If you’ve been scrutinizing your budget lately, and considering ways to save money, your monthly car payment is probably an expense you’d be happy to shrink. Fortunately, there are options available to drivers seeking to rein in the cost of car ownership without letting go of their ride. Loan modification is one approach to a…
Buying a new car is a huge purchase but there are many ways to shop smart and save.
Cars are becoming more and more expensive whether you’re looking to buy a new or used vehicle. Buying a new car is both an exciting and stressful process. So many questions start running through your mind as you do all the necessary plans to make your new car dreams a reality.
When you’re making such a huge purchase, it’s important to take your time and shop smart so you can save money when possible. Whether you’re buying your first new car or your fifth, these tips will help you get the best deal possible.
Know How Much You Can Afford
Before you begin the process of finding a new car, you want to look at your budget and see how much you can realistically afford. According to Consumer Reports, the average price of a new car increased from $36,824 in 2019, to $38,961 in 2020. Used cars are generally more affordable, but they can still cost thousands of dollars, which is why most people consider financing.
Even if you’re going to finance a car, you still need to know how much you plan to use as a down payment, as well as how much you can afford to pay each month. Knowing the monthly payment you can afford beforehand will prevent you from getting attached to a vehicle that’s outside of your budget.
Once you know how much you can afford to spend, also factor in the costs of ownership and monthly expenses like car insurance, fuel, and maintenance.
Check Your Credit
Before stepping foot in a car dealership or even shopping online, it’s important to know your credit score if you’re going to finance a car. Lenders will use your credit score to determine whether you qualify for a loan and determine your interest rate. You can visit AnnualCreditReport.com to download your full credit report from all three major credit bureaus. Another option to see your actual credit score is to visit a site like CreditSesame.com or MyFico.com.
If you have bad credit or no credit at all, it will be difficult to obtain a car loan and you may need to get a cosigner. Try boosting your credit score by paying down existing debts, keeping your credit card spending low, and paying your bills on time.
Do Your Research
Once you know how much you can afford to pay and you have a credit score that will allow you to finance, the next step in the car-buying process is to start researching cars. Compare a variety of different vehicles within your pre-determined price range and avoid letting emotion influence your decision, if possible.
You want to read reviews of each vehicle you’re considering and you should look into how much each vehicle costs to maintain. Some things you may want to consider include how many miles per gallon a car gets on average and any recent recalls.
The research stage is also a great time to figure out whether you want to buy a new or used car. Of course, new cars come with the prestige of knowing that you’re the first and only driver (thus far). New cars may also come with dealer discounts, a lengthy warranty, and fewer issues during the first few years — the biggest downside is the price.
With a used car, you’ll spend much less to buy the vehicle, and you can also consider getting an extended warranty to help with repairs. Also, keep in mind that you can probably find a great middle-ground by considering a used car that is just a few years old. That way, it will have newer features and (likely) fewer problems, but will also cost thousands less than the brand new model.
Get Preapproved for an Auto Loan
Before you head to the dealership or pursue a private car purchase, go online and see if you can get preapproved for an auto loan. Most banks or your credit union will offer low-interest personal loans that you can use to buy a vehicle from a seller. Or, if you’re going to use a dealership, they should have an online preapproval form.
It only takes a few minutes to get preapproved for an auto loan so this can shorten the time it takes to secure the proper financing once you find the car you want. When you get preapproved you’ll see what interest rate you could qualify for, and will be prepared to compare offers with those offers by dealers.
Call Ahead and Schedule a Test Drive
Once you have narrowed down which cars you want to look at and have found a suitable dealer, you should call ahead or submit a request online to see the car that you’re interested in. By doing this, you will provide the sales team with ample time to get the cars out and ready to test drive.
When you take a car out on a test drive, make sure that you see how the car performs in a variety of different settings. Drive it on the highway and in traffic. You should also see how the vehicle handles while parking.
Ask the salesperson to show you how all of the bells and whistles work. Knowing what you’re getting for your money is a key part of the test drive.
Don’t Get Stuck on the Monthly Payment
Your monthly payment is important, but it’s not the most important number when buying a car. Make sure that you’re negotiating on the full price of the vehicle, not your monthly payment. Otherwise, the salesperson will know what they can tack on to the purchase price of the vehicle to reach the maximum you’re willing to pay each month.
Car loan terms are now stretched out to 7 years or more so car dealers can meet your monthly budget of say $300 per month, but also include lots of financing fees, add-ons, and more in that monthly bill.
So instead, negotiate on the car’s final price and financing fees, and shift the car salesperson’s conversation away from the monthly payment.
Ask About Deals
Yes, there are certain times of the year where it’s better to buy a new car than others. Dealerships may offer annual or holiday sales or incentives. However, this doesn’t mean you still can’t catch a deal when you try to buy a new vehicle outside of those promotions.
Most dealerships are always running some kind of sale at any given time for car buyers. The best offers are often reserved for brand new cars where the dealer may offer $0 payments for a few months or an extra low interest rate.
It doesn’t hurt to ask for a deal or extended warranty for other types of vehicles though. Also, if you’ve done your research ahead of time and see how much the car you want costs on other websites, you may want to ask the dealership if they’d match that offer and give you the best price.
Test driving the car first will be helpful when you get to the negotiation process as well since you may notice something. If the car has a noticeable scratch or two but you don’t really mind, still ask the salesperson if you could get the car for a lower price. You can also negotiate by trading in your vehicle, although dealerships aren’t known to offer the best trade-in values. You may be better off selling your old car privately or obtaining the car’s estimated value and providing it to the dealership to encourage them to offer you more money for the trade.
Be Careful With Add-ons
If you buy your new car from a dealership, they will likely present you with lots of add-on features to consider. This will drive your costs up so you should look at these add-ons with a very critical eye — the most common is an extended warranty. While this could be helpful, it could also not cover the most important and costly issues for your car, so it’s important to read the fine print.
Other added-on features might include wheel and tire protection, key protection, and window etching. In most cases, you can probably find a better deal on maintenance and protection for your vehicle elsewhere.
Don’t Fall to Pressure
Don’t believe a salesperson when they tell you that a deal comes with a time limit. Unless the deal is tied to a specific sale or promotion, they are trying to get you to make a snap decision without considering all of the facts.
Additionally, if the salesperson offers a different car to you than what you had planned on getting, make sure that you go home and do your research before agreeing to take the deal. You need to know what you’re agreeing to before saying yes.
Consider Refinancing When the Time Is Right
Realize that you can also save money even after you finance a new car. Consider refinancing your car to help you lower the interest rate and save money on your loan. If your credit score increases after your initial purchase of the car, this could help you secure a lower interest rate or even a lower monthly payment, too.
Most lenders will allow you to refinance as soon as 30 to 90 days after your initial loan was approved. Refinancing does require another hard credit inquiry, but it could be well worth the long-term savings.
Buying a New Car Can Be Done Affordably
Cars might only continue to become more and more expensive, but there is still plenty of opportunity to find savings. By determining your budget and doing your research, you can prepare yourself to do business with a car dealership and still get a fair deal. Utilize these new car buying tips to save on your next car.