“When should I buy?” Some folks think that the end of the month is the best. Dealers need to hit their quotas and well.. isn’t every car salesman measured on their month end performance? Others believe that the best time to buy is when the new model’s change over during the August/September time frame. The manufacturers need to clear out those leftovers 2011 models for their recently pressed ‘new cars’. Most of the new cars are mostly the same so… why not just buy the old ones! Well, it’s not that simple.The answer to ‘when’ to buy always depends on three ‘whats’.
The Popular Car: Let’s say you want to buy a Hyundai Elantra. One of my personal favorites for a frugal long-term ‘keeper’ car. Let’s say the MSRP for your Elantra is about $20,000. Can you get a deal right now? Well let’s consider Hyundai’s…
Incentives? None.. to minimal if you are in the military ($500) .
Rebates? Not a chance.
Why? Seven days of inventory. In a business where the average is 48 days. Hyundai has no incentive to discount this car. They may throw a small bone towards ‘special’ financing or leasing the car. But the ‘special’ people eligible for that ultra-low rate will likely be for those chosen few ‘super-prime’ customers. No debt. Never late. A credit history as straight as the lines on an old Volvo 240. Even those buyers will likely pay right near MSRP… plus interest.
If you need the popular car now, go and buy it. But their will be a counter-clockwise flushing sound when you sign on the dotted line. Thousands of extra dollars down the drain for not waiting. Can you live with that? Well, perhaps you may want to consider …
The Other Popular Car: Some cars are popular for a reason. Others are just overproduced. Or right near the end of their model run. Take for instance another one of my other personal favorites, the Nissan Versa.
134 days in inventory. Even with a tight rental fleet relationship and a value-focused base model, Nissan can’t sell these things. Well, not entirely. The Versa still leads the subcompact segment. It’s just that Nissan is trying to satisfy it’s capacity levels and is using whatever means it can to make it so.
Consumer incentives for the Versa? Here is a quick synopsis of March… and here is a quick synopsis for April. They look pretty similar. In Nissan’s case I’m suspecting that their financing criterion is getting pretty loose compared with industry standards. Why?
As a guy who used to lqiuidate cars for Capital One Auto Finance, I can tell you that when a manufacturer is willing to take on five years of risk at no interest, they are willing to move their metal. The dealer is also going to be receiving special rewards for achieving certain sales goals during that time. That along with high inventory levels translates into an opportunity to make the right deal for the consumer.
Another good recent example is when GM decided to deep six the Chevy Cobalt with the Chevy Cruze. Six months ago you could get an XFE model for just a bit over $10,000 plus tax, tag, and dealer bogus fees. That was because GM tossed $4,000 on the hood of every Cobalt that left the building. Not including bonuses, quotas, or whatever financial brew was wafting from their Americredit subsidiary. GM wanted the Cobalt gone and they used everything within their power to make it so. The same now goes for the Versa except…
The Black Swan: The recent tragedies in Japan have completely wiped out most of the consumer’s chance for leverage. Once every few years or so there is an event that either tilts the game heavily towards the consumer or the dealer. Tariffs, bankruptcies, natural and man-made disasters. It can be Mitsubishi offering 0 down and 0 payments until several months after signing to anyone with a pulse. Or a clunker program that rewards the gluttons of America with free moolah for their next car.
In short the best time to buy was… a couple of years ago. The worst time to buy is…. more than likely the next several months. Every manufacturer will be jacking up prices to ‘captialize’ on the lack of supply. My advice is to buy used.. or to simply invest in the ride you have instead of the corporate greedfest that is to come.
But in the ‘normal’ times: Forget about the ‘end of month’ myth. Dealers play their percentages and there are so many folks that now go and buy during this time that it’s no longer a contrarian strategy. Timing car purchases is like timing stocks. Unless the owner of the dealership is your father’s cousin’s former roomate, you can forget about timing your purchase that way.
The opportunity for the deal can be broken down to three elements. Rebates. Incentives. Days in inventory. The last one usually encourages factory incentives to the dealer which makes the deal even sweeter for everyone involved. That Silverado you yearned for in 2007 now has over 90 days of inventory and some healthy rebates as well. It may be a good time to pull the trigger… on a leftover 2010. Just don’t expect anything from Japan to follow suit between now and the next few months. Or better yet… consider the ‘used’ market which I will highlight in the next write-up.
Thanks for the knowledge, Professor Lang. As always, top notch.
One question though… where do I go to find out how many days of inventory a manufacturer has of a given model? Who publishes that stuff?
Automotive News publishes days supply, and incentives (to customer and dealer). You probably don’t want to spend the $130 a year to get a sub, but a lot of libraries used to carry it.
The best time to buy a new car is when it’s reached the end of its lifecycle.
Even when the Accord was selling gangbusters, if you bought the remaining inventory at the tail end of the old generation when the new generation was on the lot, you could get a smoking deal.
Amen to the “end of life cycle” advice. I bought an ’08 Honda Pilot EX-L, after the revised improved version was announced for the next model year. I think I ended up paying about a $1,000 more than I would have for a used model a year old.
We shopped the Pilot against the new, revised improved (and enlarged) Highlander. While the Highlander was a little quicker, perhaps a little quieter and little less trucklike in its handling, the interior seemed substantially “de-contented” and my wife did not like the seats at all, even in the top line model. And, it was several thousand more expensive than the Honda.
Even better, most reviewers didn’t think the “new” Pilot was any better than the model it replaced; and some thought it was worse. It looks to me like the new version is slightly larger, which is not something I would have wanted.
@Educator Dan:
Ask a librarian at the school system you work for. You can probably get Automotive News pretty easily that way. Depending on how your library system operates, you may even be able to have the library to temporarily reserve each new issue for you when it comes in.
End of life cycle vehicles also tend to be the most reliable and robust versions of a given model. The engineers and factory have had time to work out many of the trouble spots.
An easy way to ballpark local days of inventory is to go to cars.com, search new cars and look at all inventory. It will show dealer’s stock in your area. Not as accurate as automotive news, but quick and free.
DC Bruce: “I bought an ’08 Honda Pilot EX-L, after the revised improved version was announced for the next model year. I think I ended up paying about a $1,000 more than I would have for a used model a year old.”
I was going to mention the Pilot actually. Here was the deal with the Pilot in ’08, aside from the “end of lifecycle” story:
I have a buddy that works for a big late model auction. I met him for lunch one day and he took me for a ride around the grounds. They had the business for Honda’s former leases. They had Pilots stacked up like cordwood. Honda blew them all out on $299 leases, and then ended up holding the bag on them when gas prices went nuts. They were overloaded with them at that point.
Sound advice. Thanks for the info!
Great insights. Thanks for that.
I guess I’ll be keeping the Benz another year or two, and look into a new bike with a warranty.. Any numbers on how tax-return season impacts the buying calendar?
How does one fine out the number of “days in inventory” for any given model?
Look at the build date on the car mfg. plate. That’ll at least tell you how old it is.
Or if your state requires safety inspections with windshield stickers, look at that. If the stcker is three or four months old…. that’s good information on how long it’s sat in the dealer’s lot, racking up interest charges, as they always seem to have this done as soon as the cars arrive.
My state stopped requiring the stickers a couple of years ago, but the dated inspection report is almost always in the glovebox of the car on the dealer’s lot.
I once caught a dealer rolling back miles, I was interested in a “program car” on their lot with about 3k miles on it, and I noted the mileage after driving it. I came back a week later intending to get an idea of how many test drives it had taken over the previous week, only to find the mileage was over 1000 less! Obviously I didn’t buy ANYTHING from that dealer.
“That was because GM tossed $4,000 on the hood of every Cobalt that left the building.”
Such an oxymoron would only appeal to a deluded consumer who actually believed the stated MSRP on the Cobalt reflected its actual transactional value.
Big fake savings off the big fake MSRP price !
Actually the Cobalt MSRP price wasn’t bad at all compared to the Aveo or PT Cruiser.
The magic elixirs for unsold inventory in this business have always been rebates, incentives and financing/leasing. In GM’s case, they simply paid the dealers to get these vehicles out the door. Once the dealer can get that extra amount, the car becomes that much easier to sell. Simple math.
$4k is a lot more than the typical incentive on that big fake MSRP, so it’s a real savings over what one would “normally” pay.
Days in inventory – works great for used cars as well. It requires you to constantly check the various used car websites (cars.com, autotrader.com, etc…) but after a few weeks you’ll see some patterns emerge. Some cars sit for months with their prices slowly falling. Some appear to collect dust then suddenly disappear for a few days only to come back as “newly listed”. Not sure if this is a sales tactic to draw attention, or if it means someone’s deal fell thru but I saw it happen to several listings. The danger of this game is at some point the price becomes irresistible and someone buys the car. Judging the timing and price of the actual sale is difficult but after some time you’ll know a real good deal when you see one.
I bought my C30 this way, however its a rare bird so the data collection was slim pickings. However I saw one model sit for 4 months, dropping nearly $3K before it sold. Due to the way web listings work it often takes a few days for the online inventory to update, so by the time I called the dealership this particular car had already sold – a mere 2 days after yet another price drop.
The easiest way to do this is to google:
Days of inventory (model) April 2011
That will get you the exact information nine times out of ten.
I never liked the idea of buying a year-old model at new model introduction. Here’s why: When the new models hit the showroom, the book value of the old model drops, sometimes precipitously as the first drop is always the largest. What is the chance the dealer will eat most or all of that? None. You are buying a car that the value is dropping by four if not five figures in a matter of days or weeks.
You may get a discount but it will never cover that loss in value let alone represent a true, actual savings.
Better is to save up for the biggest down payment possible. Dec-Feb always seems to be the sweet spot for me for buying a new or used car.
That’s a good point, but it only applies if you change cars out often enough that the short-term depreciation from a new model introduction impacts you.
If you keep cars for 5+ years it’s less of an issue. If you keep them for 10+ years it’s negligible.
Your initial discount becomes more of a true savings the longer you keep the car. This method of buying isn’t for everybody, but if you keep cars for a long time and don’t mind having a car that’s a generation old it can represent genuine value.
For the largest savings, buy when the model is at the end of its life cycle – or better yet, when the brand is at the end of its life cycle. I got a $10,000 discount on an Astra when Saturn was disappearing, and just got a Mazda5 at an $8,000 discount when they introduced the new uglier one. Many dealers have their inventory on line, so you can watch what is in stock, and hopefully time the biggest discount. I bought manual transmission cars, which are rare to find, but the dealers know that the market for them is limited – and they will be willing to deal. Make sure you maximize all discounts – first time buyer, loyalty, student, credit card programs etc. (And don’t assume the dealer will know about all of them!)
A comment about buying any Nissan product: Do a search on Nissan Pathfinder Transmission and you’ll get 49,000 hits. Nissan refuses to address the issues one day after the warranty expires, instead, choosing to do a land office business at the parts counter with, in some cases, $2,500 and up in parts.
Decide for yourself if this is the kind of car company you want to support.
I want to give a shout out to James Bragg’s Fighting Chance information packets. He provides a ton of current data on nearly every model sold in the USA. Highly recommended anytime you are looking to buy.
I have no relationship to James Bragg or Fighting Chance other than as a satisfied customer.
“GM wanted the Cobalt gone and they used everything within their power to make it so.”
Exactly the reason I got one. Pretty much one of the last ones they had on the lot. After all the fee b*llocks and everything else it came to $11,500 – and they even gave me a low interest loan… which considering I’m only in the country on a work permit is quite nifty really.
I’ve considered one every once in a while if I could get the coupe with 0 options. Manual trans, manual windows, ect… and then I would treat it as a palate to turn into whatever I wanted. There are a crap-load of go fast and modification parts out there. You could get a Cobalt cheap enough to even make it worth your while to swap in the Recaro bucket seats out of an SS model.
I often refer to it as the last $10,000 car. Even though most of them went out the door at the $11,500 level.
A four-door stick XFE model would have been right up my frugal territory had I not been in the car business.
I love you steve lang.
I was in the market for a new car for 4-5 months and test drove all sorts of cars from the Hyundai Accent and Kia Rio (YUCK) to the Mazda 2. At the end of the day I don’t know why everyone ragged on about the Cobalts so much. They’re much better to drive than the super cheap cars from Hyundai/Kia, and they’re about 5-6 grand cheaper than the Fiesta or Mazda 2. According to my VIN it was probably one of the last Cobalts off the line – by which point all the bugs have been ironed out. It’s an absolute stripper bar the auto transmission (I would have gone for the manual – but hey, it was the last Cobalt on the lot). At the end of the day I want a car that drives from A-B, is cheap as hell, will be cheap to fix when the warranty expires and isn’t a complete dog to drive.
In spring of 1995 a friend in Vancouver got one of the last 1994 Chevy Cavaliers, which the GM dealerships were desperate to unload in order to make room for more of the “new and improved” ’95s. How desperate were they? $9500 OTD. At that price in Canada, even in 1995 how could my buddy lose?
Here’s how:
Multiple trips back to the dealer to fix faulty ABS, loss of coolant issues and front wheel hubs that couldn’t outlast Vanilla Ice’s 15 minutes of fame. In spite of regular maintenance the engine cratered and had to be rebuilt at 156,000 kms (just under 100,000 miles) and three years, rust began to form from the inside out at the lower B-pillars and he ultimately gave it to his soon-to-be-ex-wife the following year. She gave it to the wreckers six months and one transmission later.
My friend’s next car was a near-new Mazda, which gave him several years of trouble-free driving. He hasn’t bought anything GM since.
And now here we are in 2011. Here’s hoping the Cobalt does not bestow similar tidings as the Cavalier on those who are now looking for a bargain that won’t take a huge bite out of their ass…
I live in a small city in Alberta and there are still dozens of Cavaliers driving around in fairly decent shape and I know a few people who owned them and have nothing but praise for them.
For years I have driven full-size Dodge vans. Apparently “you can’t keep a front end under ’em” according to the coffee shop mob…but I haven’t had any front end work done for years, amounting to about 150,000 kms of use. I just try to take it easy on gravel roads and I try to ensure I don’t have the suspension or steering loaded (i.e. braking or turning sharply) when I’m going up curbs etc. and not take them fast.
Basically you can always find bad examples of vehicles but a lot of it comes down to the user. Even rust, to some degree, can be exacerbated by how/where the vehicle is used.
That’s not to say that Cavaliers were all that great mind, just that they were not all crap either.
Kudos for the Black Swan theory reference. We would all be better off if more people were aware of this intriguing way of looking at how things really work.
http://en.wikipedia.org/wiki/Black_swan_theory
As to the Japanese situation, I agree that supplies are going to be tighter and thus prices higher. I’m not sure this means that the suppliers are being greedy, but rather that they are being rational. If supplies of many models are going to be tight for a time, then it stands to reason that those vehicles will go to the people willing to pay the most for them.
Speaking of which, a friend of mine suddenly found himself in the car market a few weeks ago thanks to the sudden transmission death of his aging Volvo S80. I told him that if he wanted a new car then he should act quickly because prices were likely to be going up. He cut a good deal on a loaded Toyota Camry and is thrilled with it. He got an excellent price and zero percent financing. At this moment Toyota still has pretty agressive incentives on the Camry. The next few months will be interesting to watch.
This kind of ‘black swan’ phenomena was a major focus in the work of C.S. Peirce. He thought these kinds of chance or ‘spontaneous’ (i.e., uncaused) events were an irreducible, elementary ingredient of phenomena. He actually included these kinds of events under a distinct elementary category (referring to them variously as ‘Chance,’ ‘Spontaneity’, or Firstness) and said that they could not be reduced to normal causal or rational relations. Unfortunately, this is an aspect of Peirce’s work that many have tried to downplay, dismiss, or ignore, but I agree in seeing this as a crucial insight into the general order of things.
p.s., Sorry, didn’t mean to sound like I was lecturing or anything. I just happen to find this kind of stuff extremely interesting.
Great advice!
Thanks!
I bought a CPO Prius on Monday and I’m kicking myself for not buying or leasing one two years ago after gas prices collapsed and Toyota was leasing them for $169 a month or something ludicrous like that, only a year or two after people were throwing money at Toyota dealers and paying well over MSRP after sitting on waiting lists. Now that pump prices are creeping up – and I know fuel costs are only a small slice of total cost of ownership – people are flocking back to Toyota dealers to hear the following phrases.
“Given the earthquake, we don’t know when we’ll get more in.”
“Gas prices should break $5 this summer.”
“I’ve got 4 calls on this vehicle this morning.”
I still got a good price on a good car, but this was my first experience buying a desirable car, and it is definitely different than the Nissan Sentra and VW Jetta buying experience.
Now is an excellent time to buy if the car you want is not exactly selling all that well and coming conditions make it look to be an even harder sell (in my case, a manual transmission leftover 2010 Dodge Challenger R/T) and you have a trade that is well suited to coming market conditions and whose replacement is likely to be heavily delayed by the earthquake in Japan (in my case, a 2007 Honda Civic Si, good on gas and the revised 2012 models aren’t out yet). Even if the dealer won’t want to keep the car on the lot, auction prices on used cars are going up, especially on frugal Japanese machines with perceived reliability.
In other words, go where everyone else ain’t.