27 September 2023

Time to move your car purchase into top gear

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Alison Cheung* says a combination of factors means that car salespeople are even more desperate than usual to make deals by the end of the financial year.

Whether they are looking to update their wardrobe or snap up a new set of wheels, savvy consumers know the end of a financial year (EOFY) is one of the best times to go shopping.

For those hunting for their dream ride, things are a bit different this year.

With a combination of the bushfires, COVID-19 and lower consumer confidence all contributing to plunging vehicle sales, it’s a clear buyers’ market for cars.

New vehicle sales came in at just below 60,000 in May, which is down by 35 per cent since May 2019, when the number of sales were close to 93,000, according to the Federal Chamber of Automotive Industries.

The month marks the 26th consecutive month of negative growth for the Australian new vehicle market.

Sales also fell dramatically in April, with less than 39,000 new vehicles changing hands, plummeting by some 48 per cent in the 12 months prior.

It was the biggest monthly drop in nearly 30 years.

The fall in sales is not new. More than one million new vehicles were sold in 2019, a 7.8 per cent decrease from 2018, and the lowest annual sales result since 2011.

Aside from tumbling sales, the financing used to buy cars is also dwindling.

The value of loan commitments for road vehicles dropped by almost 38 per cent in April to $625 billion, according to the Australian Bureau of Statistics (ABS).

Longer term falls are also significant, with the value of vehicle loans nose-diving by about 39 per cent in the 12 months to April.

The ABS noted that the reduced demand from borrowers and tighter lending criteria was a result from COVID-19, as Aussies find themselves financially worse off due to the pandemic.

Savvy car shoppers like going bargain hunting during EOFY, with good reason.

Car salespeople and dealerships are under the pump to meet sales targets for the year.

This is on top of their regular monthly sales quotas, which salespeople generally receive bonuses to reach.

A nice sales boost at EOFY makes their numbers, and the company’s, shine a little brighter in a period when accountants are hard at work measuring revenue and profit for the year.

Dealerships are encouraged to get rid of old or slow-selling stock to prepare for new models in the next fiscal year.

During EOFY, the priority is for dealers to move stock off the floor and have the cash in the till to show.

Thanks to the urgency in meeting sales targets and quotas, as well as clearing old stock, shoppers can expect salespeople to be more forthcoming and flexible when negotiating.

Many salespeople may be motivated by individual bonuses to get buyers across the line.

A bonus advantage for bargain hunters this year is a wider range of options to choose from.

Usually dealers may try to sell you models that don’t sell too well, rather than the top sellers, which don’t particularly need the EOFY boost to move cars out the door.

This year, with overall car sales as low as they are, you may be able to score a bargain on the best of the bunch.

Having your car financing organised before you head into the dealership will help make things easier for you when the time comes for you to make the purchase.

Just like dealerships, car loan lenders may also have targets to reach for the financial year.

The business pressures might be bigger this year, with car financing dropping consistently.

With this in mind, you may be able to negotiate with lenders to get a better interest rate, possibly even if your credit score isn’t top notch.

Before you approach a lender, it’s a good idea to do your research so you know what you’re talking about.

Compare interest rates, fees and features of different car loans from multiple lenders to find the right credit option for you.

*Alison Cheung began her career as a reporter covering real estate and now writes about personal finance and fintech.

This article first appeared on the Lifehacker website.

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