Best month - December has consistently scored high on both frequency and size of discounts, making it the best month of the year to buy a car. Holidays - Holidays are also good times to land a deal. You can score big with Black Friday deals, Christmas, or New Year's Eve.
December: December is arguably the best month to buy a car. Dealerships are trying to hit their year-end sales quotas, and salespeople are often more motivated to offer better deals to meet these targets. The closer you get to the end of the month, the better the deals tend to be.
The rule recommends making a 20% down payment on the car, taking four years to return the money to the lender, and keeping transportation costs at no more than 10% of your monthly income.
To apply this rule of thumb, budget for the following: 20% down payment: Aim to make a 20% down payment on your new car. 4-year repayment term: Choose a repayment term of four years or less on your auto loan. 10% transportation costs: Spend less than 10% of your total monthly income on transportation costs.
It's good practice to make a down payment of at least 20% on a new car (10% for used). A larger down payment can also help you nab a better interest rate. But how much a down payment should be for a car isn't black and white. If you can't afford 10% or 20%, the best down payment is the one you can afford.
Since January is the slowest month for sales, it is much slower for luxury cars to sell. Because of this, it may be more challenging for the most expensive ones to be taken out of your parking lot. To sell out the most expensive ones in your inventory, January is the best time to offer promotional deals to the buyers.
Worst Times
Warmer weather and tax refunds bring buyers out in droves. With so much demand, dealers are far less likely to be in the mood to lower their prices. Plus they still have several months before the new models flood the lots. At the beginning of a new model year (assuming you want next year's model).
If you have a high level of control over your timing, "New Year's Eve and New Year's Day" in particular "are the best days of the year to buy a used car, because there are 47.9% more deals than average," said CNBC, citing analysis by iSeeCars, a search engine for used cars. Martin Luther King Jr.
Mondays. Monday can be the best day of the week to buy a new car. Other potential shoppers are often at work, so representatives at car dealerships are focused on anyone who comes in the door.
Depreciation is the diminished value of your car that is due to normal wear and tear. Diminished value is for value lost due to a car accident.
Dealers generally do their best wheeling and dealing at the end of the calendar year. Automakers usually have big incentives to move the metal during the Christmas season because some dads and moms make the new car purchase their family's holiday gift. For some dealers, December is one of their biggest sales months.
On the other hand, December scores highly on both frequency and size of discounts — it's the month with the highest average discount and third highest frequency of deals — making it your best bet overall to find a good deal.
NerdWallet recommends spending no more than 10% of your take-home pay on your monthly auto loan payment. So if your after-tax pay each month is $3,000, you could afford a $300 car payment.
Consumer reports note that while the typical lifespan of a new vehicle is approximately 8 years or 150,000 miles, well-maintained vehicles can surpass 15 years and overcome 300,000 miles.
Dealers and their salespeople spend the month of December sprinting toward the finish line of their month-, quarter- and year-end sales goals. That makes the end of the year some of the best days to buy a new car.
Waiting until the end of the calendar year is even better, as dealerships also have specific annual sales goals to meet, meaning sellers are probably more willing to wheel and deal. In fact, according to an analysis by TrueCar, buyers who purchased a car on New Year's Eve saved an average of 8.3% off the MSRP.
The best days to buy a car usually fall earlier in the week. If a dealer is open on the weekends, that tends to be the busiest time, so you're likely to get less attention from salespeople and buying a car can take longer. Mondays and Tuesdays are better, because fewer people shop for cars on those days.
Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go.
End of the Month
Most sales employees have smaller monthly quotas they need to meet, so visiting a dealership on the last few days of the month can incentivize salespeople to give you a better deal, especially if they're trying to earn a monthly bonus.
Payment Amount
For example, for a car price of $20,000, a down payment of $4,000, a loan amount of $16,000, a loan term of 48 months, an annual interest rate of 5%, and a start-of-period payment method, your payment amount would be $366.94. You would be paying this amount each month for your auto loan.
Putting down a larger down payment will increase your equity because you won't need to finance as much through a lender. Cars are a depreciating asset. As the value of your vehicle decreases, you're more likely to go upside down on your loan — when you owe more than your car is worth.
Generally, a good credit score to buy a car falls within the range of 660 to 720 or higher. However, it's important to note that each lender has different criteria, and some may consider lower credit scores as well.