High prices, skyrocketing interest rates and long waiting times. If we thought 2022 might be a return to normality for new car sales after the disasters of 2020 and 2021, the reality turned out to be tougher than anyone imagined.
The fallout from the Covid pandemic continued to cause problems for car manufacturers trying to build cars, although this has started to improve in recent months. And then, of course, Vlad the Invader lost his marbles and decided to start a war with Ukraine, which has created chaos throughout the global economy.
We have now had nearly three years of production shortages, which has driven up prices of both new and used cars. Combined with rapidly rising interest rates to combat even-more-rapidly rising inflation, and buying a car in 2022 has been an expensive proposition.
However, there are some positive signs as we close out the year, which means that there are a few deals starting to return to the market. Here’s what to keep in mind if you’re going online or heading out to showrooms in the run-up to Christmas.
Car dealers need to hit their targets
Sales staff are paid commissions and have their own targets, and everyone needs to hit their annual targets. Despite shortages of cars to sell for most of the year, dealers and salespeople will still be keen to shift as many vehicles as they can before December 31.
The automotive retail industry runs on target-based economics, and the dramas of the last couple of years haven’t changed that. All that’s happened is that the numbers have been revised, with more pressure to succeed in other ways, like flogging more finance and add-on products.
Dealers earn money or discounts from the manufacturers as a reward for hitting or exceeding those targets. This can be worth tens of thousands of pounds to a dealership, so it is in their interests to make sure they sell (and deliver) as many cars as possible before the calendar ticks over to January 1.
For everyone in the chain, failing to hit sales targets has serious financial consequences, so they are all ‘incentivised’ to hit those targets, usually by throwing money at customers in one way or another. Obviously the biggest incentives are going to be applied to the cars that the dealer can’t sell at full price, so there’s always a reason for any discount or freebies.
If you’re in the market and the car you’re interested in is available, you can take advantage of some great Christmas deals if you’re prepared to take delivery with full payment by the end of December. If it’s not registered by 31 December, it doesn’t count, so the offers won’t usually apply.
With pressure on struggling dealers to shift metal in the last couple of weeks of the year, salesmen’s bullshit levels will be going through the roof and business managers everywhere will be rehearsing their speeches about how GAP insurance can be included with hardly any impact on your low, low monthly payments…
New car Christmas bargains
For manufacturers, new cars are what it’s all about, but the overall problem is that there haven’t been enough cars to sell. That means there won’t be the usual smorgasboard of new car offers available that you may have been used to pre-pandemic, but there will still be some bargains around if you’re prepared to be flexible.
The best deals will always apply to models that haven’t been flying out the doors during the year or are due for replacement shortly, as manufacturers and dealers try to clear the decks for 2023 models to start rolling in.
These deals usually revolve around deposit contributions and lower rates on their finance offers, although neither are likely to be as significant as they were last year.
The best deals will always be on vehicles available for delivery before 31 December, rather than forward orders that won’t arrive until January 2023 or later. The Car Expert advises that you should know what car you want and then try to get a great deal on it, rather than rushing into a purchase because you are worried about missing out on the deal of the century.
There’s no value in getting a big discount on entirely the wrong car, and there’s certainly no such thing as the deal of the century, so if you’re not sure then don’t buy.
Used car Christmas bargains
Used car pricing has been massively overinflated this year, with prices much higher than you would expect. This is a direct result of the shortage in new cars, meaning that hundreds of thousands of customers with expiring PCPs can’t change into another new car so are instead snapping up near-new used cars. That then has a knock-on effect all the way down the line, so that even old bangers are worth more than they were 18 months ago.
If you’re in the market for a used car, be aware that this is only a temporary situation as used car pricing will gradually return to normal over the next year or two. You might be paying over the odds for a car today, but that means you’re going to lose even more money when you sell it on in a few years. Combined with higher interest rates than were offer a year ago, and your next car will probably be a lot more expensive than your last car.
As with new cars, dealers are looking to shift the stock they have on site before the end of the year, so you have to be ready to do business in order to get the best deals on offer. That means money all paid and/or finance all signed up and activated so that you are driving out in your car before 31 December.
If you have all your ducks lined up and are ready to buy, then you can still save yourself some money on the advertised price, as well as maybe swing a better finance deal than is normally available. But choose you car carefully, as you’ll probably be paying more for it in the current market. So if you don’t end up liking it very much, you could lose a lot of money if you want to sell it again in six months’ time…
Pre-registered cars
Stock shortages on new cars has meant that there are very few pre-registered cars hitting the market in December than we’d normally see.
A pre-registered car is one that is registered to the manufacturer or dealer, rather than to a customer, in order to count it as a ‘sale’ on the official records. Once registered, these cars will sit in a “secure storage facility” (which is usually just a field somewhere) for at least 90 days, after which time they can be sold as used cars.
In pre-pandemic times, pre-registered cars could make up as many as 25% of new car registrations for certain brands, which was a crazy situation. Currently this situation has almost completely disappeared, but it will presumably return as soon as car manufacturers can resume pumping out more new vehicles over the next 12 months…
Out of season bargains
For years, conventional wisdom has said that the best time to buy a convertible is in winter, because demand is low since it’s freezing cold and raining/snowing/sleeting all the time. The reverse is supposedly true for 4WDs and SUVs, as demand is highest in winter when the roads are muddy and drivers get snowed in.
These ideas are still true to a certain extent, but nowhere near as much as they used to be.
Modern convertibles are perfectly comfortable with the roof up in winter, with few of the problems like leaking and terrible insulation that soft tops of yore used to have. Similarly, 4WDs are perennially popular with families all year round, and have been ever since SUVs made the jump from utility vehicle to aspirational middle-class must-have (and are often no better than a hatchback at dealing with off-road conditions).
There will always be more demand for convertibles in warm weather because people are impulsive buyers, but canny sellers will realise this and make sure they have plenty of stock available to match the demand.
So you may be able to snap a better deal on a convertible over Christmas, but not by a massive amount. Likewise, the world is not going to run out of 4x4s over winter, despite what that desperate-looking salesman keeps suggesting.
How to save money on buying a car this Christmas
The potential savings on the car you are looking at could vary wildly, but automotive retail always comes down to supply and demand. This Christmas will be more favourable to dealers than buyers, so don’t get sucked into buying a car if you don’t really need to. Prices will start going down next year, so holding out could be a better bet.
Make sure you know what sort of car you want, as specifically as possible. Many people get distracted by a deal that sounds great – and ignore the fact that the deal on offer is for a car that is not remotely suitable for their needs. Regardless of what the dealer says, be clear in your own mind about what you want.
Never roll up to a dealership without doing your homework. Check the top used car marketplaces for the going prices for the sort of car you’re looking for, and get a quote for your current car. One of the benefits of high used car pricing is that your current car will be worth more as well. Online car buying services will often offer you considerably more for your car than a dealer will as a pat-exchange, so make sure you’re getting as much money for it as you can.
Have a good read of our ten golden rules for buying a car. These are valid all-year-round but are key when there are potentially confusing offers being thrown at you from dealers.
Do your research online and make sure you understand what you are committing to. Have a read of our fantastic car finance glossary to be absolutely clear about all the jargon involved with that amazing offer the salesman was telling you about. While you’re at it, have a read of our checklist of what to organise before you apply for car finance.
Finally, and most importantly, know your financial limits. Whether you are paying cash or financing the vehicle, don’t be tempted to blow your budget just because it sounds like a good deal. And with prices being higher then normal, that may mean lowering your expectations a bit this time around.
Be a clever car buyer and you could save a bundle; if you are not so clever, it could cost you a lot more later on than you could ever save up front. Merry Christmas, and happy car shopping!
Looking for a new or used car? Our partners can help
This article was originally published in December 2014 and is updated each year. It was most recently updated for 2022 to reflect the current market situations for both new and used cars.
