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Saturday, November 17, 2018

“Supply and Demand” is the Key to Auto Discounts

As you read this, you’re in one of two groups. Group number one doesn’t yet know what supply and demand is, or doesn’t know how it works. Group two has taken at least one economics course and knows the basic idea, at least. If you’re in group number two, there’s no reason for you to read the next section of this page. You can skip down below it and learn how to find auto discounts resulting from high supply and/or low demand. For group one, let’s start with a brief explanation of the law of supply and demand.

What’s the Law of Supply and Demand?

“Supply and demand” is something that can be useful to the average consumer. Just having the concept stored away in that cranium of yours could help you save some cash one day. It goes like this:

Demand is the quantity consumers will buy at a certain price. For example, let’s say if the 2018 Honda Accord is priced at $35,000, 15,000 people will buy one.

 

Supply is the quantity that is available. For example, maybe Honda produces 16,000 2018 Accords because they have a pretty good idea how many will sell at their target price.

Here’s the thing about supply and demand. When supply increases relative to demand, the price of the product or service will decrease. The reverse is also true. When demand increases relative to supply, the price will increase. Let’s say Honda screws up and produces 28,000 2018 Accords. That’s far more than are demanded (wanted) by consumers (15,000), according to our example above. What will happen, then? The dealerships are going to discount the Accords that won’t sell. At some point, the price will be low enough to attract more buyers. In other words, the lack of demand, in relation to the supply, will force the market to decrease the price. This is plenty of detail for our purposes, but if you’d like to study up, go on over to Investopedia.

How to Take Advantage of Excess Supply / Lack of Demand and What to Expect

Don’t be surprised to find 20%, 30% or even more being hacked off the price when a car won’t sell. Auto discounts are often fueled by lack of demand when the manufacturer overestimates sales or just fails to make a product people want. It happens all the time.

 

If you want a discount on a car (or any other product, for that matter), there are ways to gauge the supply of a particular vehicle versus demand for it. However, there’s also a catch. You are unlikely to get a big discount on a car that is brand new or has just been released. If it just arrived on the dealership lot for the first time or it has only been there for a couple of months, its price is going to be close to its MSRP, which is its original suggested price. So, don’t expect huge discounts on cars that just hit the market. Instead, your best bet is to look at models from the previous year or models from the current model year that have been on the lot for several months.

Step 1: Look Around for Vehicles that Won’t Sell

You may have to get creative here. You can try searching for “cars that won’t sell” in a search engine. You might find something like this article, which will be helpful if it’s not outdated. You could also ask a salesperson at a dealership, if you happen to know one (or you can ask a salesperson you don’t know). You could simply look around the dealership lot and figure out which vehicles are in large numbers and were not recently released. Start with the kinds of vehicles you want, of course. Finding a subcompact car won’t do you much good if you have 7 kids to transport every day. On the other hand, don’t be too picky. You are looking for vehicles that won’t sell. You’re probably not going to be crazy about all of them. Keep an open mind.

Step 2: Get Some Quotes

This works best if you find vehicles from multiple manufacturers. The idea is to get quotes from competing dealerships and try to get them to keep discounting, in an attempt to finally sell this vehicle to someone (you). The easiest way to find the best price in your area is by getting quotes right here at Buying Advice.

Step 3: Compare Quotes and Use the Price War Tactic

Compare the quotes and find out which dealer offers the best price. Then, ask another dealer to beat the best price. This creates a sort of local price war. The dealers will be totally ready to sell this car if you’ve done your research right. You can expect some generous discounts.

Step 4: Settle Up and Drive Away

The last thing to do is sit down and sign the papers. Make sure everything looks right and you’ll be on your way!

Ready to get your free, no-obligation, local auto quotes? Click here.