Automatch Tom made a reference in one of his recent posts to buying at the end of the month. The idea is this: sales people are more motivated to sell at the end of the month because they are thinking about their monthly bonus compensation.

However, I've also been told flat-out by a finance person at a dealership that buying at the end of the month does not make any difference. Meanwhile, that same dealership said that at the end of every month, they do a lot of volume. I know of many stories where a person boasts of an outstanding deal they got by buying at the end of the month, but I am skeptical whether the sales person is just telling them that so that they are more likely to buy, or whether the buyer is rationalizing their purchase in such a way (which is totally fine, but I'm interested in the economic effect, not the psychological effect).

I've heard the End-of-the-Month hypothesis for a long time, but I've never really seen it backed up with facts, so I decided to do some digging and see what the research says. I found a 2008 study in Journal of Marketing Research (one of the world's most respected marketing research journals) by Rui Zhu, Xinlei Chen, and Srabana Dasgupta of the University of British Columbia that partially addresses this question, although this particular question is not the main focus of the study.

The authors do not find a statistically significant association between buying at the end of the month and vehicle price. To try to put their findings in understandable language, their estimate of the effect is -$50.77 (which suggests that buying at the end of the month would be associated with, on average, a $50.77 reduction in price). However, the data is inconsistent enough that statistically, this is not any different from zero.

They used data from all new-car sales in California in a 4-year period around 1999 to 2003. They define end of the month as the last 5 days of the month. Perhaps the trouble with their estimate is that, as some have suggested, you won't always get the best deal at the end of the month. It depends. If a sales person or dealer is well below their bonus target, they may be better off waiting until next month to book the sale so that they can take a shot at next month's bonus target. Ditto if they've already made their bonus target and are far from the next rung up. So a the power of an end of the month sale might look much larger under ideal conditions. Unfortunately, there's really no way that I know of to observe whether a particular sales person or dealer is in an optimal position to bend on price. If anyone has an idea, please comment!

I guess this calls for more research. What do you all think? Has anyone out there ever gotten a bad deal at the end of the month? Found a dealership seemingly unwilling to negotiate at the end of the month? (aside: I have). Industry insiders, some specific details about bonus compensation would be much appreciated!