Aug. 10, 2012 at 8:04 AM ET
Much to the dismay of new-car shoppers, strong sales in recent months have shaved both average dealer discounts and manufacturers’ incentives, driving up transaction prices to sky-high levels in the process.
According to data compiled by TrueCar.com, the average price paid for a new vehicle was $30,369 in July, which is up by $487 (1.6 percent) over the last 12 months.
At the same time, the average industry-wide sales incentive dropped to $2,480, which is down by $96 (3.7 percent) over July 2011’s level and $68 less (2.7 percent) than in June 2012. The ratio of incentives to average transaction price for light-vehicles was 8.2 percent in July 2012, compared to 8.4 percent in June and 8.6 percent in July 2011.
“Even though automakers may give the impression that they are ramping up incentives spending, the very low cost of funds and historically high resale values are in fact enabling them to create a ton of noise with fewer actual dollars spent,” explains Jesse Toprak, TrueCar.com’s vice president of market intelligence. “Manufacturers are increasingly moving away from cash incentives and pushing finance and lease programs, which -- along with consumers continuing to buy highly-optioned out vehicles -- is helping with sustained high level of transaction prices.”
So what’s a bargain-hunting cash-strapped new-car buyer to do? Just because average transaction prices are on the rise and incentives are waning doesn’t mean there aren’t some great deals ripe for the picking. We’ve compiled a list of 14 models that offer the deepest average discounts below MSRP in their respective classes, based on information provided by TrueCar.com. We’re also including information on what are still surprisingly generous manufacturers’ incentives that apply to each model.
Given that new-car prices are fluid and based largely on the forces of supply and demand, dealers tend to be far more willing to cut their margins on overstocked cars and trucks than they are on the hottest-selling models. Time is money in the new-car business, and the longer a new car sits unsold, the more he or she will pay in financing costs to keep it lingering in inventory. How to determine which models are most plentiful on dealers’ lots? The industry publication Automotive News -- available at many public libraries -- publishes a list of so-called “days in inventory” for most makes and models every month, and TrueCar.com similarly includes lists of models having the highest and lowest average inventories in its monthly True Trends report.
While it takes just nine days for the typical Toyota dealer to sell a compact Prius c hybrid, Mitsubishi stores are sitting on a whopping 177 average days’ supply of the compact Outlander crossover SUV. Needless to say, the Toyota dealer can afford to risk turning away some prospects by commanding close to or even full list price for Prius c, while a Mitsubishi dealer will likely be eager to sell an Outlander at -- or even below -- invoice price (which is typically a few percentage above his or her actual cost) to help winnow down the excess stock.
Among model types, those looking for full-size cars and SUVs will likely be able to garner the most substantial discounts, with the former sitting on dealers’ lots for an average 84 days and the latter for 75 days. At the other end of the size spectrum, subcompact and compact cars are moving the quickest at an average 37 days, which means meaningful discounts, especially on the most popular models, will probably be difficult to come by. By comparison, the industry-wide average days in inventory stands at 52 days.
But getting down to hard, real-world numbers, we’re highlighting an assortment of model-year 2012 cars and trucks that are being sold, on average, with the highest-percentage discounts off list price in their respective market segments. Among them, dealers are slashing a typical 14.7 percent discount off MSRP on the Chrysler 200 midsize sedan, which this month is being offered with a $3,500 cash rebate or $2,000 cash and zero percent financing for up to 72 months to help sweeten the deal. In the same market segment, the 200’s corporate cousin, the Dodge Avenger, offers the next highest discount at an average of 14.1 percent below list price with equivalent incentives.
While some automakers are able to command higher transaction prices and cut back on big-money rebates, Nissan is keeping the spigots running on sales incentives and their dealers are doing whatever it takes to keep the metal moving, as Nissan and Infiniti-branded cars and trucks account for seven out of 14 of the best deals in our list.
Still, Nissan isn’t the top brand in the industry with regard to cut-rate transaction prices. Last month Dodge’s Ram truck division boasted the biggest discounts at an average 11.4 percent below MSRP, followed by Chrysler at 10.9 and Dodge at 9.1 percent, which at least in part helps explain why Chrysler LLC’s domestic sales jumped by 13 percent in July. The industry average discount among all automakers, according to TrueCar.com, is 5.9 percent.
Keep in mind that the figures presented in the accompanying slideshow represent average transaction prices. An astute haggler should be able to negotiate even bigger discounts. No matter what model you ultimately choose, be sure to aim for the so-called invoice price (which is a few percent higher than a dealer’s actual cost) as a target, and that’s before deducting any applicable rebate or negotiating to obtain the additional dealer discount. Always predetermine the invoice price, including options, of any vehicle you’re considering before heading out to a dealership via an online pricing service. Substantial discounts may not be forthcoming on some of the most in-demand cars, but they should be much easier to come by on any of the models we’re featuring here.
In addition to average discounts, we’re highlighting applicable direct-to-consumer cash rebates, discounted financing promotions and so-called marketing-support incentives, which we call additional dealer discounts. Often favored by luxury automakers, the latter are cash allowances given to dealers to lower the prices on select models without seeming to cheapen the brand by offering cash rebates. The only catch is that a dealer may or may not automatically pass them on to the customer.
Be aware that additional incentives may apply, such as those offered to recent college graduates, members of the military and/or certain groups and owners or lessees trading in same-brand or competing models. Offers may vary by region and are subject to subsequent modification or termination by the manufacturer; cited financing rates are typically open only to qualified buyers with top credit ratings and may vary based on eligibility.