Is there anything more personal than buying a car? There’s so much to consider… budget; safety features; comfort; new or used; electric, hybrid, or gas… just to name a few.
But, there are some good strategies to help you find the vehicle that best meets your needs and your budget.
Do Your Research
Whether you’re buying new or used, it’s important to do your research in advance. Of course not every car salesman conducts business in the way commonly depicted in the media, but it’s always wise to visit sites such as Kelley Blue Book to know the value of the vehicle you’re looking to buy and the vehicle you’re trading in or selling. Knowledge is power.
Don’t Mention Your Trade-In Upfront
If you are trading in a car, wait until you’ve gotten the rock-bottom price on the new car before you mention your trade-in. The reason for this is that sometimes, if a salesman knows you have a trade-in, they’ll inflate the price of the new vehicle. Even though it sounds like you’re getting the best deal, you’re not. Make sure the trade-in value is being applied to the lowest possible price for the new car.
Look Into Financing Through Your Bank Rather Than the Dealership
It’s convenient that car dealerships offer financing… almost too convenient! According to this article from MoneyCrashers, most interest rates available through dealerships are higher than those on a car loan from a bank or credit union. Of course, this is all contingent on your credit score and your relationship with your bank, but it is worth looking into so you aren’t losing money on high interest rates. An aggregator site such as LendingTree can help you compare quotes.
New or Used?
Some people feel incredibly strongly about this, and again, it comes down to many factors.
When deciding whether to buy new or used, consider your own driving habits. If you’re someone who keeps a car for ten years, then perhaps buying a new car is a good idea for you. It is true that cars depreciate significantly as soon as you drive them off the lot. However, new cars tend to have fewer mechanical issues, at least for a few years. Plus, many of them are sold under warranty. If you take good care of it and keep up with its maintenance, the high sticker price may actually come out cheaper than getting a used car and having to replace it sooner.
Used cars don’t depreciate in value as quickly because they’ve already undergone that off-the-lot depreciation, and cost much less than new cars. Used cars often have many years of life left in them and are a great choice for shoppers on a budget.
It’s not only the lower sticker price you’ll pay for a used car, but lower insurance and dealership fees, too. A CPO (certified pre-owned) vehicle from a dealership often comes with a repair warranty as well. Keep in mind as well that buying used doesn’t mean buying a 20-year-old car. Even opting for a 2- or 3-year old model can significantly reduce the price.
Here’s a great article from Car and Driver with more information.
Buy Within Your Means
Sure, there is some perceived societal stature over having a fancy car, but unless you can easily afford it, the fancy car is going to cause you more trouble than it’s worth. If you can get a perfectly functional and safe car for a monthly payment that allows you to contribute to your savings and have some disposable income as well, you’ll be glad you didn’t get that Ferrari.
Consider Total Price, Not Only Monthly Payments
Even if you can afford a $300 monthly payment, if those payments last for 72 months, you’ll end up paying thousands more in interest. Here’s a graph to illustrate the difference in interest payments between a 36-month and 72-month loan. Sometimes if you say a price is too expensive, the dealer may offer a longer loan term, but that’s not the same as getting a better overall price.
Buy Online
If you’re someone who worries you might make a negotiation blunder, don’t worry. Companies like Carvana make finding your next used vehicle as easy as possible. Plus, you aren’t dealing with salespeople trying to buffer their commission.
You can also go the truly DIY route and buy a car directly from an individual through eBay Motors or Facebook marketplace. If you do this, you should definitely test drive the car before you agree to purchase it. These sites are often great places to find quality used vehicles for very reasonable prices, but it’s still the internet. Watch out for scams. If something seems fishy, it just might be.