The automobile industry has experienced plenty of changes in the past decade. One of the critical ones is how much money car buyers are spending on their new vehicles. The traditional 4-year, 48-month auto loan is essentially gone. Instead, many people purchase cars with 5-year or even 7- or 8-year loans to gain lower monthly payments and save money. But what does this represent for you? How can you save money while purchasing your next vehicle? Read on and we’ll examine ways you can save money when acquiring your next vehicle.
1. Find the Best Price
Vehicle prices are negotiable. The sticker price listed on the Monroney (the legal document fixed to the vehicle’s glass) is rarely what you will pay. Instead, manufacturers typically offer discounts and other incentives that will lower your cost accordingly. But not always. Indeed, if demand for a certain model is strong, you may pay above that price. For this reason, it is critically important to do your research before contacting a dealer directly. The Internet is your friend, use it to perform research.
We recommend visiting at least three dealer websites to compare prices for the model you want. For example, if you are shopping for a new Camaro, then visit three Chevrolet dealerships to review inventory and find prices. If you discover a model that interests you, then negotiate its price online. Also, it is always ideal to arrange your financing ahead of time and take the rebate instead. Besides visiting individual dealerships, you can search websites such as CarClearanceDeals and Edmunds to find out which cars offer competitive rates on interest.
2. Sell Your Current Ride
You can always trade in your vehicle and use those funds as a down payment toward your next ride. It is the easiest way to dispose of a car you no longer want. But it isn’t the best way, at least not from a financial perspective. Indeed, selling your car to a private party almost always yields a stronger offer. Yes, it can be a hassle, but with Internet sites such as Facebook making local sales simple and possible, you can do this yourself.
Check out the Kelley Blue Book price for selling your vehicle privately and compare it to what a dealer would pay for it. You may garner hundreds of dollars more by selling it yourself.
But what if your car is a clunker? Will the dealer take it? Maybe, but you may not receive much for it. Instead, selling it to a salvage yard could yield a few extra bucks. Companies like “Junk My Car” may be a good “plan B”.
3. Weight Your Financing Options
We briefly touched on financing earlier. Unless you have the cash to pay for your vehicle, you will join the other 90 percent of individuals who finance their ride. Financing can cost you dearly, therefore it is extremely important to explore your options.
As mentioned, you can finance your vehicle through the dealership, particularly if you have strong credit. Here, the manufacturer’s financing arm will explore your credit history and offer loan options ranging from three years to seven years or longer. We recommend the shorter terms as rates are lower and you’ll pay off your vehicle faster. On the other hand, your monthly payments will be higher. Likewise, your budget may not support that cost.
When financing, consider how much money you can offer as a down payment. Again, your trade is counted as a down payment. Also, there are fees involved, including registration, tags, and taxes. When added to your loan, your final cost may be much higher. Lastly, if you opt for an extended warranty, those costs may be rolled into your loan. We recommend avoiding the warranty for now – you can always purchase once your new vehicle warranty expires. All in all, consider the loan that is the best option for you financially.
4. Consider Used, Instead of New
Are you suffering from sticker shock yet? Enough buyers are, especially when comparing prices for new vehicles. As of September 2021, the average transaction on a new vehicle topped $45,000 according to a study conducted by Kelley Blue Book and Cox Automotive. Yes, that is the average transaction price and your cost may be lower. Yet, prices continue to climb and at a pace far above the rate of inflation.
Instead of buying new, consider purchasing used. This option is smart as a used vehicle doesn’t lose as much of its value moving forward. One of the best deals for consumers is off-lease vehicles. These models are driven for two or three years, then returned, prepped for sale, and marketed. Although a few years young, the majority are sold for at least 30 percent off the original cost, reflecting depreciation. Thus, what may have been a $30,000 vehicle when new may be valued at $21,000. In a few cases, the manufacturer warranty is still valid. And in some cases, the manufacturer will extend that warranty further. This might also be the time to consider purchasing an extended warranty.
Car Shopping Blues
For countless consumers, car shopping is as pleasant as getting a root canal. But it does not need to be as miserable, particularly if you enter the transaction with your eyes wide open and your research thoroughly accomplished.