Cars can get expensive fast, especially in today’s market. According to money.com, the average price of a new car hit a record high of $50,000 earlier this year.
But that doesn’t mean you can’t still find good deals on cars. You just need to know where to find them.
In this article, we’ll go over seven ways you can save on your next car purchase. Let’s get started!
1. Buy used
Did you know that a new car loses somewhere between 9% to 11% of its value as soon as you drive it off the lot? That’s because cars are depreciating assets, and new cars depreciate much faster than used cars. Hence, buying a used car can save you a lot of money.
Plus, buying a used car is much safer than it used to be. According to Tiger Okeley at car dealership Oak Motors, “Buying used is a far less risky prospect today than it was ten years ago because reliability ratings are easily available online and getting a mechanic’s inspection doesn’t cost much.”
If you’re looking for a way to save on buying a used car but you’re worried about quality, aim for low mileage, a recent model, and having a mechanic take a look before you buy.
2. Shop for the best financing options
How you finance your car purchase has a big impact on its overall cost. The best way to buy a car is to buy it in cash. However, you may not have that kind of money.
If you get a car loan, you’ll need to factor in the cost of interest over the lifetime of a loan. For example, if you finance a $20,000 car with a car loan that requires a 20% down payment ($4,000) and an average percentage rate (APR) of 6% over a six-year loan term, you’d end up paying $3,091,97 in interest alone (on top of taxes, title, and registration fees).
So it pays to shop around for the best car loan terms, especially when it comes to the interest rate. Of course, your credit score, employment, and debt-to-income (DTI) ratio will play a significant role in determining what lenders will offer you.
Compare interest rates and loan terms from different banks and credit unions. You may also consider dealer financing (aka buy here, pay here financing), which could make the process of getting a loan much easier.
3. Avoid add-ons
Some car dealerships will try to upsell you on add-ons for your car that you don’t really need. These could be luxury items like chrome rims and trim, seat warmers, entertainment systems, or extended warranties and maintenance plans. While these upgrades can be nice, they are usually not worth the extra cost.
For example, chrome rims and trim are purely aesthetic upgrades and don’t have any effect on the performance of the car. Similarly, seat warmers can be nice, but not if you live in a warm climate. As for entertainment systems, it’s often cheaper to just get a tablet or laptop for passengers in the backseat. And extended warranties and maintenance plans are usually overpriced.
The point is you should consider the cost of any add-ons and decide whether they are really worth it to you (especially if the add-on costs will be rolled into the car loan, creating more interest costs). By getting only what you need, you can significantly reduce the overall expense of buying a new car.
4. Research the cost of insurance
Some buyers don’t realize that the type of car they choose will have a direct impact on the cost of their car insurance. But it’s true. Insuring a brand-new sports car or SUV will cost more than insuring a used sedan. So take into account the ongoing cost of insurance premiums when choosing what car to buy.
Once you’ve bought a car, you can shop around for the best car insurance rates to make sure that you get the coverage you need while also not overpaying.
5. Shop online
It wasn’t that long ago that you needed to visit a car dealership to shop for a new car. But today, you can start your search online. You can browse online marketplaces like CarMax and AutoTrader or even Facebook Marketplace. Many dealerships also publish their inventory on their websites.
The benefit of shopping for your car online is that it’s free, there’s no pressure from salesmen who work on commission, and you get access to a larger car selection. Once you’ve narrowed down your search to a few car models you’re interested in, you can go into a dealership to see them in person and give them a test drive.
By starting your car shopping online, you can save money by comparing prices and not giving in to pressure to pay more than you are willing to.
6. Buy at the right time
Another way you can save on your next car is by buying at an opportune time. For example, many dealerships have sales quotas to meet at the end of the quarter or year, or they may need to make room for new inventory. As a result, some dealerships may be more motivated to offer you a deal if you buy at these times.
Lastly, it’s important to remember that the cost of a car can always be negotiated. So don’t be afraid to haggle for a lower price.
Not sure how? One easy approach is to look up the prices for the same car at other dealerships. If you can find a cheaper price, show it to the seller and ask them if they’ll price match it.
It also never hurts to ask the car dealership if they have any special deals or promotions going on. The worst that can happen is they’ll say no. But if you never ask, you’ll never know.
The bottom line
A car is a significant expense. For most people, it’s their second-largest expense after housing. So it’s worth trying to shave off some of the cost through the above mentioned strategies. If you’re uncomfortable with the final price tag of a car, try implementing the tips above. Trust me; you’ll be glad you did!