Top Tips For Year-End Car Buying

By Jean Folger | December 08, 2010 AAA
Top Tips For Year-End Car Buying

The average price of a new automobile is around $28,400, so it's no surprise that consumers are interested in scoring the best deals possible. In addition to normal haggling, consumers who do a bit of homework can save even more money. As the end of the year draws near and the new model year approaches, dealers become increasingly committed to moving old inventory in order to make room for the newer, pricier models. This puts car buyers in the driver's seat when it comes to getting a good deal. (For related reading, also check out 10 Steps To Buying A Car.)

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Cash-Back Offers
Buyers can take advantage of many dealers' model year-end sales events. In an attempt to move older inventory, dealers may offer cash back - $1,000, for example - towards the purchase of specific models. Holding on to older inventory is bad business, as the new models roll in and dealers are eager to do what it takes to sell the previous year's models. Manufacturers may offer incentives for the dealers to get rid of the old inventory and, in many cases, these incentive bonuses can be passed on to the buyers.

Financing Deals
In another attempt to sell older inventory, many dealers offer excellent financing deals, including 0% financing, to attract buyers. Zero percent financing allows car buyers to make monthly payments against the car loan without any interest. This can add up to considerable savings. A $20,000 four-year loan with a 5.5% interest rate, for example, will incur over $2,300 in interest. Is 0% financing too good to be true? It depends. If the car buyer could have gotten a much better price on the vehicle without the special financing, it might not work in the buyer's favor in the long run. That said, desperate dealers may allow both cash-back offers and low financing, allowing buyers to truly save money on the actual price, including any interest, for purchasing the car. (For more on car loans, see Decoding Car Deals: Whats The Real Deal?)

Dealer Discounts
The longer a car sits on the lot, the more willing the dealer will be to let the car sell at a discount off the sticker price. TrueCar.com releases a monthly TrueTrends Report that lists statistics including the average number of days certain vehicles spend in inventory before being sold. As of November, 2010, the cars that sat in inventory the longest were the Ford Mustang (235 days in inventory), the Lincoln MKT (228 days), and the Scion xB (191 days). The top-10 vehicles are listed for both the longest and shortest number of days in inventory. Consumers can research which models are the most likely to remain unsold for extended periods, giving them bargaining power when it comes time to negotiate.

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Inventory Overstock
According to TrueCar.com, many dealers will reduce a car's price by about 7% after it has been on the lot for two months; after 200 days, consumers can expect to see prices drop by as much as 14% off of the sticker price. Car buyers can do more homework on Edmunds.com, where they can view the inventory of specific models at local dealers. This can give buyers an edge when it comes to negotiating: if a dealer has a large stock of a certain model, they may be more likely to accept a lower offer simply to reduce the inventory. A quick search at Edmunds.com (click on "search new car inventory"), for example, shows that one dealer in the Cleveland, Ohio area has 40 2010 Chevrolet Impalas in stock, while most other nearby dealers have only between one and five of the same model. Buyers may find a better deal by visiting the showroom that has the greatest need to reduce inventory.

A Buyer's Market
Year-end car buying can give consumers an advantage in finding the best deal. Dealers often receive bonuses from the automobile manufacturers to get rid of old inventory, and they also want to make room for the newer, pricier models. It's not good business to have the old inventory on hand since it can steer customers away from the more profitable models. As such, dealers are often willing to negotiate, reduce prices and offer incentives to year-end car buyers - especially those who do their homework. (For more information, take a look at 5 Reasons To Buy A New Car.)

Find out what happened in financial news this week. Read Water Cooler Finance: Steady Stocks, Big G's And Madoff News.

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