Ready to buy a new car? The process can certainly be overwhelming. It seems like every step of the way you are hit with some hidden or unexpected cost, and that you either end up overspending or getting a lower quality vehicle than you planned on because you cannot ultimately afford what you wanted to get. Here are some ways that you can save money when purchasing a car, and get the best car for the money, without breaking your budget.
1. Analyze Your Finances and Set Your Budget
First things first – you have to know how much you can actually afford to spend on a new car. Some people decide what car they want, without ever thinking through how much they can spend. These people are often left disappointed, because the car of their dreams either breaks their budget and leaves them struggling, or they end up having to settle for something they didn’t really want. Once you set your budget, you get a great idea about what kinds of cars you can start to look at.
2. Do Some Homework
If you already own a car and are looking to upgrade, it is important that you know how much your current car is actually worth. You can get different estimates, depending on whether you plan to sell your current vehicle privately or whether you plan to trade it in. Do enough homework so that you know what your options are. When you trade in a vehicle, you can ultimately make your payments lower. But, if you stand to make a significantly larger amount by selling your car privately, you might be better off doing this and using the money to pay down your loan.
Part of doing your homework also involves searching the internet for the best deals. Not only do you need to know the value of your current vehicle, but you need to know the range you can expect to pay for the vehicle that you are hoping to buy.
3. Understand Financing and Insurance
When shopping for a new car, you need to decide whether or not you will be taking out a loan on the car or paying cash. Obviously, most newer cars will require a loan, as the average person does not have that kind of cash saved up. Plus, with the great interest rates available today, it makes sense to borrow the money and pay a low interest rate. Shop around for the best interest rates, too, just like you would shop for the best car prices.
Also, it is wise to contact your insurance agent and find out what the rates are going to be for your new vehicle, compared with the vehicle you currently own. Determine the coverage you will need, and make sure you can afford the insurance. This is an unpleasant surprise for many who opt for much newer cars than the ones they are used to driving!
4. Comparison Shop, and Negotiate!
Buying a new car (or newer used car) requires some negotiation skills. In almost every case, there is some wiggle room built into the price that you are offered. As you shop around, it is perfectly acceptable—and expected—that you are going to compare dealers and negotiate. One dealer may offer you a package of options as an incentive, another may offer a better interest rate. Go ahead and share the details that you have been offered, you will be surprised to learn how often you can get one dealer to match the offer of another, just to make the sale. This negotiation alone is where you can save thousands of dollars off of the sticker price! That is money that stays in your pocket!
5. Call in the Troops!
Don’t be afraid to bring along reinforcements when shopping for cars. Salespeople are trained negotiators, and they will definitely “sell” you. Having a trusted friend or family member along with you can help protect you from being swayed by a sweet-talking salesperson. Buying a car is a major purchase, and it can help to not only have some moral support, but also someone else listening in on the negotiations, to help you make sure you are getting a good deal.
6. Skip the Aftermarket Offers
One of the biggest ways that car dealers make money is by selling aftermarket add-ons, like extended warranties, rustproofing, a sunroof, or any other features or options that are not included in the standard package being offered. Weigh your options very carefully, as these aftermarket offers are typically very expensive. While an extended bumper-to-bumper warranty may be a wise purchase, there are others that will look fancy when flashed in your face, but will cost you megabucks in the long run.
Extra tip: Consider Charging Some of the Amount to Your Rewards Credit Card
Some dealerships will allow you to pay for a portion of the vehicle with your credit card. So if you’re needing to meet a spending requirement on a rewards credit card or just want to earn more rewards, consider charging a portion of the cost to your rewards card. For example, one of our team members recently charged $3,000 of the price of his new car to his Discover it® card (that was the amount the dealership allowed). Obviously, only do this if you can pay the balance off so that you don’t accrue unnecessary interest. Something to think about!
Buying a new car is serious business, and you need to focus, do your homework, know what to expect, and be ready to negotiate hard in order to save money on your purchase. When you get a fair deal on a quality vehicle, you will feel great and enjoy driving your new car for years to come!