Why are Used Cars Cheaper in the fall?

New-cars sales are at their lowest monthly levels since the recession began.

As shopping gets easier, people are buying more cars. New models offer better fuel efficiency and look nicer inside and out. With incomes rising, Americans are able to buy new cars that cost thousands of dollars more than used cars do. And there is the emotional element: New cars have a fresh-from-the factory feel, and many drivers equate buying new with being a responsible person who cares about the appearance of his or her vehicle.

But there is a logical reason for this preference, according to Los Angeles Times columnist Michael Hiltzik:

• Dealers sell more used cars in the fall than at any other time of the year because that’s what most people can afford. For some perspective on how much cheaper [used] cars get in September and October, consider that Edmunds lists today (Aug. 18) as having an average retail value on Buick Lacrosse models of $33,128; on Aug. 10, you could get one for $29,964; on Sept. 20, you could get one for $26,477.
• Used cars have a higher markup in September and October because dealers know that end-of-the-month bonuses from car companies are the highest during this time of year. In addition, October is the best month to sell a new car because it’s consider “the start of the new model year” and many people will wait until then to buy a new automobile.
• Hiltzik says these facts explain why buyers should consider buying a used car right before the slowest sales months of the year:
• The two big shopping seasons for used cars — November through January and July through August — bookend the period when most people purchase new cars. If you afford to own only one vehicle, you’ll likely pay more for your new ride during the shopping season. But if you can afford two, or are willing to make your purchase before or after the sales period, buying a used car could save you thousands of dollars.

• Used cars have higher markups in July and August, too, because executives at car companies are allow to trade their vehicles for free during that time period. As Hiltzik points out:
• The annual ritual around “employee pricing” is inexorably moving up its traditional starting date — sometime near mid-August — until it begins coinciding with back-to-school shopping, said Alec Gutierrez, senior market analyst at Kelley Blue Book. He said he expects this year’s program to begin in Aug. 16.
• “Car companies have got very savvy in how they market their vehicles,” he said. “They’re trying to get the employee pricing out there early so it gets some buzz, and make sure the dealer networks are clear on pricing.”
• For more information about buying a used car or new cars head over to Edmunds Auto Observer blog.
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