The average transaction price for new cars has crept up, even amid the coronavirus pandemic. The typical cost for a new vehicle in the United States rose 1.3% since last November and hit $39,259 this year, according to data from Kelley Blue Book.
Prices remain historically high: KBB expects prices in November to be the third-highest month ever on record. But the cost of new cars from certain automakers has fallen since October. The average transaction price on vehicles from the Volkswagen Group, which includes Audi, Volkswagen, and Porsche, is down more than 7%.
Even just a small percentage drop can help you save thousands of dollars.
It makes sense that prices are coming down toward the end of the year. December has long been one of the best months to buy a new car as dealers are looking to clear space on the lot for newer models.
Here's how you can make the most of year-end car deals.
As the calendar year comes to a close and newer 2021 models begin to arrive, prices for 2020 models could continue to fall. "In general, the end of the year is a good time to buy a car, especially a new car," since dealers want to get the newer model cars on their lots and out front, Brian Moody, executive editor at Autotrader, told Grow last year.
That means now is a good time to negotiate a better deal on a 2020 model.
"In previous years, it was better to buy a car on the last couple days of the year as some dealerships may be going after a year-end bonus and can take a bigger loss on the sale of a vehicle because they will recoup that through bonus and incentives," says Zach Klempf, the founder and CEO of Selly Automotive. "This year there is less of that, but it doesn't mean you couldn't negotiate a slightly better deal on the last day of the year if a dealer is close to hitting a bonus level."
Dealerships are looking to clear unsold inventory, so you could find an even deeper discount if you're willing to be flexible with the make and model, along with the customizations. While deals tend to get better later in the year, the earlier you start the process, the more time you'll have to negotiate in advance and the bigger the selection you're likely to have.
When it comes to negotiating a better price on a car, buyers should know that many offers that lower the per-month cost come in the form of zero-interest rates or longer payoff terms on the loan. And that could be a good deal, depending on how much you can afford and how long the terms are, says Lauren Fix, a sector analyst at auto news and education website Car Coach Reports.
"I do not recommend anything longer than a five-year loan or a three-year lease," Fix says. "After that point, you're leaving money on the table and it's a bad financial move."
Video by Jason Armesto
A shorter loan could also allow you more years in between car purchases where you have no monthly auto payment, helping you put thousands of dollars towards other financial goals.
It also makes sense to determine how much you can realistically afford before you visit the dealership. You can shop around for different financing options to get a better idea of what kind of auto loan you could qualify for based on your credit score.
"Do your research in advance by looking at reviews, Car Coach Reports, Kelley Blue Book, and others that are good resources," Fix says. "Third-party experts will always give you a different perspective because they're not trying to sell you the vehicle they're just trying to educate and inform."
More from Grow: