Shopping for a new car can be an exciting experience, but doing it while trying to stick to a budget can be stressful.
According to a Kelly Blue Book 2022 car report, the price of new vehicles has hit an all time high. Still, owning a car is becoming more and more of a necessity for many.
Fortunately, there're ways to help you save when purchasing a car. Here are the best I learned that helped me hold on to my coins.
Market Value Research
Research the market value of the vehicle you want to purchase.
Two main reasons:
You want to make sure you're paying a fair price for the car you want.
Dealers will hike up the price of a car. Who knew?
So, before you walk into a dealership, it's important to equip yourself with the right information about the car you want.
Search multiple dealerships' websites, read reviews from real customers who bought the same car, and don't sleep on Kelly Blue Book to help you fully understand the pricing.
Now market value of the car is something you can't control, but what you can control is the interest rate you receive when you purchase your car.
Having good credit is another factor that will determine the monthly payments of your car purchase, and it's one of the few things you can control.
Taking some time to build your credit before purchasing a car will allow you to have more power over how the car dealers deal with you.
Bad credit means desperate when you walk into a dealership and they show no mercy. They know that there are a few places you can go that will give you the time of day.
They will use this to sell you a car for way more than you can afford.
This leads to my next tip, knowing your finances and getting funding before you shop for a car.
Get Funding Before You Shop
Once you've done a bit of research and you have an idea of the car you want. It's time to obtain funding.
While saving for a hefty down payment would be the best way to save money, the average American doesn't have that luxury.
So, what if you have a small down payment but still want to get savings on your car purchase?
I hear a lot of people say this, and I must agree, avoid getting financing from the dealership if you can help it.
I would suggest checking with your bank first and getting a preapproval letter before walking into the dealership.
Three reasons to get preapproval:
You already know how much you can borrow, and depending on your bank, this may include taxes, title, and any additional fees.
You can focus on the car you want and less time being razzle dazzled by the dealer.
You will have greater negotiating power and can be more assertive when it comes to what you're willing to spend.
This brings me to my next way to save when purchasing a car, setting a budget.
Set a Reasonable Budget
When it comes to purchasing a car, what you are preapproved to borrow doesn't mean it's what you should borrow.
Take the time to do the math and analyze your lifestyle and your budget. Do you really want a car that will cost more than your rent?
Set a realistic budget for the car you want to purchase. Factor in the monthly cost of the vehicle: gas, insurance, maintenance, and repairs.
Yes, even new cars require maintenance and repairs; things like oil changes, tires, and windshield replacements can all be maintenance and repair expenses on a car you just drove off the lot.
True story, when I first purchased my car, fresh off the lot, eight miles on the car, which was the test drive, I had to get the windshield replaced.
Someone threw something out of their car window while we were on the highway and hit my windshield.
It's unrealistic to think you won't have to pay for repairs just because you bought a new car. No, you won't have major repairs, but you'll still have maintenance fees and minor repairs.
Therefore, you have to budget accordingly and realistically look at how much you borrow will affect your quality of life for the term of the loan.
Again, just because you were approved for a certain amount doesn't mean you have to take it.
Next, I would suggest shopping for deals and specials.
Shop Around for Deals and Specials
A great way to get the best deal when purchasing a car is to look out for additional cost savings with special offers and rebates.
Manufacturer rebates can save you money right off the bat, while dealers may offer their own freebies in the form of trade-in allowances or dealer discounts.
Closed mouths don't get fed; dealers won't always mention these deals unless you ask. So open your mouth and ask!
If you do your research beforehand, you'll already be empowered with the deals and rebates available for the car you want from the dealer and the manufacturer.
Tips to Help You Negotiate
Before I mentioned the importance of having negotiating power, this is easier said than done.
Many people get nervous, especially if you're the type of person that dislikes confrontation, suffers from anxiety when speaking publicly, or just finds this part of car shopping stressful.
Here's what to do to help.
Scope out several dealerships and price the car you, so you can be able to walk away if the dealer is saying something different.
Invite a trusted friend to express your negotiations.
Negotiate over the phone or by email before you enter the dealership.
Another car purchasing tip that can save you tons of money is buying at the end of the model year.
Buy at the End of the Model Year
Try buying at the end of the calendar year, when the latest models are out but still have current features.
Most car models keep the same model for multiple years, so no one will know which year you purchased it.
This is the same as buying the oldest car on the lot. Selling cars is a business, and the bottom line is getting moving the inventory so that they can get more.
Offering to purchase the oldest car on the lot or the end of the model year is doing them a huge favor and gives you more negotiating power.
With that being said, the best time to buy a car is December, and if you purchase during this month, you can get an average of 6.1% off the manufacturer's suggested retail price (MSRP) at most dealerships.
They have sales goals to meet, so don't underestimate the power of choosing this type of car in the model you want, of course.
But what if you try all these things and still can't get to the price that's right for you? Try this last money-saving tactic.
Consider buying Certified Pre-Owned
Purchasing a certified pre-owned car could be the answer to your wallet. You get the same quality as a new car, with a few extra miles.
What makes certified pre-owned cars so special?
The manufacturer has inspected these cars, and any damaged or worn parts replaced and certified. So these cars come with guarantees and warranties, just like new cars.
You want to look for cars with the lowest mileage, of course, and research the certification status and pull the car's history.
If you go this route, you may want to hire an independent mechanic to make sure any existing damages have been identified so you can make an informed decision about purchasing the car.
This will also give you the power to negotiate a lower asking price saving you even more!
Major Take Away
Besides buying a house, buying a car is one of the other major purchases many of us will make in our lives.
But with major purchases, you can have major savings.
Especially if you take the time to research: car values, deals, dealerships, and lenders, get pre-approved, set a realistic budget and stick with it, and use your power of negotiating.
You'll be riding in saving in no time!