In two previous posts on the subject, I described several ways to buy a new car: forcing local dealers to compete for your business strictly on price, using an auto broker or using your selected dealership's fleet sales manager.
However, in the last six years I've discovered yet another way to buy a new car. This method does have some constraints on it. First, you have to be very flexible regarding color and options, and you have to be willing to own the car for a long time, to avoid taking a huge depreciation loss when you sell it.
This process involves patiently waiting until the end of the model year and the next year's models have arrived in dealer showrooms. Also, you're looking for a car that is the top-of-the-line, with options on it that typical buyers don't want, and without the options that typical buyers do want. Basically you're looking for a car the dealer does not want and is willing to take a loss on to get rid of.
Let me give you an example based on our own experience. I had been trying to interest my wife in a Hyundai Santa Fe for several years. In October, 2012 after the 2013 models became available we went to several Hyundai dealers. The 2013 models had been redesigned in the egg shape, and we wanted the older two-box shape (engine box and cabin box). (This was done because the Honda CR-V was eating Hyundai's lunch.) So we went looking for a 2012 model, a red one. We live in the Portland area and the nearest red 2012 Santa Fe was in Tacoma. It was a Limited Edition, and was loaded with options, including a dealer-installed remote start. So the price was around $34,000. However the car was missing the most desirable option, four-wheel-drive, which is almost a necessity in the Pacific Northwest. This is why it had sat on the dealer's lot for six months and he was eager to sell it. We were able to buy it for $27,800 and I'm convinced, in retrospect, that if we had negotiated harder or been more patient, we could have bought it for $25,000.
The thing to remember about doing this is that as soon as you drive the car off the lot, you will be eating the first year's depreciation. So it's important to negotiate the price down so the dealer eats that depreciation, not you. To paraphrase real estate guru Robert Kiyosaki (Rich Dad, Poor Dad), you want to make your profit when you buy the car, not when you sell.
The experience that made me realize this could be a real car buying strategy occurred in May, 2018. We discovered a new 2017 Mercedes-Benz SL450 designo Edition at a local dealer. This car had a sticker price of $103,235 and had been in the dealer's inventory for over 300 days (10 months). The 2019 models were only a few months away, and clearly the dealer was eager to sell the car. He offered it to us for $89,588 which was the base price for a new SL450, and we countered at $80,000, which he accepted. I recently went online to AutoTrader and CarGurus and have found new 2017 SL450s at dealerships for $103,000 and used, low-mileage examples, both at dealerships and privately owned, for $80,000 to $85,000. Basically, by saving $23,000 off MSRP, we have effectively avoided the first 18 months of depreciation. And since we plan to keep the car for at least ten years, we think we got a great deal.
So, to recap: (A) wait until the end of the model year and the new models are in the showrooms, (B) be flexible as far as color and options, (C) do your research so you know what equivalent year and models are worth as used cars, so you know what the car is realistically worth when you drive it off the lot, (D) be firm about what you are willing to pay, (E) avoid the trade-in trap... be prepared to pay cash or secure your financing before you negotiate, (F) plan to own the car for a number of years to minimize the depreciation hit and (G) ideally pick a brand and model that has been redesigned for the new year, making the end-of-year model you're negotiating for even less appealing for the dealer to keep in inventory.
