Is December the Best Time to Buy a Car? Year-End Deals and the Loan Math
December has a reputation as the best month to buy a car, and there are good reasons for it. Dealers are chasing monthly, quarterly and yearly sales goals all at once, last year's models need to make room for the new ones, and automakers run holiday sales events. But a discount only helps if the loan behind it is a good one too. Here's how year-end deals work and how to check the math before you sign.
Why December can be a good month to buy
Sales goals. Many dealerships and salespeople earn bonuses for hitting monthly, quarterly and yearly targets. In the last days of December all three line up, so a dealer short of a target may accept a lower price.
Model-year clearance. New model-year vehicles arrive through the fall. Unsold cars from the outgoing model year take up space and money, so they're often discounted.
Holiday incentives. Automakers often add cash-back offers or low promotional APRs on selected models in their year-end sales events.
When December isn't a bargain
Popular models in short supply may see little or no discount.
Showrooms are busy in the last week of the year, so you may wait longer and have less time to read the paperwork.
Low promotional APRs usually go to buyers with excellent credit.
Judge the deal by total cost, not the monthly payment
A lower monthly payment can hide a more expensive loan. Here's one example: a car with a $36,000 price, 7% sales tax, $500 in fees, a $4,000 down payment and a 7% APR loan.
No discount, 60-month loan
Amount borrowed: $35,020
Monthly payment: about $693
Interest over the loan: about $6,586
Total cost, including the down payment: about $45,606
$2,500 year-end discount, 60-month loan
Amount borrowed: $32,345
Monthly payment: about $640
Interest over the loan: about $6,083
Total cost: about $42,428
The $2,500 discount saves about $3,178 in total, because you also pay less sales tax and less interest on the smaller loan.
The same discount, stretched to 72 months
Monthly payment: about $551, which is $89 a month less
Interest over the loan: about $7,359
Total cost: about $43,704
The longer loan feels cheaper every month, but it gives back about $1,276 of the discount in extra interest, and you'll owe more than the car is worth for longer.
A 0.9% promotional APR instead of the discount
If the same car came with 0.9% financing for 60 months and no discount, the payment would be about $597, the interest about $807 and the total cost about $39,827. That beats the $2,500 discount by roughly $2,600. Automakers often make you choose between a cash rebate and a low APR, so always run both.
How sales tax applies to discounts, rebates and trade-ins depends on your state, so ask the dealer for an itemized out-the-door price.
A December car-buying checklist
Get preapproved first. A loan offer from your bank or credit union gives you a rate to beat. Let the dealer try to beat it, but you'll know a good offer when you see one.
Negotiate the out-the-door price. Agree on the total price, including taxes and fees, before you talk about monthly payments or your trade-in.
Keep the loan term short. Compare 48, 60 and 72 months by total cost. If you can only afford the car over 72 months or more, consider a less expensive car.
Price your trade-in separately. Get quotes from other dealers or online buyers, so a generous trade-in figure isn't hiding a smaller discount.
Watch the add-ons. Extended warranties, GAP coverage and protection packages may be useful, but they're optional and often cheaper elsewhere. Anything added to the loan costs you interest too.
Look at last year's model. If the new model year changed little, an outgoing model can be the best value on the lot.
Should you wait until January?
Discounts on outgoing models can continue into the new year, but the year-end goals that push December deals are gone, and the best-equipped cars may already be sold. If you're ready to buy, have your financing lined up and know your numbers, the last two weeks of December are a strong time to shop.
Run your own numbers
Before you visit the dealer, try different prices, down payments, rates and loan terms in our auto loan calculator to see the monthly payment and total interest. Comparing two offers? Put them side by side in our loan comparison tool.
Frequently asked questions
Is the end of the month or the end of the year better for buying a car?
Both can help, because dealers have monthly goals as well as yearly ones. The last days of December combine monthly, quarterly and yearly goals, which is why that week is often the best of the year.
Is a 72-month car loan a bad idea?
Not always, but it costs more interest than a shorter loan and keeps you owing more than the car is worth for longer. Compare the total cost of 60 and 72 months before you decide.
Can I get 0% financing in December?
Automakers often offer 0% or low promotional APRs on selected models during year-end sales, usually for buyers with excellent credit. Compare the promotional rate with any cash rebate you'd give up to get it.
How much should I put down on a car?
A larger down payment lowers your monthly payment and the interest you pay, and it helps you avoid owing more than the car is worth. Many buyers aim for 10% to 20% of the price.
The examples are for illustration only, with rounded figures, and are not financial advice. Your actual price, rate, taxes and fees decide your payments.
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