When’s the Best Time to Buy A Car?
Whether buying or leasing, some times are better than others.
Web2Carz Senior Writer
Published: April 12th, 2012
The fiscal year for car dealers is the same as the calendar year, so there are multiple reasons why dealers want to sell as many cars as possible before the end of the year.
or most people, the time to buy a car is, well, when they need a new car. But if you’re looking for a good deal, there are some times that are definitely better than others. Of course, if your car breaks down and the repairs cost more than your car is worth, you can’t really afford to wait. But if you know you want to upgrade, downgrade, or just get something different, it pays to plan ahead.
There are three times that are best for car shopping, all based on the way dealerships operate, according to Ralph Ebersole, Regional Director of Sales for ActivEngage, and a 30-plus-year auto industry insider.
Understanding the reasons why these times are best requires a bit of background on the relationship between dealers and manufacturers, which is by no means simple. The first thing to know about dealerships is that they don’t usually own the cars on their lots. They’re all financed through what is known in the trade as “floor plan.” Think of it as a car loan, like you might take when you buy a car, but for every car on the lot. Dealers don’t want to tie up all their money on inventory, so floor plan loans let them keep their operating costs low. When they sell a car, they pay back the loan.
End Of The Model Year
When manufacturers announce a new model of a particular vehicle, dealers want to get the soon to be “old” model off the floor as soon as possible. Manufacturers also want to get rid of the old model, and they give dealers extra savings to pass along to buyers. So if you’re willing to not have the latest of whatever additions or improvements the manufacturer has made to the car you want to buy, buying the old model close to the release of the new model will save you money. One caveat, however, is that doing this only makes sense if you plan on holding on to your car for a long time. Why? Depreciation. “If you buy a car in October, you’ve already gone through a year’s depreciation,” Ebersole says. This means that the money you save on the sale will be lost through depreciation if you want to sell the car in just a year or two. “It’s pay me now or pay me later,” Ebersole advises.
End Of The Month
Auto manufacturers offer various incentives to dealers to encourage them to move more product. One obvious incentive is that the more cars the dealer sells, the more room they have on their showroom floor for the newest models. Because of the aforementioned floor plan, and because dealers submit monthly reports to manufacturers, who want to have the latest figures on what is and isn’t selling, they want to close out each month with the best figures possible. “It behooves dealers to clear out as much as they can by the end of the month,” Ebersole says. “They want to close their books with the best sales they can, so you can have some negotiating power.”
End Of The Year
The best time to find savings on a car is at the end of the year. The fiscal year for car dealers is the same as the calendar year, so there are multiple reasons why dealers want to sell as many cars as possible before the end of the year. Some reasons are tax related, some have to do with clearing out inventory, and some relate to the floor plan loans. Also, manufacturers have their own incentives at the end of the year that go on top of the dealer’s incentives.
But don’t wait until the last week of the year. According to Ebersole, there are a few reasons for this. “For one thing you’ll avoid the crowds,” Ebersole points out. “You’ll also have more inventory to choose from.” Ebersole advises going in any time during the month of December, finding the car you want, and making an offer. If the dealer doesn’t take the offer, walk away. There’s a good chance the dealer will call back as the end of the year approaches and accept your offer.
So for the best deal, buy a car at the end of its model year during the month of December, that’s when the dealer has every reason to get the car off the lot.
One important thing to remember is that dealers buy used cars are under the floor plan loans as well, so the same end of the month and end of the year advice applies to those cars. Even when someone trades in a car, the dealer takes a floor plan loan on the car and only pays the bank when the car sells. This isn’t true for all dealers, but it’s usually the case.
But what can this advice mean to you in real-world terms? Ebersol gives an example:
"Last summer, a friend in Michigan was shopping for a pre-owned Chrysler Crossfire. The dealership was asking $18,299. My friend drove over a hundred miles to the dealership around July 15, drove the cars and offered them $17,800 including tax and fees. The dealer turned down the offer. He started to shop online for another Crossfire. At the end of the month, he got a call from the dealer who had initially turned him down. Not only did they accept his offer, the dealership trucked the vehicle the hundred-plus miles to his home. End of the month special."