Car sales, especially new car sales, have continued to slide throughout 2018, although without the rapid drops of 2017 and general air of desperation in the air as we reach the end of another year.
With month after month of decreasing sales, manufacturers and dealerships are likely to have a lot of unsold stock on their hands that they are very keen to get rid of. That could be good news for you, if you’re looking for a new or used car and are hoping to pick up an end-of-year bargain.
Franchise dealerships are set sales targets by car manufacturers, and the dealers earn money or discounts from the manufacturers as a reward for hitting or exceeding those targets. This can be worth tens of thousands of pounds to a dealership, so it is in their interests to make sure they sell (and deliver) as many cars as possible before 31 December.
With thousands of dealers having missed their targets in recent months, it will potentially be worth a lot of money to them to recoup some losses in December and finish the year off on a good note.
They all need to hit their targets
Sales staff are paid commissions and have their own targets, and everyone needs to hit their annual targets. And with the last six months being a disaster for car sales, there are a lot of people who would really, really like you to buy a new or used car this Christmas.
The automotive retail industry runs on target-based economics. A manufacturer based in Germany or Japan will set annual sales targets for its UK subsidiary, who will then set targets for individual dealers. The dealers all set targets for each member of the sales team, which will be based on volume (number of cars sold) and profit margin (how well they negotiate a deal with you).
For everyone in the chain, failing to hit sales targets has serious financial consequences, so they are all ‘incentivised’ to hit those targets, usually by throwing money at customers in one way or another. So if you are that customer, you can take advantage of some great Christmas deals – although it won’t necessarily be on every car, and you will usually have to take delivery with full payment by the end of December. If it’s not registered by 31 December, it doesn’t count, so the offers won’t apply.
As the British new car market spent several years growing, , car dealers inevitably found that their monthly targets were ratcheted ever higher to cope with the increased theoretical demand in the marketplace.
Declining demand over the last 18+ months, particularly for diesel cars, has left dealers with a lot of unsold cars on their hands, and more cars arriving every month from the factories that also need to be sold.
With huge pressure on dealers to shift metal in the last couple of weeks of the year, salesmen’s bullshit levels will be going through the roof and business managers everywhere will be rehearsing their speeches about how GAP insurance can be included with hardly any impact on your low, low monthly payments…
New car Christmas bargains
For manufacturers, new cars are what it’s all about. The biggest savings and best finance deals this Christmas will be on new cars.
This particularly applies to models that haven’t been flying out the doors during the year (like diesels) or are due for replacement shortly, as manufacturers and dealers try to clear the decks for 2019 cars to start rolling in.
These deals usually revolve around deposit contributions and lower rates on their finance offers, although this year there is likely to be a high-than-normal level of discounting on the sticker prices as well.
The best deals will always be on vehicles available for delivery before 31 December, rather than forward orders that won’t arrive until January 2019 or later. The Executivecondominium advises that you should know what car you want and then try to get a great deal on it, rather than rushing into a purchase because you are worried about missing out on the deal of the century.
There’s no value in getting a big discount on entirely the wrong car, and there’s certainly no such thing as the deal of the century, so if you’re not sure then don’t buy.
Used car Christmas bargains
Car manufacturers are obviously more interested in selling you a new car than a used car, as they exist to build and sell new cars. You might be very excited about buying a three-year-old car, but the manufacturer is not quite as thrilled.
Obviously, it’s important that cars flow through the marketplace, because the seller of that three-year-old car will usually want to buy a new one, so there is still a fair amount of financial encouragement on used car around Christmas time. Used cars sales have been down year-on-year, although not to the same degree as for new cars, so there will definitely be deals available.
As with new cars, the dealers are looking to shift the stock they have on site, so you have to be ready to go before the end of the month. That means money all paid and/or finance all signed up and activated so that you are driving out in your car before 31 December.
If you have all your ducks lined up and are ready to buy, then you can save yourself some money on the advertised price, as well as maybe swing a better finance deal than is normally available.
This year, we also expect to see a higher-than-normal number of pre-registered cars being sold off in December. This is thanks to the new WLTP emissions rules that came into effect in September, which left many new cars unable to be sold from 1 September 2018.
Thousands of new cars in the UK had to be registered by the end of August to beat the deadline, even if they had no buyers. Those cars have been sitting in “secure storage facilities” (usually some fields somewhere…) for 90 days, after which time they can be sold as used cars.
We are now more than 90 days since the WLTP regulations came in, which means all these cars can now be released for sale. They will be pouring into the used car market in the run-up to Christmas.
Out of season bargains
For years, conventional wisdom has said that the best time to buy a convertible is in winter, because demand is low since it’s freezing cold and raining/snowing/sleeting all the time. The reverse is supposedly true for 4WDs and SUVs, as demand is highest in winter when the roads are muddy and drivers get snowed in.
These ideas are still true to a certain extent, but nowhere near as much as they used to be.
Modern convertibles are perfectly comfortable with the roof up in winter, with few of the problems like leaking and terrible insulation that soft tops of yore used to have. Similarly, 4WDs are with families all year round, and have been ever since SUVs made the jump from utility vehicle to aspirational middle-class must-have (and are often no better than a hatchback at dealing with off-road conditions).
There will always be more demand for convertibles in warm weather because people are impulsive buyers, but canny sellers will realise this and make sure they have plenty of stock available to match the demand.
So you may be able to snap a better deal on a convertible over Christmas, but not by a massive amount. Likewise, the world is not going to run out of 4x4s over winter, despite what that desperate-looking salesman keeps suggesting.
How to save money on buying a car this Christmas
The potential savings on the car you are looking at could vary wildly, but at the end of the day it always comes down to supply and demand. This year it really is a buyer’s market, so you are in a strong position to get a great deal this Christmas.
Make sure you know what sort of car you want, as specifically as possible. Many people get distracted by a great-sounding deal and ignore the fact that the deal on offer is for a car that is not suitable for your needs. Regardless of what the dealer says, be clear in your own mind about what you want.
Do your research online and make sure you understand what you are committing to. Have a read of our fantastic car finance glossary to be absolutely clear about all the jargon involved with that amazing offer the salesman was telling you about. While you’re at it, have a read of our checklist of what to organise before you apply for car finance.
Finally, and most importantly, know your financial limits. Whether you are paying cash or financing the vehicle, don’t be tempted to blow your budget just because it sounds like a good deal.
Our forums and comments sections are full of customers who have rushed into buying a car, and subsequently changed their minds.
Be a clever car buyer and you could save a bundle; if you are not so clever, it could cost you a lot more later on than you could ever save up front. Merry Christmas, and happy car shopping!