Whether you celebrate Happy Honda Days or Toyotaton, December is generally a good time to buy a car. Automakers and dealers want to end the year with strong sales on the books, which usually means some extra savings for shoppers. However, not every model is going to qualify for these seasonal sales.
It’s important to understand the context of why December is a good time to score a deal on a new car. It primarily comes down to two factors: rebates and inventory. There are essentially two types of rebates: advertised rebates and “dealer cash” rebates. The first one is what you would see on an automaker’s website, often called “customer cash.” An example would be something like this $6,500 rebate from Ford on remaining 2024 Edge units.
In this case, car shoppers know that there is a $6,500 discount from the factory in addition to whatever discount the dealer wants to take off the top. The second kind of factory rebate known as “dealer cash” is a little trickier because it’s not advertised, and isn’t always consistent from region to region, or even dealer to dealer. Dealer cash is a rebate given to the dealer to move units as means to pass on additional savings at their discretion. This is how dealers can sell cars below their invoice price. The gap between invoice and MSRP is closer than most folks realize—usually between three to five percent. This can be hard to believe for some buyers who think that the profit margins on new cars are really wide. Here is an invoice sheet from a VW dealer on an Atlas CrossSport it has about a three percent margin.
Going back to how dealer cash can allow for additional savings; let’s say a dealer has a $30,000 crossover, with a five percent margin which would make their invoice price would be about $28,500. If a dealer were to discount this car by $1,500 a customer would get it “at cost” and that would be a reasonably competitive deal. If there is an additional $1,000 in unadvertised “dealer cash” to move these units out before the New Year, a dealer could then discount this car by $2,500.
Sometimes even without dealer cash on the table, dealers may be willing to discount slightly below their invoice price and take a “loss” on a unit because the dealership will get bonus money from the automaker for hitting a certain sales goal for hitting or exceeding a monthly or quarterly target.
All of these avenues for potential discounts are directly related to the available units that need to be sold. This is very important context because I’ve spoken with several car buyers recently who assumed that the end of the year, in and of itself meant savings on their selected car.
I had a client looking for the new Civic Hybrid with her desire to score an “end-of-year deal” on one of these new cars. There were a few factors working against her: First, she wanted the sedan not the hatchback, second, she wanted the Sport trim not the more popular (but more expensive) Sport Touring, and third, she only wanted red. A 300-mile search revealed only four units. This was a recently launched model, with excellent reviews in a color that not too many people go for. While I managed to find a few deals at $700-$800 off the MSRP, this was not a car that was going to be “blown out” for the month of December.
I also spoke with a shopper who was in the market for a Toyota Sienna and he didn’t understand why his local dealer wouldn’t budge at all off the sticker price and had several thousands of dollars in dealer add-ons. He said, “I thought there were supposed to be deals in December?” Then I asked him, “How many Siennas in this trim did this dealer have?” He said they only had one. At that point, it seemed to click as to why this car wasn’t going to see much in the way of discounts
Like most things, it comes down to simple supply-and-demand economics. If your chosen model is in high-demand with low supply, the chances of you scoring a “deal” is slim, whereas if you are shopping for a car and dealers are sitting on a boatload of inventory, you have more negotiation power. When you conduct your inventory search, pay attention to how many listings match your desired trim and color combo. If you can only find a handful, you may want to temper your expectations as to what a “deal” is going to look like.
Tom McParland is a contributing writer for Jalopnik and runs AutomatchConsulting.com. He takes the hassle out of buying or leasing a car. Got a car buying question? Send it to [email protected]
