The 23-year-old was believed to have been on the Gunners' list of possible replacements for Aaron Ramsdale, who joined Southampton on transfer deadline day after losing his place in the team to David Raya.
However, Arsenal were priced out of a move for Garcia by Espanyol, who apparently rebuffed a bid of around £16m from the North London giants and insisted that his €30m (£25m) release clause was to be paid in full.
Instead, Arsenal took the experienced Neto on loan from Bournemouth in the last knockings of the window, and Garcia admitted afterwards that he felt "isolated" during the summer months.
The Spaniard - an Olympic gold medallist with his country at the Paris 2024 Games - played a major role in getting Espanyol promoted last season, but he has only kept one clean sheet in his first 10 La Liga appearances of the current season.
Garcia release clause 'reduced by £4.2m'
As Arsenal do not have the option to convert Neto's loan into a permanent deal next summer, the Brazilian is expected to head back to Bournemouth, at which point the Gunners will search for a younger alternative.
Should Arteta's side reignite their interest in Garcia either in January or the summer, Mundo Deportivo reports that they may be able to get him at a slightly discounted price if they move quickly.
The Spanish publication claims that his release clause will be set at €25m (£20.8m) for the first 15 days of the transfer window, after which it will rise again to €30m (£25m).
That fee could also increase to €35m (£29.2m) if he is called up to the Spain national team by Luis de la Fuente, who nominated him to his preliminary squad for their most recent set of fixtures.
Garcia still has four years left to run on his contract with Espanyol, whom he has amassed 14 clean sheets in 39 appearances for since graduating from their youth team ranks.
Should Arsenal take up their Garcia discount option?
Arsenal's decision to sign Neto on loan was evidently not a well-thought-out one, as the Brazilian is cup-tied for the duration of Arsenal's EFL Cup journey, which saw 16-year-old Jack Porter thrown into the spotlight against Bolton Wanderers last month.
The Cherries loanee could also not take on his parent club Bournemouth in Saturday's 2-0 loss, which of course had no impact on the starting XI, but it forced Mikel Arteta to promote another teenager in Tommy Setford to the bench.
The former Ajax youngster is one of a few fledgling products hoping to work their way up to the first team in the next 12 months - Lucas Nygaard and Alexei Rojas are the others - and Arsenal could do better than to spend over £20m on a backup goalkeeper.
After all, the Gunners only forked out £27m to sign current number one Raya, so unless Espanyol are prepared to drastically reduce their price demands in 2025, Arsenal should either look elsewhere or promote from within.