Business|Santa Didn't Bring a Car? December Is the Best Month for Bargains
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YOUR MONEY ADVISER
Santa Didn't Bring a Car? December Is the Best Month for Bargains
Holiday sales can present a prime opportunity for those in the market for a new vehicle — if you're flexible on the model.
Credit...Till Lauer
By Ann Carrns
In one advertisement, a young woman drives home through swirling snowflakes, to be greeted by the family dog. Another depicts a gift-laden pickup hauling a tree sized for Rockefeller Center. A third focuses on a man in a frosty field, hugging a truck.
Automakers typically pull out all the stops over the holidays to push car buying. But is December really a good time to shop for a new vehicle?
It often is, experts say. Manufacturers and dealerships have year-end sales goals to meet and sales employees may be looking to lift their commissions. So there are deals to be had.
"The end of the year is the best time to buy," said Eric Lyman, the chief industry analyst at TrueCar, an online pricing service.
Often, manufacturers offer financial incentives to dealers and shoppers late in the year to help move last year's models off their lots, said Patrick Manzi, senior economist for the National Automobile Dealers Association, which represents franchised new-car dealerships. Incentives are discounts that carmakers give to shoppers and dealers.
December typically has the highest discount off the manufacturer's suggested price — about 6 percent on average, according to the automotive website Edmunds.
This year, dealers are awash with 2019 model cars, as a long-running boom in car sales begins to peter out. November had record average incentives of more than $4,500 per vehicle, and average December incentives are likely to reach about $4,600, said Tyson Jominy, the vice president for automotive data and analytics at J.D. Power.
December shoppers may save several thousand dollars off a car's sticker price, depending on the vehicle and its location, said Jeff Bartlett, a deputy editor at Consumer Reports, which lists notable deals available through Jan. 2.
One other potential source of bargains is "demo" cars, current year models that typically have been used by dealership employees. They usually have low miles and carry a discount, Mr. Bartlett said. The availability of demo cars is limited, although it doesn't hurt to ask about them. They can be great deals, as long as the car is right for you. "But don't compromise on the safety equipment and key features that will ensure your long-term satisfaction," he said.
The cost of cars has been climbing, so any discounts are welcome. The average transaction price of a new vehicle in October was about $37,000, up about 4 percent from a year earlier, according to the dealers association.
There can be drawbacks to shopping in December. You may feel stressed or rushed with other holiday shopping, or lack the time to research your purchase and negotiate with car sales employees. In that case, Mr. Bartlett said, consider breaking your car hunting into two trips — one visit to gather information and test-drive, and a second to negotiate. Cold weather also means you and your family will be wearing bulky coats, which should ideally be removed when you sit in the car, he said, so you can truly gauge what the seats feel like.
And consider whether a new car may be a stretch, given other spending during the holidays. "It's a great time to save money," Mr. Bartlett said, "but only if it's the right time for you to get a car."
While you may find the price you want at year-end, the car itself may not be the specific model you were seeking. Perhaps it has an "interesting" color, Mr. Lyman said, or an odd mix of options — a top-grade stereo, say, but no leather seats. So be sure that the price you're getting is worth the trade-off.
"Do you really want to drive an orange car?" Mr. Lyman said.
Here are some questions and answers about buying a car:
What interest rates are currently available on car loans?
Average loan rates have been falling in recent months. In November, the average rate for a new-car loan was 5.5 percent, down from 5.7 percent in October and 6 percent in November 2018, the automotive site Edmunds said. Nearly a quarter of shoppers who financed their car purchases in November got an interest rate below 3 percent.
Still, the rising cost of cars means that more people are taking out loans with longer terms to lower their monthly payments. The average new-car loan in the third quarter of this year was about $32,500 and stretched for about 69 months — almost six years, according to Experian Automotive, an arm of the Experian credit bureau. The average payment for new vehicles was $550. Lengthier terms can put borrowers "under water" for longer periods — meaning they owe more than the car is worth. That could force them to come up with extra cash if they trade in the car or sell it before they pay off the loan.
How much does it cost over all to own a new car?
The automotive group AAA says the average annual cost of owning a new vehicle is $9,282, or about $774 a month, which is up about 5 percent over last year. Average costs increased in every category the association analyzed, including fuel, maintenance, insurance and repair.
A new car isn't in the budget right now. When is the next best time to buy?
If you don't need a new car right away, consider waiting until the summer to upgrade. TrueCar says August, when dealers begin clearing space on their lots in advance of the arrival of next year's models, ranks a close second after December for prime car shopping.