Understand when buy a car and how to negotiate to save thousands on your next purchase
Car and truck dealers are about to enter full-blown crisis mode in 2018. Prices on used cars are plunging and dealerships will soon be scrambling to keep up sales quotas.
Their pain is going to be your gain and 2018 could be one of the best times to buy a car we’ve seen in decades.
Understanding why this is happening and what you can do to negotiate your best deal will put you in the driver’s seat…literally.
Why 2018 Will Be a Horrible Year for Car Makers
The reason why 2018 will be the best time to buy a car is that the industry is entering the worst crisis in a decade.
Car sales boomed after the recession on the Cash for Clunkers program and super-low interest rates. Car sales hit a record of 18 million units last year as buyers took advantage of discounts and low rates.
Just like every great party, the hangover isn’t as much fun.
Car and truck sales are already down 8% in 2017 versus last years’ sales and this could be the first year to see declining sales since 2008.
Lower car sales are not the worst of the problem. All those new cars bought and leased over the last decade are being traded in. The average consumer keeps their new car for 6.5 years before trading it in and the average lease runs 36 months. That huge wave of cars hitting the used car market means prices are plunging.
The average used car lost 17% of its value over the past year according to Black Book, an auto analytics company. The rate of yearly depreciation on used cars has been increasing and is now almost double the amount seen in 2014. Luxury and compact cars did even worse, losing an average of 20% of their value over the last year.
Think about that. The value of the average luxury car lost 20% of its value over the last year. If it was worth $25,000 in 2016, a buyer could snap it up off the used dealer’s lot for $20k now.
And next year is bound to be even worse for dealers.
Auto loan delinquencies have jumped and KAR Auction Services expects nearly two million vehicles to be repossessed this year, double the amount that were repossessed in the worst year of the recession.
All those repossessed cars and trade-ins will continue to drive prices lower in 2018.
How Buyers Win in the 2018 Car Market
If you are thinking about buying a new or used car, you could be in luck. With prices of used cars plunging, new car dealerships will be forced to lower their prices and add extra incentives to meet their quotas. There’s a good chance we’ll see a lot of car dealerships close in 2018 as the price-cutting gets too fierce to make money.
So we know that next year could be the best time to get a new car, but when next year?
I looked at data from TrueCar and at general sales numbers to find when to get the best deals on your next new or used car. I found four rules for when to buy a car that pay off big time.
Go car shopping during cold or rainy weather. If everyone else is staying home, dealers are going to be eager to cut a deal.
Mondays and Tuesdays show the biggest discounts according to TrueCar data. Most people do their car shopping on the weekend or are just too tired at the beginning of the week. That means an empty dealership and enthusiastic dealers.
The end of the month and end of the day are also great times to start negotiating for a car. Dealers have monthly quotas they must meet and contests they want to win. The dealer on a dry spell that hasn’t talked to anyone all day is going to be very generous if she can close a deal and go home happy.
October through December also tend to be the best months to get discounts on cars. It’s cold and dealerships are running up against annual sales quotas.
So the best time to buy a car may just be on a cold Monday afternoon, late October.
How to Negotiate the Best Deal on Your New Car
Going to buy a car at the right time is only half the battle. There are also things you can do to negotiate the best deal possible.
Dealer financing isn't bad at new car dealerships. You can usually get a good rate but you pay for it with the higher price of new cars. Interest rates on used car lots tend to be much higher, especially for bad credit borrowers or buy-here, pay-here dealers.
I use MyAutoLoan to shop around for financing whenever I go to buy a new or used car. The website is a lender aggregator, meaning it shops your loan around to find the best rates. You get up to four offers from different lenders in less than a few minutes and can use it for a new or used car. You can even use it to refinance your old car to lower your payments.
You should never pay the amount listed on the window…ever. Dealers pride themselves on negotiating but would be happy to take as much of your money as possible. The average discount below the manufacturer’s suggested retail price is 8% though this will vary depending on model and other factors.
Make sure to check the Blue Book value for new and like-new cars before you go to the dealer. A lot of buyers go to the dealership ‘just to look around’ and plan on going back home to discuss and look for more information. Without knowing all the facts beforehand, they fall into a slick trap by the dealer and end up driving home in a new and very expensive car.
Dealers like to use the trick of commitment to sell you a car. They’ll spend hours talking to you about a car, letting you test drive it and ‘pre-approving’ your credit. After all that time spent, many buyers feel like they have to buy a car or they just wasted their time.
Turn the trick against the dealer. Don’t be afraid to just walk away after hours of the dealer’s time and let them know you’re ready to do it. Mention you have an appointment to be somewhere and must leave at a certain time. This puts them in countdown mode and the discount offers will just keep getting better.
If you can wait a few months, 2018 could be the best time to buy a car in more than a decade. Prices should continue to fall and dealers will get increasingly desperate to make a sale. Understand when to buy a car and how to negotiate your best deal.