March 21rst, 2007
Blurb: Ask a car dealer when the best time to buy and the likely answer you’ll get is “now.” But the car industry moves in cycles.
Is "now" the best time to buy a new car?
By Peter Diekmeyer • Bankrate.com
The advent of spring, the melting snow and the increasing patches of black that many can now see on the country’s roads are focusing Canadian drivers’ attention on their vehicles. “It’s the busiest time of year for us,” said Gustavo Pabon, a sales manager at the Montreal-based Excel Honda dealership. “Dealers want to put the slow winter season behind them. Now they want to move vehicles fast and will make special efforts to do so.”
With the aggressive reputation that car salesmen have, it should come as no surprise that Pabon should say that “now,” is the best time to buy. Cynics would say that fall, when the new models come out, or winter, when activity is low, are also attractive times. That said, Pabon, makes a convincing case that spring, when the industry’s sales tend to peak, is as good a time as any.
“There are several reasons, which when put together, provide a lot of momentum to automotive markets in the spring,” said Pabon. “For one, manufacturers are quite aware of the seasonal factors and as a result, they put forward a lot of incentives at this time of the year.” For example, Honda is currently extending 1.9 percent financing for its Accord models as well as a special 3.9 percent rate for certain leasing options. Other dealers are offering similar deals.
According to Pabon, the increased dealer traffic also provides significant advantages to customers who want to trade in their old vehicles. “If you want to do a trade-in during December, when buyers are few and far between, your dealer will offer you far less for your vehicle than he would in the spring, when demand for used vehicles is much stronger,” said Pabon.
Pabon also cites a desire among dealers to clear out the previous years’ models as a key factor. “When spring comes around we often have between 80 and 100 older models still on the lot,” said Pabon. “This year, for some reason, there are a lot less, but we are still very motivated to move them.”
Leasing a car? Think winter
Despite Pabon’s enthusiasm for buying now, there is a good case to be made that occasionally, lying low during the busy months can pay off big time for deal seekers, says one long time industry watcher. “If you want to lease or finance a car, Christmas is often the best time to do it,” said George Iny, president of the Automobile Protection Association. “The car business is traditionally very slow during December and January, but in recent years, the manufacturers have been pushing forward significant incentives to even out their sales.”
According to Iny, one incentive that has worked particularly well is the three-month break that automotive manufacturers have taken to extending during Christmas time, before buyers make their first payment. “The carmakers figured that during the holiday season, people would be in the mood to buy, but they wouldn’t have the ready cash,” said Iny. “Three months with no payments, gives buyers the time they need to make all of their other Christmas purchases and then to pay off their credits cards. Only then would their car payments begin to kick in.”
That said, Iny concedes that spring has its attractions for Canadian new car buyers. In fact, Iny was only able to chat briefly, rattling off his interview over a car phone as he rushed between media interviews following the release of Auto 2007, the APA’s annual car guide. That’s because the guide, which is published in conjunction with Protegez-Vous, a Quebec-based consumer advocacy magazine, is put out to coincide with the busy spring season.
A cyclical and seasonal industry
Of course Christmas and spring aren’t the only times that one can buy a car. In fact, what’s fairly clear from listening to both Iny and Pabon, is that the industry moves in cycles, and that there are clearly advantages and disadvantages to buying at any particular time. For many, fall, when dealers begin getting all of their new models, is a good time to be seeking a new vehicle.
In fact buyers who change their vehicles often have a big incentive for doing do in the fall, due to the particularities regarding the way vehicle depreciation is calculated in the minds of many buyers.
For example if you buy a 2007 vehicle during April and keep it for four years, when you sell it, there will be a four year difference between the model year of the car you are selling and the year that you sell it in (2011 less 2007 equals four years).
However if you wait a couple of months until fall comes around and then buy a 2008 model, when you sell it four years down the road, (during the fall of 2011) there will only be a three-year difference (2011 less 2008 equals three years). In the minds of many buyers, a car with three years’ worth of depreciation is worth a lot more than one with four years behind it. The upshot is that by waiting a couple of extra months, you should be able to get a much higher resale price.
Another possibility that can bring significant advantages for shoppers who are too busy to visit a slew of dealerships is be to time their purchases to coincide with car shows that are held in most big cities. In Montreal, Toronto and Vancouver, these are held in January, February and April respectively.
The advantage is that increasingly, for many Canadians, particularly hourly workers, contract employees and professionals, time is money. And if a worker can save ten or 20 hours, by checking out all of the autos he wants to at one show, as opposed to trudging around to a slew of dealerships, the time savings could be considerable.
Getting the best deal if you can’t wait
There are many industry “experts” out there with all kinds of advice on how to get the best deal if you cannot afford to wait until the perfect time of the year. Some say you should go at the beginning of the day, when salesman have little traffic, others advise going at the end, when salesmen are busy and are thus more in the mood to “close” fast. Others advise buying at the end of the month when both salesmen and dealerships are trying to make their quotas.
While much of that is sound advice, the most important thing to remember is that a good car salesman has hundreds of car sales behind him, often many more. But most consumers only buy once every seven or eight years.
The upshot is that most salesmen will see you coming from miles away. Many will almost instantly and instinctively anticipate your moves. As a result, the best thing you can do to level the playing field, is by getting informed and by chatting with as many salesmen as you can. By doing so you’ll pick up a few of their tricks and habits. And then hopefully whether it is spring, summer, fall or winter, you’ll be able to get yourself a better deal… no matter what season it is.
Peter Diekmeyer (www.peterdiekmeyer.com) a freelance business and economics writer.
|© 2007 Peter Diekmeyer Communications Inc.|