Search Results for: 1/10th rule for car buying

If you’re looking for a car buying rule, let me introduce you to the 1/10th rule for car buying. The 1/10th rule will help you spend responsibly, reduce your car ownership stress, and boost your net worth over time.

In 2009, I watched in horror as a total of 690,000 new vehicles averaging $24,000 each were sold under the Cash For Clunkers program.

The government’s $4,000 rebate for trading in your car ended up hurting hundred of thousands of people’s finances instead. With a median household income of only around $50,221 at the time, spending $24,000 on a new car was clearly too much.

Instead of buying a $24,000 car in 2009, if you had invested the $24,000 in the S&P 500, you would now have over $70,000 in 2021. That’s quite an opportunity cost for buying a new car!

Buying too much car is one of the easiest and biggest financial mistakes someone can make. Besides the purchase price of a car, you’ve got to also pay car insurance, maintenance, parking tickets, and traffic tickets.

When you add everything up, I’m pretty sure you’ll be shocked at how much it really costs to own a car and hurl.

Since the global pandemic began, used car prices have gone way up. Everybody is buying a car instead of taking transportation. This post looks into the best time of the year to buy a car.

My 13 year old SUV named Moose feels like it’s on its last legs. There’s a loud whiny noise every time I turn the steering wheel, which likely means the power steering box is cracked. Moose drips engine oil everywhere he goes and now he leaks coolant!

With a Blue Book value of only around $3,000, spending ~$1,000 to fix doesn’t seem prudent. It costs around $100 to fill up his 24 gallon tank and he only gets roughly 16 miles per gallon. Luckily I only drive about 6,500 miles a year.

The other reason why I’m looking to buy a new car is due to the advancement in safety features. Better brakes, better traction control, and more airbags would be nice. I’m not even sure my airbags work after 13 years!

One of my all time favorite things to do is spend time at a car dealer. There’s nothing like inhaling that new car smell and taking the latest models for a spin for free. All told I’ve probably visited a car dealership 30 times in the last 12 months and probably over 100 times in the last five years.

Call me thorough, crazy, an enthusiast, or simply a consumer who shows great constraint for not spending any money on one of his favorite things. Whatever you say there’s nothing better than finding something you love to do that’s free.

Best Time Of Year To Buy A Car

Car salespeople probably hate me, but that’s good for those of you who are looking to get some insights into exactly when is the best time to buy a car. You see, I LOVE to negotiate.

Finding sales people’s breaking points is a scintillating experience. It’s a respectful battle based on gamesmanship and false compliments e.g. “Have you lost some weight Sam? You deserve to buy this new car!”

If you ever want to work on your negotiation skills, practice at a car dealership. They are consistently some of the most aggressive sales people in any industry. This post will focus mainly on the best times to buy a car and not so much on negotiating tactics.

Here are the best times of the year to buy a car.

1) Tax Season

The best time of the year to buy a car is during tax season (January through April). Ask any small business owner who is not in the tax business and they will tell you that business always sees a cyclical slowdown in April. The reason being that plenty of people owe taxes by April 15.

I personally owed a surprising five figure tax bill due to a retroactive law that raised taxes by 3% for those who make more than a certain amount in California. As a result, I didn’t spend money on anything other than necessities in March and April.

(See: What Happens If I Don’t Pay My Taxes?)

From my position as an online publisher, I see an increase in search traffic related to saving money and reducing taxes as opposed to search results relating to making more money, buying stuff, and going on vacations.

2) Memorial Day Weekend. 

The second best time of the year to buy a car is during Memorial Day weekend. Memorial Day is the traditional start of Summer.

One of the key reasons is that auto dealerships need to clear inventory for next year’s models which come out in the Fall. For example, the 2022 BMW 335i Coupe will come out in August 2021. This launch cycle is consistent with practically every major auto manufacture in existence.

Memorial Day Weekend will also have brand new left over inventory from the previous year. These are often the best deals because you not only get a new car, you get a huge discount, and a warranty that starts at the time of purchase and not the time of manufacture.

Time period: End of May and the month of June.

3) Labor Day Weekend

The third best time of year to buy a car is during Labor Day Weekend. Labor Day Weekend marks the end of Summer and the beginning of Fall. Vacation is over and its back to the salt mines baby! A lot of people blow plenty of money during the Summer and the last thing on their mind is to spend tens of thousands of dollars on a new vehicle.

Besides, folks who were looking for a new vehicle probably bought one just three to four months earlier during Memorial Day Weekend. However, because the following year’s models are now out in the Fall, current year models start looking very dated.

Any left over current year models will be heavily discounted. Unfortunately, you will also be tempted by the new models!

Time period: End of August, early September.

4) End Of Year.

The fourth best time of the year to buy a car is at the end of the year. There are always going to be end of year holiday sales. The best day of the year is probably the day before and the day after New Years where one day makes a car one year older or one year newer.

Blue Book values plunge the first day of the New Year for example. Your new 2021 car come January 1, 2022 just doesn’t sound as new as on December 31, 2013.

Time period: End of December.

If you just can’t wait for any of these four time periods, then at least wait until the end of the month. Car salespeople have quotas, and those who are lagging are the most motivated to sell you a car at the lowest of margins.

It’s up to you to find the hungriest or greenest car salesperson at the dealership! The best time to refinance a mortgage very closely mimics the best time to buy a car due to similar sales incentives.

A Car Negotiation Tip To Remember

If there’s one negotiation tip I’ve come away with after speaking to hundreds of car salespeople is that you must always be willing to walk away to get the best price.

Even after you’ve spent an hour negotiating, walk away for a bit and go through the pros and cons. Get some lunch or literally go for a nice long walk. During this time period of wait, your salesperson will be wondering if you’ll ever come back. He’ll start doing the math on how much lower he’ll be willing to go if you do come back.

Finally, I’d just like to say that the best time of the year to buy a car is when you can afford to buy and need a car. Follow The 1/10th Rule For Car Buying to determine if you can truly afford buying the car you’re eyeing.

So long as you follow my 1/10th rule for car buying, you should be good to go!

Auto Insurance Recommendation

Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Allstate has good driver discounts, and multi-product discounts as well.

Updated for 2021 and beyond.