NEW YORK (MainStreet) — Everyone knows the best time to buy new cars is the end of the month, when salespeople are struggling to meet their quotas, right?
Wrong, an analysis of millions of 2012-13 U.S. auto sales has found.
"People think the last day of the month has the lowest prices, but that's not true. The first couple of days of the month actually have lower average prices," says John Krafcik of car-buying site TrueCar.com.
TrueCar reviewed a statistical sampling of all car sales (not just those arranged through its site) and found that consumers paid the highest average amount for vehicles on the 31st day of the month — $31,545. That's $843 above the $30,702 average that people paid during the study period for car purchases regardless of date.
Shoppers who bought vehicles on the 30th day of any given month fared little better, typically paying $31,120 — the second-highest average price of the month.
By contrast, TrueCar found that people who buy cars at the beginning of the month make out the best.
Buy a vehicle on the second day of the month and you can expect to pay $30,291, the lowest average price the study found. You'll do almost as well on the first day of the month, paying $30,336 on average.
Krafcik attributes the roughly $1,000 price swing between a month's early and late days to two factors.
First, the industry's "sales month" only ends on the last day of a calendar month when that final day falls on a business day. If the calendar month's last day occurs on a weekend or legal holiday, the industry will count all of the new calendar month's period before the next business day as part of the "old" sales month.
For instance, Labor Day 2014 fell on Monday, Sept. 1, so this year's August sales month actually ended Sept. 1 rather than Aug. 31. Krafcik says that meant salespeople felt the greatest pressure to cut deals and make monthly sales quotas not on Aug. 31, but on Sept. 1.
"Consumers might not realize that if they bought a car on Sept. 1 this year, that sale was going to be included in [a dealership's] August sales," he says.
Even when a calendar month's end falls on a business day, TrueCar found that average sticker prices — the price cars "list" for regardless of what buyers actually pay — typically rise as the month spins out.
For instance, sticker prices on cars sold on the 31st day of the month average $34,296, or $1,701 more than the typical manufacturer's suggested retail price on vehicles bought on the second day of the month.
Krafcik theorizes that salespeople feels more and more pressure as weeks go by to make their monthly quotas in dollar terms, so they push buyers into costlier models late in the period.
"We think that salespeople are more likely to get worried as the month wears on and jam people into cars that have more features than the person really wants," he says.