Labor Day is still a good time to buy a car. 'It just looks a little different this year,' experts say

  • The average price for a new car is about $35,400, according to J.D. Power.
  • Depending on the make and model year of your current car, dealers may be willing to give you a premium for trading it in, experts say.
  • Many manufacturer discounts or other incentives are for 2020 models, which dealerships will want to clear out as next year's crop of cars roll into their lots.

If you're hoping to take advantage of special Labor Day car sales, a trade-in could make the purchase a bit less costly than usual.

With inventory at dealerships still tight, used cars are fetching a premium. For instance, the average list price for a 2017 model climbed to $24,287 in August, up $721 from July and up nearly $1,500 from June, according to data from Edmunds.com.

"Car shoppers are experiencing an interesting dynamic right now, because local dealerships may pay more for a popular vehicle this year than in years past," said Matt Smith, deputy editor of CarGurus.com.

Car-buying activity has picked up after dropping off at the beginning of the pandemic, although August sales for new cars were an estimated 10% lower than a year earlier, according to a forecast from J.D. Power and LCM Automotive.

And while production has ramped back up after pandemic-related plant closures, availability of some 2021 models may be limited.

In August, about 4.6% of sales — roughly 1 of every 20 cars sold — involved 2021 models, up from 1.8% (1 of every 50 cars) in July, Edmunds research shows.

Right now, 2021 versions comprise 12% of new-car inventory on Cars.com, said Kelsey Mays, the site's senior consumer affairs editor. The remainder are largely 2020 models — which is where the best incentives might be found.

For instance, the 2020 Kia Soul, with a starting price of roughly $17,500, offers $2,000 off, plus another $1,000 on certain versions, according to Cars.com. Qualified buyers can get 0% financing for 66 months.

The 2020 Nissan Murano, which starts at about $31,500, comes with $4,000 off, plus $1,000 for the SL or Platinum trims. Or, you may qualify for 0% financing with 72 months plus bonus cash.

Used-car values jump

Used car (2017 model) August 2020 value March 2020 value Increase

Of course, incentives on 2020 models may edge upward as the year progresses, Mays said. "The flip side, however, is that those vehicles will become harder to find," he said.

Shoppers should also be prepared for a different buying experience.

In a business known for its personal interaction, the pandemic forced many dealerships to move much of the process online in March and April amid shutdowns and stay-at-home orders. 

And while dealerships have re-opened their showrooms as local regulations have permitted, it's worth calling ahead if you want to go there because you may need to schedule an appointment. 

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More than 70% of the inventory on Cars.com, for example, is noted as coming with some type of non-traditional sales such as home delivery or a virtual appointment, Mays said. You may be able to even sign documents online, although it depends on the location.

"Dealerships are really going extra mile to make sure customers feel safe," Mays said. 

Additionally, make sure you compare dealerships, which typically can be done online. While they all generally give you the manufacturer's discount, one may offer a better deal on your trade-in, a lower interest rate on your loan or some other perk.

Experts also recommend getting pre-approved financing before engaging with the dealership. If you're offered better terms from the dealer, great. If not, you have the best deal you could find. The average rate is about 4%, although it will depend on your credit score and the terms of the loan.

And, as always, consider the financial impact beyond the car's price or the monthly payment, such as how the purchase will affect your insurance cost and gas consumption.

"Labor Day is still a good time to buy a car," Smith said. "It just looks a little different this year."

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