If your current car or truck is getting long in the tooth and you've been thinking about trading it in, you may want to drop by your local dealership before year-end. While some people believe the fall is the best time to buy a new car because the dealers want to clear out their inventory to make room for the new models, in fact the end of the calendar year is just as good a time, if not better. Here's why:
- Dealership employees and vehicle manufacturer employees, including retail salespeople, retail sales managers, retail general managers, and people throughout several levels at the manufacturers are compensated in part on whether or not they achieve year-end sales objectives.
- These personnel are also compensated on whether or not they meet December sales objectives; therefore, they are being measured on and compensated based on two different measures at year-end, which in effect doubles the pressure to sell new vehicles. This can result in savings to the retail customer over and above what is available at other times of the year.
- This year, there will be exceptional pressure on dealers and salespersons for selected makes because the make performances year-to-date are so close to one another. One example is in the premium market, where the two market leaders, BMW and Mercedes-Benz, are vying for 2012 luxury sales leadership. Through November, Mercedes-Benz (less Sprinter) leads BMW by just 5,162 units; Mercedes-Benz is eager to be the luxury sales leader since BMW came out on top in 2011 and Lexus had been the leader for many years prior.
- The race for supremacy in muscle cars is also close. Through 11 months, the Camaro leads the Mustang by just 1,096 units. Mustang had been number one in this category for many years until the re-designed Camaro was launched, and since then the Chevrolet product has generally edged out the Mustang, there should be great deals on both these cars through the rest of December.
- In 2011, sales of Toyota products plummeted due to reduced inventories after the March 2011 earthquake and tsunami; however, Toyota's inventories this year are back at "normal" levels and the make has enjoyed major sales and share gains. Through 11 months, the Toyota make is number three behind Ford and Chevrolet, but it trails Chevrolet by just 9,753 units. Chevrolet will want to ensure that it ends the year in the runner-up spot, and therefore, we will see exceptional year-end deals across the Chevrolet lineup. Toyota, on the other hand, will want to surpass Chevrolet, which should generate special deals on their products.
- GM is in the process of converting four assembly plants from production of the existing Silverado and Sierra to re-designed versions which will arrive in dealerships next spring. In anticipation of this downtime, GM has produced excess inventories of the old truck to keep sales at normal levels throughout the changeover period. However, actual inventories of the old truck have ballooned to levels above those desired. At the end of November, Chevrolet and GMC dealers had 139 days supply of these two models (246,000 units) versus a desired level of 80-85 days. To rectify this situation, recently GM has put additional incentives on the existing inventory and as year-end approaches, there will be increasing pressure to move these units.
- Lastly, both GM and Ford have experienced market share losses this year and both companies want to maximize December deliveries to mitigate their share declines. The retail customer, therefore, can expect extra incentives and offers as the month winds down.
Posted by Tom Libby, Lead Analyst, North American Forecasting, Polk (12.13.2012)