A Car Pro Show listener was curious if the end of the month was really the best time to buy a vehicle or if it was just hype created by the car dealers and automakers. I have talked many times about dealers hitting their forecast and quotas from the factory. Often, hitting their factory sales numbers makes them money and they push hard at month end, and the sales standings that are shared with all dealers is a huge thing.
When I was in the business, that last car to hit your bonus could mean tens of thousands of dollars, and just getting close doesn’t count. Dealers open their gates every single day to sell cars, but they push harder at the end of any given month, and particularly when the end of the month is also at the end of quarter, like the period we are in now.
I’ll address the listener’s question along with some other common car dealers myths I’ve heard over the years, and answer the most common ones.
- The end of the month is the best time to buy. Yes, this is true. Dealers, managers, and salespeople push harder the final week of any month. Everyone in the car business has a goal to reach and the end of the month is crunch time and also means big bonuses.
- Financing is cheaper outside the dealership. Not always the case, dealers have a lot of sources for financing, and often they have lenders competing for the best rate for you. It’s a good idea to know what you can get on your own, but often the dealer can offer a rate of 0% to 3% and can match or beat the best rate you can find. There are also often extra rebates if you finance with the automaker’s captive finance company.
- Don’t tell the dealer you have a trade until the end. Usually, this just slows the process. You don’t want the dealer playing games with you, don’t play games with them. Your trade-in is worth the same no matter when you reveal it. If you have a clean trade-in, the dealer will often make you a better deal on the new vehicle just to get your trade-in, especially when used cars are short in supply.
- Dealers never lose money on a new vehicle. They wish! Many dealers take deep loses on vehicles often. It might be on a demo, a loaner, a vehicle that has been in stock too long, or a designated loss-leader, but it happens way more than you think, especially in a competitive environment. I have seen dealers take losses on up to 25% of the vehicles they sell.
- If I know what the dealer paid for the vehicle, I can get a better deal. There is some truth in this one. When vehicles are abundant, it is easier to negotiate from dealer invoice up, than it is from MSRP down. All businesses deserve to make a profit, even car dealers. What a dealer pays for a car is not important. All that really matters is that you get the best possible deal, even if that is MSRP, or something close to that. What other business that sells a product has their cost of goods available to the public?
- Going through the Internet Manager is always cheaper. Internet Managers are salespeople who can type. Most of the time, their job is to get you into the showroom to go through the normal process of purchasing. However, this has evolved since Covid-19 arose. If you are shopping two dealers against each other, you can get much done before going into the dealership
. - Paying cash always saves money. Not true. Many times it can actually cause you to pay more. There are extra incentives often for financing with a captive lender like Ford Credit or Toyota Financial. You can often take $1000 or more off the sales price just by financing with the dealership. You can always re-finance if rates drop.
- Buy on a rainy day. Seriously? Dealers need to sell cars every day, the weather makes no difference whatsoever, unless we’re talking hurricanes, hail, or gale-force winds.
- Dealers need to move the old models out when the new models start to arrive. This is absolutely true, even right now. Dealers make it a mission to move out old inventory. There is a saying in the business, “cars are not like wine, they don’t get better with age”. The dealers know the longer they have a car in inventory, the less profit it makes or the bigger the loss. Also, there are often factory-to-dealer hidden incentives that they can use to make the deals better.
There are a lot of “experts” out there who give you advice on car buying, unfortunately a lot of that information is false, or often outdated. If you use such advice, it can make car buying unnecessarily difficult and can even cause you to pay too much for your next car.
