Timing can make a big difference in the deal you’ll get when you’re shopping for a car. Many car buyers find, for example, that they can get a better price towards month-end when sales reps are scrambling to meet targets.
This is even truer in December when many dealers are eager to move stock off their floor before the end of the year, says Ernest North, co-founder of fully digital insurance platform Naked.
“Car dealers with a lot of inventory will want to shift as much of it as possible to avoid it getting devalued by the arrival of a new year,” says North “That means you can often negotiate a better discount now than you could during other times of the year. But bear in mind that a new car is a major financial commitment, even if you find a great deal.”
North recommends assessing whether to buy a car now, next year or not at all by asking these questions:
1. Which car are you looking to buy?
So, you’ve established that you’d like to downgrade to a smaller car due to working from home, buy a bigger car because your family has grown or you’re travelling more, or replace an old vehicle that has become expensive to service. The next step is to think about which car you’d like to buy and whether you want to get it new or secondhand.
This step takes quite a bit of research, once you’ve established which make and model you are interested in. Spend some time finding out about what the supply, demand and pricing situation is like.
It’s important to note that variability between the official ‘retail’ and ‘trade’ prices and the real-world prices is the highest it has been in a while, so it’s important to be well-informed.
There are a range of factors this year that may affect vehicle pricing and sellers’ willingness to negotiate:
- Supply chain disruptions due to Covid and other international political events, the riots and the Kwa-Zulu Natal floods mean some manufacturers have not been able to fulfil demand for new cars. As a result, some models are in higher demand on the used car market and are selling for premium prices.
- Some cars are in lower demand because they are perceived as hijack risks. It’s worth doing your homework to establish how real these risks are as well as the impact on insurance premiums.
- Diesel prices are soaring, which may impact costs for diesel-powered vehicles.
- Car prices are not uniform nationwide. If you’re willing to shop online, you might find a bargain from a dealer in another city. You can test-drive at a local dealer and buy online if you like the make and model.
- If you’re considering a used vehicle, many private sellers are under pressure early in the year with Christmas and “back-to-school” depleting their cash flow. Some might offer an attractive price to secure a quick sale.
2. If you’re buying new, what are the pros and cons of getting a 2022 versus a 2023 model?
The most obvious reason to wait until next year if you’re buying new is that you’ll be able to buy a 2023 model, which massively affects your resale value.
But getting a 2022 model might be cheaper than buying it next year, and could also mean a lower insurance premium than driving a 2023 model.
3. Will you definitely be buying a car within the next year?
Inflation has been unpredictable in recent times (due to various contributing factors), and used and new car prices have been rising for the past year. If you plan to buy a car sooner than later, it might make sense to buy a car before the dealers bring in their 2023 models and hike their prices. “The prices of many models may rise more than you expect, especially if the car (or a significant portion of the parts) are imported,” says North.
4. Is a new model or variant of your preferred model due within the next few months?
If there is buzz about a new model replacing the car you’re considering, it might be worth holding on for a few months. The price for older models tends to fall sharply when a newer version comes to market.
But this looks different for different vehicles, so be sure to do your research or speak to an expert about the prospect of new cars in coming months and the expected impact on different vehicles’ valuations.
5. What do your finances look like as the year ends?
If you’re planning an expensive holiday or didn’t get a bonus you were expecting, your financial resources may be under pressure. Plus, there are often unexpected costs at the start of a year.
Before committing, you might want to ensure you can afford a new car even if fuel prices, car servicing expenses, insurance and interest rates continue to rise for the next year.
North says: “Think about how your long-term financial position will be affected by spending different amounts of money on a new car versus alternatives like Uber.
“To answer this question, exclude the capital repayment portion of your instalment, but include the depreciation over the finance period. Look at how different makes and models depreciate and how that affects your long-term value for money decision.”
6. Do you really, really need that new car?
Buying a car involves tying up capital you could save or taking on a loan for up to four years. High inflation and rising interest rates mean that you need to budget carefully for a vehicle, especially if you’re seeking finance.
“All too many car purchases are fuelled by a desire to show status or keep up with peers,” says North.
“If you’re driving a reliable, run-around car that is fully paid-off and you work from home, you probably don’t need to upgrade to a petrol-guzzling, luxury SUV. You might thank yourself in future years if you invest the deposit and monthly repayments instead or put the money away towards a home deposit. A car is not an investment; it’s an expense.”