Along with twinkling trees and candy canes, Christmas brings with it a glut of advertisements from car dealers promising the best deals of the year on sedans, minivans, and sport-utility vehicles. But these advertisements aren't just holiday hype. December really is the best month to purchase a vehicle, whether new or used.
You'd be hard-pressed to get a better deal than you can get in the final days of the year, when dealerships are scrambling to unload the inventory on their lots. December is the month with the highest discounts off the manufacturer's suggested retail price (MSRP), at an average of 6.1%, according to Edmunds.com.
Here are five reasons why December is the best month to buy an automobile.
1. Excess inventory
New-model cars arrive in October each year and take their place at car dealerships alongside previous-year models. This results in a glut of inventory and puts pressure on sales staff to sell both new-model vehicles and the inventory they have of last year's models. The goal is to have more new-model cars on the lot than cars from last year come January. So, as autumn progresses, the prices on older-model vehicles drop, and the incentives to buy them rise.
This means that you should have plenty of bargaining power when buying a previous-year model vehicle in December. Of course, you'll be limited to the vehicles that are on the dealer's lot. But you should look to get a higher-end model for a base model price. Try and get a 2017 vehicle that comes with upgrades such as an "infotainment" system, heated seats, or larger wheels.
2. Discontinued models
While car dealers are desperate to get rid of surplus inventory in December, they're also determined to offload discontinued vehicles. These are models that manufacturers have stopped making. As soon as it's announced that a particular vehicle is being discontinued, car dealers push that vehicle to the front of their lots and slap a reduced price on the windshield. They do this because the market for discontinued cars dries up fast.
Once a car is discontinued, the service contracts and parts that support the vehicle are also gone, meaning consumers have fewer incentives to purchase that particular brand of vehicle. Plus, many consumers assume that something is wrong with a vehicle if it's discontinued, making interest in that model plummet.
In December, the best deals are often for discontinued cars, trucks, and SUVs. Popular models that were discontinued in 2018 include the Ford Focus, Dodge Viper, and two-door Honda Accord Coupe. General Motors recently announced that it, too, is pulling the plug on a number of vehicles, including the Chevrolet Volt gas-electric hybrid car, the compact Chevy Cruze, and the Buick LaCrosse luxury sedan.
3. It's bonus time
Sales staff at car dealerships work largely on commission. The more cars they sell in a month, the more money they earn. However, most car dealerships also provide their sales staff with an added incentive in the form of a year-end bonus that's tied to how many cars they sell for the entire year.
Some dealers provide bonuses based on how much inventory is moved off the lot in December and whether the dealership meets its annual targets. This means salespeople have a vested interest in selling you a car during December. Many will agree to favorable terms so that you'll buy a vehicle they can count toward their sales tally for the year and increase the year-end bonuses they receive.
4. Competition from other retailers
Most of the year, car dealerships compete with other car dealers for people's hard-earned money. But during the holiday season, car dealerships compete with every retailer in terms of deals, sales, and consumer dollars. In December, the Ford dealership is competing not only with the Honda dealership for your business, but also with the likes of Best Buy and Home Depot, which may have great deals on HD televisions and snow blowers.
One of the main reasons car dealerships offer the lowest prices in December is that they're trying to attract consumers who are inundated with advertisements and pulled in many different directions during the holidays.
5. January and February are slow sales months
After Christmas, most Americans are broke and hunkering down paying off their credit cards. This, along with the cold winter climate in much of the country, conspires to keep people out of car dealerships in January and February. This makes the start of the year the slowest season in terms of car sales.
Staff at car dealerships know that December is their last month to capitalize on consumer spending until spring. Dealerships count on December to carry them through the lean months of January and February, when most people are huddled indoors, rather than tramping through the snow on car lots.
Keep these facts in mind when shopping for a car, truck, or SUV this December. Having this knowledge will put you in a better position to negotiate the purchase of a new or used vehicle. You'll leave the dealership feeling satisfied that you got a truly great deal on a big purchase at Christmas.
10 stocks we like better than WalmartWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 14, 2018The author(s) may have a position in any stocks mentioned.
The Motley Fool has a disclosure policy.