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Explainer

Is it more profitable to buy a new car at the start of the year rather than later?

Make use of global discount trends running until mid-January, February, and even later



While most car brands implement December sales schemes, it's important to note a trend that most discounts run until mid-January or even February worldwide.
Image Credit: Pexels / Gustavo Fring

Dubai: The beginning and the end of a year are traditionally times for steep discounts at most four-wheeler dealerships, be it high-end car manufacturers or at budget-friendly brands. So as many wait until then to buy, sales in December and January are often higher than the rest of the year.

"While most car brands implement December sales schemes, it's important to note a trend that most discounts run until mid-January or even February worldwide,” said Jacob Koshy, a Dubai-based automotive analyst specialising in retail pricing.

“This way you don't have to worry about missing out on good year-end deals on a new vehicle, or even when you’re looking to buy a car after the year begins. So it can profit you to know how this trend holds true to score a great deal on a car if you wait to buy it at the start or end of any year.”

Why buy a new car at the start or end of a year?

In December, Ibrahim Riba, a senior salesman at a car dealership based in Abu Dhabi, noted that it’s a well-established fact that car brands and dealerships are motivated to not just meet monthly sales volume targets but also meet end-of-year expectations. But it’s not limited to just December alone.

“While December has the highest daily selling rate for vehicles worldwide compared to any other week throughout the year, there is room for better deals on current models even after the new year's models are on the lot ready to be sold, especially ones being redesigned or discontinued.”

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If you're not set on owning the latest car model, Riba also suggested possibly waiting until the end of the ‘model year’ to buy a car. “Cars for new ‘model years’ usually have their debut later in the year, but do your research to see if your top picks might follow a different schedule,” he added.

What is the ‘model year’ of a car? Is it different from year the car is made?
Regarding a to-be-launched car, the ‘model year’ is the year the manufacturer puts on the car to designate a distinct vehicle model and indicates when the car is expected to be launched.

The ‘model year’ may not be the same as the calendar year in which the vehicle was produced and the month of car manufacture and the ‘model year’ may differ by up to six months.

This is because external factors delay a car’s launch date such as regulatory rules, marketing considerations, and, as of late, supply-chain issues or delays in getting certain parts.

When else is it more profitable to buy a new car?

Like the end of the calendar year, Koshy too agreed that the end of the ‘model year’ of a car is a “prime time” for buying a car. “Irrespective of the calendar year, dealers offer more discounts and rebates at the end of a ‘model year’ to make room for the next year's new supply,” he explained.

“Similarly, you can opt for a car model that's undergone a redesign. As this happens, both manufacturers and dealerships are eager to clear their inventories of the old model and make room for the shiny new editions.”

As you look further into the calendar year, the end of each quarter also stands out as another opportunity to secure a deal on a new car.
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As you look further into the calendar year, Koshy also pointed out that the end of each quarter stands out as another opportunity to secure a deal on a new car. “As dealerships have quarterly sales quotas to reach, you often find more promotions offered in order to meet their targets.

“So mark your calendar with these end-of-quarter dates, as these are months when car prices typically go down in any year: March 31 (i.e. the end of first quarter); June 30 (end of second quarter); September 30 (end of third quarter); December 31 (end of fourth quarter).”

Why car prices change throughout a year, how these factors affect buying decisions
Car prices can fluctuate for various reasons, but they all usually boil down to demand and supply in the market. “Dealer inventory reflects the immediate supply of cars available at their lots. When this inventory decreases, even as demand remains the same or rises, prices tend to rise,” added Riba.

“Additionally, some manufacturers can face parts shortages and not fulfil car orders due to a lack of inventory. An immediate price drop is less likely for such vehicles, particularly if they are in high demand. These high-demand vehicles are also less likely to offer dealer discounts.”

Buyers can also benefit knowing how global interest rates affects car supply and demand. “While higher interest rates meant less favourable auto loans and postponed purchases so far, buyers who explore financing in 2024 may find their vehicle more affordable as interest rates drop,” said Riba.

Bottom line: Buy new car at start of 2024 or lucrative to wait?

If you missed the usual end-of-year December sales on new cars, don't despair, say experts, as dealerships offer attractive sales well into January and even later in the year. However, it’s prudent to watch out for periods when dealers look to clear inventory to make room for new arrivals.

While the new year can be an opportune time to start looking for a new car, mostly because dealerships look to clear out previous ‘model years’, shopping for a car may not be always as simple when it comes to the state of your finances or savings.

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“If you have enough for a down payment on a discounted new car, you may proceed only if the financing incentives offered to you are truly lucrative. But if you can wait until the end of the year, cheaper auto loans can potentially help you turn a profit,” added Koshy.

“However, UAE-based buyers will still find that the road to owning a new car is smoother than it has ever been, with more banks now allowing zero per cent down payment and even up to three months before having to pay the first instalment.”

While there's no single answer to what car buyers should do, as their specific circumstances differ, the above tips and tactics can help you time your car purchases better, and typically serve as reliable guidelines for car purchases in the coming year.

First steps to simplify car shopping this year
Step 1: Set a budget – Before you browse for cars, set a budget. “Create a list that differentiates between your wants and needs in a car, and stick to cars your budget can handle to handle a sudden change in your financial income,” said UAE-based financial planner Mohammad Shaan.

Step 2: Ensure your credit is in good shape – “About three to six months before you start seriously shopping for cars, make sure your credit is in good shape by paying your bills on time, and routinely checking for fraudulent activity and to ensure all information is accurate,” he advised.

Step 3: Shop for loan options – Statistics show more than 85 per cent of new vehicles are financed worldwide. “Remember that financing isn't limited to a single type of lender. Aside from loan options offered at a dealership, shop around for loans to see who has better terms and rates,” Shaan added.
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