December is traditionally the busiest shopping month of the year, and most retailers offer sales and incentives to get people who are out shopping for Christmas to enter their stores and buy their products. This is especially true of car dealerships, which pull out all the stops in the last month of the year to sell vehicles and unwind their existing inventory.
This means that December is traditionally the best time of year to get a great deal on a new vehicle. In fact, TrueCar.com estimates that car prices in the U.S. are between 8% and 10% lower in December than any other month of the year. That makes the holiday season an attractive time to splash out on a big purchase. Here are 10 reasons why it is a good idea to buy a car in December.
10. It’s Bonus Time
It’s no secret that the sales staff at car dealerships work largely on commission. The more cars they sell in a given month, the more money they earn. However, most car dealerships also provide their sales staff with added incentive in the form of bonuses based on how many cars they sell for the year. Some dealers also provide year-end bonuses specifically for sales staff who move inventory off the lot in December and help the company meet its annual targets.
What does all this mean for you, the car buyer? It means that the sales staff will be extra motivated to sell you a car in the month of December. They will likely agree to more favorable terms just to get you to sign a deal. Then they can count it towards their sales total for the year and increase their personal bonus.
9. The Clock is Ticking
During the month of December, the clock is ticking towards midnight on New Year’s Eve. That’s when the new sales year starts and the old one ends at most car dealerships. Targets are reset, sales for the year are tallied, inventory is counted, and performance appraisals of sales staff are conducted.
Basically, this means that everyone at a car dealership is trying to sell as many cars as possible before the clock strikes midnight on December 31. This is the reason that many consumer websites lists December 31 as the very best day of the year to get a great deal on a vehicle. (The second best day of the year for a car deal is Black Friday.)
But nothing tops New Year’s Eve. That’s when sales staff are most desperate and eager to unload as many vehicles as possible before their head office closes the books on the year. After that, they will assess the dealerships’ success – and failure – in terms of sales. Moving cars in December (or not) can swing those assessments in big ways.
8. Competition From Other Retailers
During most of the year, dealerships are competing with other brands in terms of deals and incentives. But during the Christmas shopping season, car dealerships are competing with every other retailer out there. Every store is offering deals in December, trying to earn your business.
The Ford dealership isn’t just competing with the VW dealership for your business, it’s also competing with Best Buy, Home Depot, Wal-Mart, and Macy’s. Whether you want a new car, a big screen TV, or a new snowblower, you can find a sale in December to suit your needs.
One of the main reasons that car dealerships offer the lowest prices of the year in December is because they are facing competition from everywhere else during the month.
7. Less Foot Traffic
This one comes down to consumer psychology. Car sales (like home sales) are highest in late spring and early summer. This is because the nice weather brings people outside and makes them eager to shop. In winter, car sales drop because the weather is bad and it makes it more difficult for people to get out of their house and to the car dealerships.
People tend to hibernate in the winter months. That means there’s less foot traffic in dealerships over the winter. That puts more pressure on sales staff to close more sales, since there are fewer potential customers. All of that means that, the buyer, are in the driver’s seat when it comes to negotiating. You’ll have extra leverage in terms of the price you are willing to pay and the extra features you want in a car you’re considering purchasing. Remember, you are in control.
6. Excess Inventory
New model cars arrive in October and take their place alongside the previous year’s models. Right now at dealerships, brand new cars are sitting next to older models. This results in a glut of inventory. In the last three months of the calendar year, sales staff are under pressure to not only sell the new model vehicles they have on their lot, but also to clear out the inventory they have of old models.
As October and November progress, the prices on last year’s model vehicles steadily drop. Then, the incentives on them steadily rise as the sales force works to unload the excess inventory. By January 1st, the goal is to have the newest models left in inventory, offloading cars from the previous year.
In December, the sales staff is in a state of near panic trying to sell the inventory they have of car models from the previous year. When mid-December hits, you’ll be able to get a great deal on a one-year old model vehicle (that is still technically brand new), simply due to dealers running out of space.
5. Bragging Rights
Automotive manufacturers, and their dealers, like to have bragging rights over their competitors in terms of their sales figures. They love to brag about having the best-selling car, whether it’s in their city, state, or all of North America. Whatever companies can use to advertise and sell their vehicles, they will grab hold of it. But it all comes down to sales figures.
That means that dealerships will offer serious deals in December to earn bragging rights for the year ahead. Of course, you can help them reach their magic sales numbers and achieve bragging rights – for the right price. You should be ruthless in December when negotiating the sales price of a car. You get the great deal, and the car dealer can have their bragging rights.
4. Future Inventory
There’s another behind the scenes incentive for dealerships to move units. If they want to receive a steady supply of new inventory from the head office, they need to show that they can move those cars off the lots in a timely fashion.
Dealers that sell lots of vehicles will get the most new models, as well as the best-selling models, and lots more inventory. This makes the job of the sales staff easier and helps to drive sales (and profits) higher at the dealership. It becomes a positive cycle for the dealers.
On the flip side of that coin, car dealers that cannot move their inventory might receive fewer units the following year. While they can always order a specific make or model for customers, most buyers want to physically sit in their prospective car before signing any paperwork. If there’s less selection around the lot because the dealer didn’t sell enough in the last 12 months, future sales are likely to decline too.
3. January and February are Dead Sales Months
After Christmas, most people are broke. Any money they had was spent on Christmas gifts or Boxing Day sales. When you add in frozen winter climate in many locations, it means that January and February are the deadest months of the year in terms of car sales.
The staff at car dealerships know that December is the last month they have to really capitalize on consumer spending until the spring rolls around. They try to pump up their December deals in hopes that it can carry them through the coming lean months. People are at home watching Netflix and paying off their credit cards after Christmas, not out shopping for new cars. Keep this in mind when haggling with a car dealer over the price you are willing to pay for a car you buy in December.
2. Discontinued Models
While dealers are desperate to get rid of their surplus inventory in December and end the year strong, they are absolutely rabid to get rid of discontinued vehicles. That is, models that the manufacturer is no longer making. As soon as it is announced that a particular nameplate is being discontinued, car dealers will immediately push this vehicle to the front of their lot and slap a reduced price on the windshield.
They do this because the market for discontinued cars dries up very fast. Once a car is discontinued, the service contracts and parts to support the vehicle are also soon gone. That means there are fewer incentives for buyers to purchase that particular brand of vehicle. Plus, many consumers assume something is wrong with a certain vehicle if it is discontinued, causing interest in the vehicle plummet further. In December, the best deals are often found on discontinued cars, trucks, and SUVs.
1. Inventory Tax
The number one reason you are likely to get a deal when buying a vehicle in December is because of what’s known as “inventory tax.” What is inventory tax, you ask? It’s a tax that car dealers in most U.S. states have to pay on all unsold vehicle inventory come January 1. It can be a considerable amount and difficult to pay, particularly for small car dealerships.
The only real way to avoid paying this tax is to sell as many cars as possible before midnight on December 31. This is the major incentive for salespeople to make deals. Their bosses put considerable pressure on them to sell as many vehicles as possible, so that the dealership can avoid paying the dreaded inventory tax. This makes the sales staff even more desperate to cut you a deal and move a car off their lot. Take full advantage of this desperation! It’s the best thing you’ve got going for you as a consumer.