A car is a big ticket item, with the average price of a new car at the end of 2022 coming in at $48,681, according to Kelley Blue Book.
If you’re in the market for a new car, there are some smart money moves that can help you make the most of your purchase — like figuring out how to make extra money to put towards your down payment.
Let’s take a look at a few more money-saving tips to think about before you drive off the lot.
A car depreciates in value as soon as you leave the lot, with some figures pointing to a 20% drop in value as soon as you buy it.
A used car might not be the most appealing purchase, especially if you like the new car feel. But it can save you a lot, even if it’s only a few months old.
Remember that a used car doesn’t necessarily mean “old.” Look for a vehicle with low mileage and many of the features you want. If you really want to get as close as you can to that new car feel, consider last year’s model.
Shop for better financing options
The cost of your next car purchase isn’t just the sticker price. It’s also the finance charges in the form of interest that you’ll pay over the lifetime of your loan.
In 2022, the average APR for a new car loan ranged from 3.84% to 12.93%, depending on credit score. No matter your rate, you’re still paying more than the original loan amount to finance your vehicle.
If you want to try and save some money, compare interest rates from a few lenders. The extra effort could save you thousands.
Skip unnecessary features
Buy the car you need and not just one that’s packed with add-ons. For instance, if you live in a winter climate, seat warmers might make more sense compared to someone that lives in a warmer area.
Make a list of essentials to help you avoid overspending. You should also consider more cost-effective alternatives to specific options. For instance, you can skip built-in navigation if the car offers smartphone compatibility.
Compare models carefully
Many vehicles are released under different models and packages, which provides drivers with some sort of customization. Typically, the higher the model level, the more expensive it is due to extra features.
Take some time to compare models and see if the price jump is worth it. A bigger engine might be great, but it will also mean higher fuel costs down the line.
Sell your old car privately
Talk with a few dealerships about the trade-in value of your current vehicle. If you don’t like what you’re hearing, consider a private sale.
There are a lot of platforms that make a private sale much easier now, including Autotrader and Facebook Marketplace. If you receive an offer, check Kelley Blue Book to get a sense of whether or not the deal seems reasonable.
Buy at the right time
Cars cost less at certain times of the year, especially around the end of the quarter. You may find some great pricing in September, for instance, as the dealerships work to clear room for the next year’s model that’s about to roll out.
Buying at the end of the month is another good idea since that's when sales teams are trying to make their quota.
Research the cost of insurance
Look into insurance ahead of time to be better prepared for the full cost of your new vehicle. Insurance varies depending on the make and model of your car, with sports cars and SUVs being more expensive to insure than smaller compact cars.
It’s also a good idea to shop around for different rates before committing to a policy. You may be able to save money on car insurance with a little extra research and negotiation.
Choose a shorter loan term
The dealership’s financing team will likely tell you that you can get lower monthly payments by stretching out your loan. But the longer the loan term, the more interest you'll rack up.
To save money, choose the shortest loan length possible. You’ll pay more monthly but pay off your car sooner and for less money overall.
Don’t be afraid to negotiate
The sticker price on the window isn’t always the lowest cost the dealership can offer, but you won’t know unless you ask.
An easy way to set up a negotiation is to look at prices at other dealerships. If you find something lower, ask if the sales team can match it. Additionally, if you’re willing to walk away from a car, the seller may call you with a better deal too.
Reconsider extended warranties and service packages
Some dealerships offer extended warranties or additional service packages that cover everything from oil changes to car washes. But before you invest in them, consider the costs.
Also remember that if you're rolling these costs into the loan, that means you’re paying interest on top of the actual price.
Most people need to buy a car at some point, and although it is a big purchase, there are a few tricks that can help you save money.
It’s good to get in a saving mindset before you step off the lot, and once you’re in your new car, figure out how you can continue to save.
For instance, some of the best credit cards for gas can give you cash back on your next trip to the pump. A bit of research can go a long way.
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