 16 hours online researching a car, is going to spend three-to-four hours sitting in a dealership to buy one,” Dykstra points out. “The holidays offer families the time needed for couples to make this big dollar decision together at the dealership.”
Others agree, stating the deals are great, especially if you dig deeply into your options.
“Year-end sales goals and holiday promotions make December an excellent time to buy a car,” says Todd Nelson, business development officer at LightStream, the online lending division of SunTrust. “Look for vehicles that have been sitting on the lot for a while. You may be able to negotiate an even better deal, as carrying costs may be cutting into dealer profits.”
Plan ahead for year-end savings on a car purchase
That means keeping your eyes open and planning ahead. And don't forget car insurance.
“Your budget is the most important factor when purchasing a car,” Nelson adds. “To make a spending plan, consider the down payment, monthly payments and interest rates. Also research mpg, maintenance expenses, insurance and other costs of ownership. Purchasing within a budget can prevent financial stress down the road.
As you narrow down the make, model and year of the vehicle you wish to purchase, research the fair purchase price on sites like Kelley Blue Book, advises Nelson.
“Also, check to see if your desired vehicle is eligible for incentives. Knowing an estimated price allows you to negotiate from an informed position at the dealership,” he says.
Nelson also notes that purchasing a car can be a stressful, uncertain process, but securing financing in advance provides significant benefits and confidence at the dealership.
“When financing is already in place, you’re empowered to negotiate like a cash buyer for any car – regardless of make, model, year or mileage – at virtually any dealership.”
In the end, purchasing a car or truck at year end can lead to a great deal, but only if you’re ready to pull the trigger.
“Really, the best time to by is when you’re fully prepared to make a $20,000 to $75,000 purchase decision,” Dykstra says.
End of the calendar year or not, that’s the best advice any vehicle buyer can receive.