A sale here, an incentive there. No money down, zero percent, and we’ll even throw in a cash bonus!
Automakers will do all they can to entice you to buy, of course. And there are times and circumstances when you can reasonably expect to get a better deal—but there are also things you should know in order to help you make the right decision.
“New vehicle prices have come down in recent years,” says Carlos Gomes, a senior economist and auto industry specialist for Scotiabank. “Prices are actually below where they were in 2007.”
Gomes says this is because automakers have boosted incentives annually in the past few years, primarily due to factors such as the U.S. economic crash and the European debt crisis. “This year, it was the fact that sales levels got off to a weak start in the first quarter, and automakers reacted in the spring,” he says.
He predicts that prices will fall even more in 2014 as more used cars come into the market and consumers have the option of choosing a cheaper pre-owned vehicle over a new one. Used cars have been in short supply, especially four-year-old ones, because sales of new cars dropped so dramatically during the U.S. financial crisis in 2008. You might also be surprised to know that Canada usually imports about 150,000 to 200,000 used vehicles from the U.S. each year. That number fell by about 40 percent during the last five years due to the crash, but should start picking up again, and putting even more pressure on new-car prices to come down.
Not unsurprisingly, you can expect to get the best deals in the fall, as retailers clear out last year’s models to make way for the new ones coming in. That’s the good news. The bad news is that you’ll have to take an in-stock unit, which means you may not get the exact options and colour you want. Also, if you wait too long to make up your mind, those last-year models will be sold out.
No matter what model year, you’ll always have a better chance of making a deal on an in-stock unit, meaning a car that’s sitting in the dealer’s inventory, because it’s costing the dealership money.
Automakers talk about “our customers,” but you’re not one of them. Almost all dealerships are independently owned franchises, and they are the automaker’s customers. The manufacturer sells vehicles to the dealership, almost all of which pay for them on a revolving line of credit, called a floor plan. As soon as the car rolls off the delivery truck and onto the dealer’s lot, it’s racking up interest charges. The sooner it’s sold, the quicker it generates profit instead of loss.
Interest is usually charged monthly, while sales figures — and usually the salespeople’s commission — are tallied up at the same time. Come in toward the end of the month, and you can probably negotiate a better price as the dealer tries to clear out as many cars as possibly before month’s end.
Of course, there is a limit to how low you can go. The dealership still needs to cover its overhead and pay its staff, especially since improved vehicle reliability and longer service intervals have cut into the profits traditionally generated by the service and parts departments.
And don’t just think about a cheaper price when you’re negotiating. If a cash discount isn’t possible, look at such things as low or zero percent financing, or maintenance packages such as free oil changes or winter tires.
Look at your own schedule, too. You’re always in the best bargaining position if you don’t need the car right away, and you have time to look around and negotiate. Start shopping before your old wreck breaks down for the last time, or before the newest family member arrives and requires you to trade your two-seater for a minivan. As with any other type of deal, timing is everything when it comes to your new vehicle.