The 2023 winter holiday period is looking like one of the best times to buy a new vehicle in recent memory.
The average discount on a new vehicle is more than $1,000 for the first time since April 2021, according to Edmunds. (The "discount" is the difference between the sticker price and the actual sale price; from late 2020 until fairly recently, new cars have often been selling for above the sticker price due to high demand and low inventory.)
Historically, the end of the year is often the best time to buy a new car, and with inventory improving, you can expect to see solid cash rebate and financing deals throughout December.
You can find good deals on new cars again
There are around 30 vehicles with 0% APR financing offers from manufacturers right now, marking a major increase from the summer when there were only about 10, according to RealCarTips.com. The site’s founder, Gregg Fidan, monitors manufacturers’ websites to track financing deals, and he says things haven't looked this good in years.
“We've seen a huge uptick in the number of incentives that manufacturers have started offering, everything from rebates to better lease deals to more financing deals,” Fidan said in late November. “We’re also seeing a lot more 1.9% and 2.9% financing deals.”
Persistently high auto loan rates and high car prices are still obstacles to purchasing a new vehicle right now, but the market has stabilized and there doesn't appear to be any benefit in waiting longer to buy.
The average transaction price for new vehicles was $47,753 in October, according to Edmunds. That’s $763 less than the record high of $48,516 at the end of last year.
The average auto loan interest rate on a 60-month loan for buyers with credit scores of 740 or higher was 6.6% in late November, according to Mark Pregmon, vice president of consumer lending at USAA.
Discounts and incentives can make car purchases more attainable for buyers. For example, if you can find a financing deal that reduces your rate to 2.9%, you would save about $4,000 in interest on a 60-month loan financing $40,000.
Alternatively, if you have the cash to make a sizable down payment, high loan rates don't affect you as much and you can benefit from the market being relatively slow. There are cash rebates available on some models, and you may find that dealerships are willing to cut end-of-month or end-of-year deals.
"If you've held off so far, now might be a great time to start shopping," says Jeffrey Roach, chief economist at LPL Financial.
Best time of year to buy a new car?
There are several reasons why more deals on new cars are popping up. First of all, inventory levels are getting back to normal as manufacturers increase production in the aftermath of pandemic-era supply shortages. Meanwhile, auto loan rates are depressing new vehicle sales, which means dealerships may be more willing to negotiate.
Traditionally, the weeks around Black Friday, Christmas and New Year’s are some of the best windows for buying new cars. Holiday sales events are going on, and car buyers will often have the choice between a financing deal or a cash rebate during these promotions. You can use online calculators to determine which offer is better.
Winter holiday deals are often better than what's advertised around other car shopping holidays, experts say. Near the end of month, dealerships may be more willing to make a deal because manufacturers often have incentives for dealerships that sell a certain number of cars, and salespeople want to meet those goals. There are also end-of-year sales goals, which makes December one of the best months to buy a car.
"Historically, car prices tend to drop at the end of the year as dealers strive to reach sales quotas," says Joe Pendergast, Vice President of Consumer Lending at Navy Federal Credit Union.
If you’re willing to make some compromises, car shopping in December has other appeals, too. Dealerships will be keen to sell their 2023 model year cars to make way for 2024 editions. If you're interested in a 2023 car model, you can probably save some money. Lastly, the peak holiday weeks aren't when many people want to spend a day at the dealership, which means fewer buyers and potentially lower prices.
“There are not a lot of people shopping for new cars during that last week or two in December just because there's so much holiday stuff going on, so dealerships do tend to be a little bit slower and more likely to make a deal,” Fidan says.
Additionally, automakers usually want to end the year on a high note before reporting sales numbers to their shareholders — that can be a motivation for real deals during promotional events. New car sales events traditionally ramp up in December, and you'll see commercials for “Happy Honda Days," “Toyotathon," Lexus “December to Remember” and others.
Overall, Pendergast says the car buying deals this winter will be better than last year's, but you won't find the "blockbuster discount offers Americans were used to before COVID due to some remaining inventory constraints."
Car buying advice from Money
There are definitely good deals out there on new cars, at least compared to recent years. However, they're not available at every dealership or on every car. For that reason, it's best to inquire about prices at multiple dealerships and try to include multiple brands and vehicle models in your search.
The best deal may be at a dealership that's up against a quota, but it's going to take some legwork to find and secure that offer. To get the best price on your next car, you'll need to be persistent in your search and your negotiations.