For buyers looking for a new ride before the summer Memorial Day weekend is, historically, a pretty good time to buy. Most automakers and dealers would be clearing out previous model-year inventory with competitive discounts. This year is different, and you should probably just stay home. If you insist on buying a car this summer, follow these tips.
Our friends at Lifehacker did an excellent breakdown of how this might be the absolute worst time to buy a new or used car. It’s worth a read, but the short version is that inventory is down and prices are up. There also doesn’t seem to be any relief in sight with some analysts predicting that a market correction may not happen until 2023.
Furthermore, there is a pretty good chance that the car you want isn’t even available. Several major automakers including Subaru and Toyota have closed factories due to the microchip shortage. Therefore, the likelihood of you finding a “deal” on this holiday weekend is slim.
If you can’t put off getting a new ride for a while and you are going to be in the car market this summer, here are some tips to keep in mind.
- Don’t be picky: If you have to have a specific car in only one color with a narrow set of options you are setting yourself up for a world of frustration. I was speaking with a buyer looking for a RAV4 TRD in Lunar Rock. I ran a search and there are only 50 RAV4 TRD trim models available in the entire country, only a handful of those was “grey” and an even smaller number were the Lunar Rock. The greater your level of flexibility on the model of your choosing the better your chances of success.
- Consider other model alternatives: The truth is that it is very hard to find a “bad car” nowadays. While some models may be better than others, building in some cross-shopping between a few brands is going to give you more options to find a competitive price. The inventory shortages are impacting everyone, but some cars are much easier to find than others. You may want to think about buying a “hold-me-over” car if you need something now. This is a vehicle that will do the job but might not be something you love, but it can get you through this transition time, and when the market changes you can trade it in for your preferred model.
- Cast your net wide: This one is obvious, but don’t think you only have to shop within your market region. If you open up your search within several hundred miles of your location you are more likely to find a match, and you have more leverage to get the best price. I recently helped a client in the DC metro with a WRX STI, and the dealers in FL and Ohio were surprisingly competitive with their deals. Even with shipping costs, he was still saving money over the local stores.
- Understand that a “deal” is relative: You can’t compare prices this year to last year and you definitely can’t compare what you paid for a similar model a few years ago to what you may pay today. In some cases for some cars, full sticker price might be the “best” deal you can get if many dealers are charging over sticker for a popular model. As always you want to compare the out-the-door price for new cars to see who is offering the lowest total transaction cost. The key here is to have a frame of reference when it comes to your pricing. I recently was working on a brand new Honda Odyssey deal and the discounts ranged from nothing, with a few dealers offering only $500 or $1,000 off the MSRP. One dealer came down $2,800. Based on previous years, $2,800 off a $40,000 van wouldn’t seem that great, but when compared to the rest of the field that was the deal.
Of course, before you step foot into a dealership you should have a handle on your budget and your credit. Running the math ahead of time and knowing what you can and cannot afford, is the best way to avoid being ripped off.