Perfect Time To Buy A Car

Always I get calls from friends and previous customers, they want to know when is the perfect time to buy a car?

This is a very good question. It is almost like the question "how do I know that you are not selling me a vehicle that will be a lemon?" (ppssssttt.. manufacturers would have paid me or any one else who knows to pin point which vehicle will be a lemon multi million dollars annually)

This is almost like asking when is the perfect time to go golfing... where? In TX, in Hawaii, in US, or Africa?
The sky may be clear and wind may be less than 5miles/hour and every thing may seem great. But at that time you are home.. by the time you get to the first tee, it is raining, there is crazy wind and things are just not co-operating. Some times you just cannot plan. But sometimes when you are prepared, you could just swing to the golf club at the right time and have a gala time.

Again, this is a very complicated question as simple as it may seem, there are way too many variables for some one to say exactly when is the perfect time to buy a car. The time is different for every one based on several factors. Some periods are a little more favorable than others and some of the so called truth's from some of the best and well meaning guide lines for consumers are just myths. I hope in today's post I can help a few people find when is the perfect time for them.

So what are different factors that can impact when the right time is to buy a car

Factor #1
Do you have a vehicle to trade?
98% of the time problem in a deal lies in the trade, especially if the trade is too new or too old.
Fact#1 about vehicles
One has to know that ALL vehicles and ALL make and models depreciate (so for those who think they invested in a car or truck, you need to take investment 101, invest only in things that will appreciate)
98% of accessories do not add significant value to the vehicle. They are accessories, good for the consumer because they make the vehicle more desirable to initial purchaser, the accessories kind of make the vehicle personalised. You will agree with me here ANYTHING customized or personalized only has value on eBay OR if the person owning it is a celebrity, other than that, no one wants those items.
Imagine going to purchase a used car for your kid or just for you to run errands. The car is about 5 years old with 70,000 to 80,000 miles and has under body spoiler, rear wing spoiler, custom alloy wheels, blue accent led lights inside the vehicle and these items add about $3,000 to the vehicle price so that the vehicle now sells for $9,000 instead of $6,000 or lets assume that they only increase the price by $1,500. Would you pay the extra $1,500 for a car that you just want to be a beater? Probably not... so why assume that some one else wold want what you added to your vehicle (if you are not selling it on eBay other such places?). Since the dealer knows that other customers will not pay, they too will not give you money for those items.
Again, there are some accessories that add value but most do not! A performance enhancement part for example is great for the buyer, but when you are ready to sell the vehicle, EVERYONE knows you did not put those things to baby your car. So in other words you over worked the engine and other components more than what the manufacturer had intended. If you really loved the car that you paid so much to customize you would not sell, so every one assumes you are selling your problem to them or a vehicle that is due to deteriorate any time soon.
With that said, it is true that some manufacturers are more reputable than others in building vehicles that are very dependable and last long time which in turn makes their vehicles depreciate less than others. The phrase is "they have higher residual value" than others.
Fact#2 about vehicles
ALL vehicles depreciate MOST in the first 1 year, followed by the second year then the 3rd year. Manufacturers who build vehicles that hold their value (have higher residual) typically drop their value to about 50% of original price in 3 years. After this, the drop in value is very slow and gradual.
So why are trades most often the problem?
(a) the consumer assumes that if they drove the vehicle only one year or less and have very few miles they should get at least 90% of what they paid! They forget that 7% to 8% of what they paid was not for the vehicle, it went to Uncle Sam.
They forget or do not know to take into account that the vehicle has had major depreciation (if they are trading within the first 2 years of ownership)
Many times the consumer forgets that in order to get the current vehicle they are about to trade, they traded in another vehicle which they owed more than the trade value, so some amount that was rolled into the current vehicle loan is just a burden that does not add value. It is called 'inequity' or it puts you in what they call 'inequity' situation or 'upside down' situation in current car buying lingo.

Factor#2.
The other factor if you are trading in a car. Is it 4, 6, or 8 Cylinder? Is it a car or a truck?
Why does this matter?
IF gas prices are high, no one wants big engine vehicles. The less the cylinders the better. In fact most people who trade in bigger engines are looking for smaller engines during the times when gas prices are high. So why assume that some one else would LOVE to have what you are trying to get rid of?
On the other hand during these times it is 'good' to trade a smaller engine vehicle, because generally they are in demand. Unless in the local auction some car rental company has just released a huge fleet of vehicle just like yours for auction at some crazy low price, at that point the dealer would rather get the car at the auction for cheaper than give you the money. They are in business to make money too just in case you were wondering. Granted that they will give you the most they could to make it a win-win situation so you can purchase a car, maybe even pay you $500 or $1,000 more than what they can purchase a car like yours at the auction just to make a deal and because they now KNOW your vehicle a little more than the vehicle at the auction.
Oh if gas prices are low, trucks and bigger engines seem to be more favored especially here in Texas. So you may find that you are getting a great deal trading your truck. Of course when your truck trade is high, the truck you are bout to buy is also on demand (goes hand in hand). Same is fact that if you are getting more for your 4 cylinder car, it means that they are in demand, so if you are buying a 4 cylinder you have to expect less discounts... relative!

Factor#3
Your trade may do well 'according to Kelly Blue Book' or 'according to NADA' or 'according to Edmunds', problem is ALL of these are guides AND they are not as accurate and upto date as the auction data. AND NONE of these website will buy your car at the price quoted! They neither buy or sell in Texas. I'm not saying you don't get these values. What I am saying is that sometimes you get more and sometimes you get less, it really depends on what is happening the week you are trading in your vehicle.

Factor#4
Love is blind
You ever noticed how whey your carpet at the front door entrance gets a stain, it bugs you. But as time goes by it seems to fade away or disappear until some one points it out again after 6 months and boy oh boy! it is still there as dark or darker then it was first time!
Same happens to the dings and scratches that you get on your car and the chips on the windshield and the little stains here and there in the car. You forget about them until the appraiser points them out. They are not attractive to second buyer just like you would want a discount on a used car if you see too many of them or you would want a new windshield on the used car, so there will be deductions for these accordingly. Most people forget these items when using all the different online appraisal sites like Kelly Blue Book etc.

Then there is that classic one... I just spent $700 on repairs, I put new tires or I put new timing belt etc... you have to pay me for that..., well... are you not suppose to keep the car maintained anyway?
That is like selling a house and telling the new buyer, hmmm the toilet now works fine it wasn't working last week. Also the sewage is all good, the garage is clean, the paint is uniform, the carpet is all one color, the A/C and heater are working, all the switches and lights are working etc... that is called maintenance, all these things are expected to be that way, if they are not there will be deductions accordingly.

The hardest one to work with is someone that has had an old car 8 to 12 year old with 170,000 or 250,000 miles. They got their moneys worth 2 to 3 times over. They do not want to give it to any one in the family, they do not want to donate it to charity yet they want all the money in the world.

Or they have had the vehicle in the family for so long that they are emotionally attached to the car because of all the memories hey have had with it (normally if you think about it, asking for more money does not add value to the memories, rather it devalues them, because you cannot put monetary value to a lot of memories), so it is hard both for the dealer to give more money because they just cannot and the owner feels offended because the car is worth so much to them that almost no amount of money makes sense.

Most of the times the computers appraise with negative amount. I remember this clearly, there was this lady with a cavalier, she brought it with over 140,000 miles, do not ask me how it did that, but it had quite some miles. The appraisal was -$350 and some change. We both laughed about it, it was my first time to see such a thing and she just thought it was funny. We did offer to give her $500 for the car just out of respect and out of the fact that she was purchasing a vehicle from us. There were some other issues we could not handle so that deal did not go through.

Factor#5
Rebates, rebates, rebates and low, low rates!
These are GREAT if you are buying, not if you are trading or selling.
Imagine you purchase a 2009 truck in December of 2008 and you get $1,000 rebate. A great start!
However in March the manufacturer announces $4,000 rebate. You now have 5,000 miles on your truck. You want to sell it, you have only made 2 payments maybe 3 payments on your truck. What are chances of some one buying your truck from you when they can get it for $3,000 less than you purchased it for?
To finance your truck they will have to get used car rates, while they can get lower rates on new vehicles!
Oh so you think it does not affect you because your vehicle is 1 year old?
So why would some one buy your truck (and pay it off) a truck that is one year older, has more miles and finance as a used car for same payment that they would get on a new vehicle that is about $3,000 more than you are selling your vehicle because of special low rates?
See the domino effects?

Factor#6
Is the car you want available or will it be available the time you are ready?
Many times I hear people saying, I will wait for clearance then I will buy the car I want... good luck, I mean I wish you very very good luck
Lets get it straight
So you want to buy the most sought after color "diamond white pearl". A vehicle that will depreciate any way and you are gambling on the fact that you can get it cheaper during clearance?
Here are some facts about 'left over' vehicles that make it to publicized year end clearance events.
Fact#1: These vehicles are remaining because no one else wanted them
Fact#2: Most of the times they have more accessories and options on them, that you do not actually see any savings (IF you had intentions to purchase all these options, then you got a deal"
Fact#3: As unique as you are, there are a lot of people who live in your neighborhood and visit the same store you do and have same taste like yours... you don't believe me? wait till new year and see who else has SAME color SAME model and make of the car that you were looking at (it may seem bizarre, but it is real)
Fact#4: Vehicle has already depreciated... that is why you are getting extra discount, many times the manufacturers give dealers money to sell these vehicles for less than the dealers purchased the vehicles for (there is a clue for you, dealers will not sell for less than what they paid for the vehicle.. it is called business. IF they are able to sell less than what they paid, it is because the manufacturer has given them something to compensate or else they will go out of business soon)
Fact#5: Most people assume they are the only ones that tell the dealer "sell this one cheap to me and lose money on me, you can make money on the other customer"... the truth is the other customer is saying the same! IF dealers keep following these wishes, soon you will not have cars to buy as the dealers will go bankrupt and the stores will close. Can you imagine going to circuit city or other store and telling the manager 'sell the item to me for less', don't pay your employees on this item. They don't need to pay their rent, or take care of their families etc.

Factor#7
Is it beginning of the model make for the current generation, is it the middle or is it the last year of the model make for the generation of the vehicle you are looking at?
This can determine whether or not it is good time to buy.
When the model is just entering the market (new generation), typically there is way too much demand for them. So at these times any deal is a good deal and most of the deals are close to what the manufacturer suggests or a little bit more.
However most of the times when the model is about to be replaced (end of current generation) there are so many perks on the vehicle and the prices are attractive.

Factor#8
Do you have minimum amounts needed for transaction in your account?
Some times ALL the planets and stars are aligned, kids are with grandma, both buying parties are ready mentally, the car you want is on the lot, the price is right everything is perfect, but the check book and bank balances are not in agreement. So it may be perfect time to buy a car for some one else not for you.

What I tell my customers
In October (the next year model) is sold for XX amount
In March the model is considered 3 months old, so it is sold for XX -3*X factor
In October (another year model is releasing) so this one sells for XX-10*X factor.
IF you drive the vehicle that many months, it would have depreciated at least 10*X factor, so why delay your joy to drive the vehicle that you would love (already in love with) by 10 months if it will depreciate (to equal the discount any way?)

The perfect time to buy a car according to me is
When you get the best rates, best value for your trade, best value for new car and are ready to make the move... duuhh! you say... that is what every one wants... so when is this time?

Let me give you an example
I have a customer that has owned several Honda Pilots in EX-L model only.
He purchased the first one for cash in the month of September 2002.
September 2003 he came back, paid $3,500 cash and picked a new one, his trade had 36,000 miles. In his case, perfect timing, he drove whole year and 36,000 miles for only $3,500 try doing that with a rental!
September 2004 he came back, paid $3,500 cash and picked a new one, his trade had 35,000 miles. Perfect timing again and man... by this time I was confused, I just could not figure out how he does it.
September 2006 he came back, this time he had to pay $5,000!!! oops, what happened?
For the first time 2WD model was available, his vehicle which was less wanted now depreciated a little more AND gas prices were going up (if you remember) so no one wanted big vehicles.

Another example
I purchased my 2004 Element EX 2WD June of 2004. Paid a few hundred more than my customers (believe it or not) because I have to support my business. I understand that there are a lot of people working at dealership not just the manager and sales person, every one has to get paid. So, no short cuts, I do not regret it, rather I feel good about it.

Anyway, January 2007, I have over 68,000 miles (only 2 & half years old car).
Good news, I knew the rate at which we were putting the miles, they would bite us during trade-in. So we were paying $40 to $60 more every month.
According to Kelly Blue Book fair condition for the vehicle was $8,250
(of course with 68,000 miles it is not excellent condition, excellent condition is in the show room!), plus the car had a few dings. New windshield (part of regular care taking) new tires etc.
We owed about that amount! How did they know??
When I took the vehicle in for hands on evaluation/appraisal I was shocked!
Good news#2, gas prices were shooting up! so 4 cylinder vehicles like mine were enjoying good trade-in value... I got $10,500.
Good news#3, we were paying 8.5% or so on the current vehicle. But our credit had built up to where we cold take advantage of the specials from Honda for 4.9% at that time.
Good news#4, both my wife and I were ready to make a purchase the same day if numbers made sense financially and we did within 2 days (because the vehicle we wanted was sold to another customer, our customers always come first), they had to trade for my vehicle. That was perfect time for us...

by the way... does any one get excellent condition value?
YES once in a blue moon that happens, it has happened to 2 of my customers over the last 6 years.
Get this! one traded a Chrysler Seabring Convertible loaded.. with about $20,000 miles. Leather looked like no one ever sat on it!!! We could literally take and put the car in the showroom without doing anything to it.
It was sparkling clean and shining like it just came from the showroom!

The other customer had a Chevy truck with about 10,000 miles. She had kept it in immaculate condition. The bed liner did not have a scratch, looked as if it just got sprayed, the tires looked brand new and everything was shining like the vehicle had just left the showroom.

Both the customers are loyal Honda customers now and have replaced the ones they purchased from me with new Honda vehicles since.

So, your perfect time is different from any one elses.

By the way, there are more factors, such as availability of the vehicle you want to purchase at the time you are ready etc.

We live in this world with these materialistic tastes only once, why hold off when you are not guaranteed tomorrow? IF you got the money, you have done your tithing, you have taken care of your family and loved ones, you have given to charities, you will not be stealing from Peter to pay Paul, it is time you give to you.

Go get you the car you want and enjoy it.