A BIG thank you to Ayers Automotive Repairs in Santa Barbara for
sponsoring this podcast. Tips to find the car you want at a decent
price:
● Think about financing before you start shopping. If you have
savings, buying a car outright is always the cheapest option.
However, most consumers choose to finance their purchase, paying
less upfront but more in the long run since you’ll need to borrow
money and pay interest on your car loan. Whichever route you take,
start by figuring out your budget. Decide how much you can afford
to set aside for monthly car payments. Talk to your bank about
getting preapproved for an auto loan. Not only will this give you
some bargaining power when you are at the dealer, but you’ll also
be able to compare dealer financing to find the lowest interest
rate on your loan.
● Don’t get underwater. Many cars are still selling at prices over
their sticker value. Consumers may be tempted to take out a bigger
loan when it seems all vehicles sell for a premium. The problem is
that cars are depreciating assets, and their value drops
significantly as soon as you drive them off the lot. Without a
decent down payment, you could quickly end up upside-down (a.k.a.
underwater) on a loan, owing more than your car is worth. If your
car gets totaled in a wreck or stolen, you could be left owing
money on a vehicle you no longer have. If you can’t afford a larger
down payment, consider purchasing gap insurance, which would cover
the difference in the event of a severe accident.
● Don’t count on discounts or even haggling. In the past, year-end
deals and bartering to get a lower price on a car were part of the
sales process. With limited inventory, getting a deep discount from
a dealer trying to clear off excess inventory isn’t likely. On the
bright side, your used car trade-in is likely worth a little more
than it would have been pre-pandemic. Consider using that for a
little extra leverage to strike a deal.
● Do your research and try to be flexible. Before you set foot on a
dealership lot, know which cars will fill your needs and their
current market value. Look at several different dealerships’
websites to view their inventory and check their prices. When
you’ve settled on a particular model or two, decide which feature
package you want before a salesperson convinces you to need the
premium package. Keep in mind that flexibility is critical. If you
have a few color options in mind or are willing to consider two
different model cars, you’ll have a better chance of finding a
vehicle you like.
● You can order a car, but you’ll have to wait. Another option with
fewer cars on dealers’ lots is to request a car customized to meet
your needs. If you go this route, know that you’ll probably wait at
least six weeks to get the car, or much longer if it’s a model in
high demand.
● Look farther afield. If you’re having trouble finding a car
locally, consider expanding your search geographically. Looking
outside of your city will give you more options but remember; you
may need to travel to see the car and take it for a test
drive.
● Negotiate if you find a car you like. Budgeting, getting
preapproved for financing, and researching ahead of time are all
critical. Turnover on dealership lots is fast, and you must be
ready to act. If you find a car you like and don’t buy it
immediately, another shopper could swoop in before you make up your
mind.
● Consider a used vehicle. Consider buying a used car if a new car
doesn’t fit your budget. Certified pre-owned cars might be a good
option since they have warranty coverage and other “like new”
perks. However, be willing to pay a little more for this option.
Whether you buy from a dealer or a private seller, always do plenty
of research and inspect the car carefully before you seal the
deal.
● Buy your lease. If you leased a car before all the supply
disruptions started, chances are the end-of-lease purchase cost,
set when you signed the contract, will be well below the current
market price. If this is an opportunity open to you, take
advantage!
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