The good news for the auto industry is that both sales and average transaction prices are on the increase. The bad news for consumers is that it’s become more difficult to garner a great deal on a new car. That is, unless you know how to leverage the laws of supply and demand to your advantage.
Automakers sold 1,404,774 cars and trucks in the U.S. during March, which represents a healthy 12.7 increase over the same period in 2011, according to Autodata Corp. Concurrently, the average transaction price on new models jumped to $30,748 last month, according to TrueCar.com, which was an increase of 6.9 percent over March 2011. And that’s despite major sales gains among smaller and typically less-expensive models. What’s more, average sales incentives, including rebates and cut-rate financing, continue their downward trend.
“The auto manufacturers have finally found their sweet spot, with the production of vehicles meeting the demand of consumers, keeping incentives to a minimum,” says Jesse Toprak, VP of Industry Trends and Insights for TrueCar.com. “This led to the highest transaction prices in the industry in March, along with record highs for Chrysler, GM, Hyundai/Kia and Nissan.”
While some of the hottest-selling rides may command close to – sometimes even in excess of – their sticker prices, astute bargain hunters can usually garner the deepest discounts on slower selling and overstocked models. According to TrueCar.com, large sedans and full-size SUVs and pickup trucks will continue to command the biggest markdowns and incentives, as will models like the Mitsubishi Galant and Chevrolet Impala that have remained too long in their current generations without significant updates.
But astute bargain hunters can negotiate some great deals on a full range of vehicles, including some highly rated models, if they know which cars and trucks – whether from slumping sales or over-production – are sitting unsold in the greatest numbers on dealers’ lots. The industry publication Automotive News – available at many public libraries – publishes a list of so-called “days in inventory” for most makes and models every month, and TrueCar.com similarly includes lists of models having the highest and lowest average inventories in its monthly True Trends reports.
On average it takes 48 days to sell a new car, but it takes just 10 days to sell a Toyota Prius hybrid; at the other end of the spectrum a Mitsubishi Outlander crossover SUV can be expected to sit for 107 days before someone drives it off a dealer’s lot. Time is money to an auto dealer and the longer a new car sits in inventory the more he or she will pay in financing costs simply to watch it collect dust. It thus behooves a dealer to take less cash up front to move an overstocked model that may wind up costing him or her more money over time.
Astute hagglers can often negotiate the final cost of such models all the way down to the dealer’s invoice price and even lower, especially if a manufacturer’s cash rebate applies. Myriad new-car websites like Kelley Blue Book and Edmund’s publish list and invoice prices for all new vehicles (including options) sold in the U.S. Be aware that a dealer’s true cost is actually a bit less than a vehicle’s invoice price thanks to something called a holdback allowance. Typically, this is a percentage (usually two or three percent) of either the list or invoice price of a car or truck that a manufacturer pays to a dealer when a vehicle is sold to help assist with the cost of financing.
While you might think the current list of the industry’s most-overstocked models consists solely of behemoth gas-guzzlers and dismal outdated models, it actually runs the gamut among size and price classes, and includes some highly rated vehicles. They range from the Fiat 500 subcompact coupe and the compact Honda Civic Hybrid to the Chevrolet Corvette sports car, the luxury-minded Infiniti M37 sedan and EX35 crossover, Nissan NV commercial van, GMC Canyon pickup, Suzuki Grand Vitara compact SUV and even the Chevrolet Volt “extended range electric car.”
On the other hand, the models boasting the shortest days in inventory according to TrueCar.com include the Ford Econoline van and BMW X6 luxury coupe/convertible (at 9 days each), Hyundai Elantra and Veloster (11 days), Honda CR-V (12 days) and the Subaru Impreza Wagon (13 days). Even the most hard-nosed hagglers will likely have trouble finding a dealer who’s willing to knock more than a token amount off the sticker prices on any of these in-demand models.
We're highlighting the 10 vehicles estimated to be in the greatest supply on dealers’ lots in the accompanying slide show, noting the number of average days in inventory and applicable factory sales incentives – these include cash rebates, financing deals and additional discounts paid directly to a dealer which may not necessarily be passed on to a buyer without some hard-nosed negotiations. We’re also including the range of list and invoice prices to help identify the dealer’s markup that’s up for negotiation with each model.
In the words of John F. Kennedy, “Let us never negotiate out of fear, but let us never fear to negotiate.”