When Is The Best Time To Buy A Car?!

I have always been confused by the influx of car commercials that always make it sound like NOW is the best time to buy {whenever that NOW is}.

Year-End Clearance!

Model Year End Sale!

Come in right now and get Rebates! Cash Back! or some other Promotion!

With all the confusion, how are we supposed to know when we are really, truly, getting a good deal?

Watch my TV Segment when I spoke about this topic on Fox:

Everything you buy has a sales cycle. A time when the price is the lowest, and then a period where the price goes back up to normal.

Buying at that best time always requires patience.

When considering buying a car, I always thought the best time to buy was around a holiday such as Memorial Day or Labor Day etc.

But that is not the case.

And thankfully, it’s a little bit easier!

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When Should You Buy A Car?

Believe it or not, the best time to buy a car (regardless if it is new or used) is at the end of the month.

Any month, just aim for around that last day.

You know why? Accounting.

The negotiations are going to be the highest at the end of the month because it is about to “close” and that means the quotas and bonuses are on the line as the month counts down to that last day.

One big thing you HAVE TO do is to go to 3 Dealerships in order to price shop. Do not go to one place and settle there only.

Last month we needed a new stove. We went to Lowe’s, Home Depot and Best Buy. If I can do that for my $400 stove, I can go to three dealerships for a $20,000 vehicle. Shop around.

Is Your Heart Set? Get The Best Selection

Now, knowing that the negotiating should be done on (or near) the last day of the month is the number-related part. But if you have your heart set on a certain car, then shopping in late summer is when the new year models come out so you will get the best selection.

And when the supply is up, it automatically drives down the price.

So, actually, that means the best day to buy a car is the last day of a late summer month.

The New vs Used Debate

I must admit that I am not a diehard “used car only” person. I can see the benefits of both and I’ve bought both types of vehicles. I believe which one you buy is a personal decision based on how long you are planning to keep the car. But there are some important facts for you to consider when making a large purchase such as a car.

Today’s new cars lose an average 20% of their value in the first year alone. They will lose 30% of their value in the first three years.

For example, I love my Honda Odyssey Minivan. If I were in the market to buy one today, a new one costs around $34,000. Obviously the specific price is based on the “trim” model you choose. I chose the “EX” for this example, and I rounded it to the closest thousand for easy math. One year later its trade in value is $23,000. That’s an $11,000 loss…just for being its first owner.

That same vehicle, when 3 years old, will be worth $20,600 (trade in value). That means in 3 years you’ve lost $13,400 value. That’s a 40% loss of value in 3 years.

It wouldn’t be so bad except that you probably still owe more than it’s worth, in debt.

The point of these numbers is that if you can let someone else drive the car first, let them own it first, then you will get more car for less money.

Try to find a car that is less than 3 years old and you are gonna get the best deal.

No Extra Surprises

I have always dreaded the extra other expenses I received when we bought a new car. The car dealership doesn’t tell you these because they aren’t responsible to pay them.

Be a smart cookie and know these answers before you buy:

  1. Know the Tax – The less you pay for the vehicle, the less tax you pay. Taxes are based on the final negotiated number. Spend less and pay less tax. Typically, this means you’ll want to buy a used car because it will cost less.
  2. Call your Car Insurance Company  – Ask them to give you a quote on new car insurance. Trust me, I hate to do this too… but you will have to call after you make the purchase, so you might as well ask them how much it will cost before you can’t back out. It may surprise you that a used sports car worth nearly nothing could still cost you more for insurance than a reliable new sedan. Call so that you aren’t surprised later.
  3. Gap Insurance & Theft Protection  – This is another thing you need to ask your Car Insurance Carrier about because it is a typical “add on” item at the dealership and it might be a completely unnecessary expense. We have USAA and when we bought our new car (now this was ages ago) it was a fraction of the cost than the dealership tried to charge me. I was so shocked I called USAA while we were in the Finance Office just to be sure. Yep… I didn’t need it because they had me covered. Don’t overpay because of a lack-of-knowledge. Be a smart consumer.

Buying Used? Always Check the Vehicle’s History

I know that the car salesperson standing in front of you has gained your trust. I feel it too. But you cannot take the salesperson’s word about the history and condition of the vehicle. You must get a vehicle-history report from CarFax.  Note that if you do this yourself, it will cost $40. However, most dealerships have given me this for free to prove that their used car is legit.

The report is important because it can alert you to possible odometer fraud, reveal past flood, fire, and accident damage, or tell you if a rebuilt or salvage title was ever issued for the vehicle.

You can also get a free VIN check from the National Insurance Crime Bureau to determine if a vehicle has been reported as stolen, but not recovered, or has been reported as a salvage vehicle.

“Stall” With Your Trade

You have to insist on negotiating one car at a time. This is not a “lump” deal… the new purchase is separate from your trade in.

Your first priority is to settle on the lowest price you can get on the new purchase. Only after you’ve locked in that price should you begin to discuss a trade-in or financing.

We went to get our car repaired a few months ago, and my repair was over $1,000. My Odyssey is over 10 years old and fully paid off.  They suggested that I look at getting a deal on a new car.

While I was waiting on my car to be repaired, I went through the entire negotiation process.

And so did the gal next to me. Her car was also getting repaired, and it was also paid off, and it was also an Odyssey.

They gave us the SAME FINAL PRICE. Only she had informed them that she was KEEPING her vehicle, so no trade in.

The final price on my quote included my car to trade.

That means they were trying to get my car for FREE! While they were giving her an additional $4,000 discount (the value they offered for my trade) for nothing.

Do your homework and know how much your trade is worth and don’t pull it in until AFTER you’ve negotiated the new purchase.

Never {EVER!!} Shop By Payment

Car Advertisements on TV always list the car you can get by monthly payment.

That is not a good gauge because they don’t care how MANY payments it takes… or how much car you can actually afford!

Consumer Reports’ financial experts recommend that your total debt payment be no more than 36 percent of your gross income. Going by this rule, it’s easy to calculate how much of your monthly income you can comfortably afford to put toward your auto payments:

  1. Calculate 36% of your gross monthly income (that’s the number before they take any taxes out).
  2. Itemize and total all your monthly payments, including your mortgage or rent, credit-card bills, and any other debts/loans.
  3. Subtract the total of your monthly payments from the 36% number (Item #2 – Item #1)

Here’s a quick example to follow:

1. If your pretax income is $50,000, multiply that by 36% = $18,000. This is the number your debt payments should not exceed for the year.
2. Total up your existing debt payments. Let’s pretend they are $1,100 per month (that’s $13,200 for the year).
3. Subtracting the $18,000 – $13,000 means you could afford to spend $4,800 each year on a new car payment. That’s a $400 monthly car payment!

Now, knowing that you can afford a $400 payment doesn’t mean that you should actually buy a car with that number in mind.

It just gives you a good gauge of what you could spend. But you don’t want to pay that forever! Multiply that payment by 6 years (the average length of a car loan) and you are buying a $28,800 vehicle (after taxes and before any interest). That is a LOT of car!

Just Say No

I’m just gonna say it. Please don’t EVER let me hear that you paid extra for:

  • car mats (cheaper at Walmart)
  • service contracts
  • glass etching
  • undercoating
  • paint sealants.

Those are all unnecessary add-ons to help the dealership maximize its profits. Just don’t buy them.

Make Them Beat Your Rate

Before you head to the dealership ready to buy, you need to call your bank or a credit union to get pre-approved for a loan.

This works to your advantage in two ways:

  1. You know how much money you are allowed to spend (this will most likely be more than you can truly afford though, so be warned).
  2. The financing available at the dealership might try to beat that rate. WIN!

When you sign your paperwork, double check the numbers and make sure nothing snuck in there accidentally.

ALWAYS double check them. {remember the old saying… measure twice, cut once… yes, always do the math!}

What About An Extended Warranty?

Okay, I realize you are going to think I am crazy.

But listen, in all the research I’ve personally had and done, there is a break even on those extended warranties.

Every time I do the math it comes out at 6 years. Which means you will need to do some math.

Determine how much the warranty is costing per month.

Then, you might want to take the dollar amount that it WOULD cost you to get the extended warranty and withdraw that out of your checking account on the same day as your car payment and move it into a savings account.

Then you’ll have a back up account to use in case any repairs arise. If you don’t use it, then, when you get rid of the car, you have a nice down payment to use along with your trade.

Your Turn: What do you think? Are you headed to get a new car soon? What other questions do you have about the process? Let me know in the comments below!

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When Is The Best Time To Buy A Car?!