How to Buy a Cheap New Car (Tip 1 of 10)

TIP 1: Buy your next new car at the end of the month

When you buy a new car, timing is everything. New-car dealerships have very aggressive sales targets, and they are accountable for those projected new-car sales on a monthly basis. Serious financial incentives are paid by wholesalers (car companies) to the dealers that meet their targets; those that miss their target lose their bonuses.

New car dealerships also pay interest on their new car stock on a monthly basis. In fact, all the ‘floor stock’ in the dealer’s showroom is paid for on credit, so any sale knocks interest of the bill at the end of the month.

What this means is that, at the end of every month the car dealerships that are just shy of their target are highly motivated to sell. If you are a new car buyer this could mean a substantial discount. Motivated dealers will often lose all or most of their profit on your next new car in exchange for that critical extra sale – if it helps get them over the line.

Different dealerships are often very differently motivated for your new car business towards the end of the month. A dealer just shy of the target will be very motivated to discount to achieve your new car business whereas one who has achieved his target would still like to sell you the car – but not at a hugely discounted price. This is why you must always either shop around at least three new car dealers, or use a car broker.

Obviously, don’t expect to see a ‘just shy of my target’ sign out the front of a new car dealership on the 29th of the month – dealerships keep this kind of sales information strictly confidential. What you need to do if you’re buying a new car is offer to pay a substantially discounted amount – and see what the salesperson’s response is.

Basically you need to get the dealer to tell you the ‘drive away’ price – the all-up amount you have to pay to drive the new car off the lot, today – and then pitch an offer substantially lower than that, and see if they cave in. Don’t be afraid to pitch a price 15 or even 20 per cent low. (You can always come up higher if they rebut your initial offer, but you have to make it sound like this initial amount is all you can afford in the first instance. However, if you pitch $25k as your offer and the response is ‘yes’, you can’t then expect to achieve a further reduction in price. If you ask: ‘How about $23k, then?’ you’ll merely look like an idiot.)

It also pays not to be in a hurry to purchase the new car. Wait until the 29th or the 30th of the month, and shop at least three dealers to see who’s motivated and who’s not.

Once you’ve got the drive-away price for the exact new car you want to buy, you could even put the deal out to tender to several – even dozens – of dealers by e-mail. Detail the exact car you wish to purchase, point out it’s a tender arrangement (lowest bid wins) and press ‘send’ in the last 48hrs of the month. See what the response is. Don’t forget to include some rural dealers if you live in the city – and vice-versa.

(The easiest way to find new car dealers is to visit the parent company’s website and use the inbuilt ‘dealer locator’ function.)