Pain-Free Car Buying Tips
Many consumers have waited to buy a car in recent years as prices and interest rates have soared. Interest rates remain high, but car prices are starting to come down in 2024. On average, new cars are being sold at 97 percent of list price compared to 102 percent in 2022, according to Kiplinger.com. If you must buy a car this year, our friends at Ohio Credit Union League (OCUL) outline a few tips to help you drive off the lot at a price you can afford.
New or Used?
Should you buy a new or used car? New cars are typically more expensive, which could make monthly payments harder on your budget. New cars also lose value faster and are more expensive to insure. But buying new lets you get the latest technology and features you want. A used vehicle may be a better choice if you want to lower your initial cost and payments, and if you can find one with low mileage and the features you want. But you may have to replace the car sooner than a new one, and you should know its maintenance and repair history before buying.
Car Buying Tips to Borrow Within Your Budget
Ideally, your car loan should be less than 15 percent of your monthly post-tax income, and your total car expenses, including maintenance and gas, should be under 20 percent. It’s always best to have a healthy down payment to put towards a new car. It will lower your total loan amount and monthly payments. Other factors besides price that determine your monthly payment are the terms of the loan, which is how many months you will have to pay it off, and your credit score, which determines your interest rate. Use this handy calculator to find your ideal purchase price. If you’re wondering how lending might influence your purchase, try the loan calculator at ffcommunity.com.
Headache Removal with Pre-Approval
Getting pre-approved is one of the often overlooked car-buying tips. FFCCU offers great rates for new and used car loans. We’ve touched on the pre-approval process in a previous article, but you can always stop by your preferred FFCCU branch to chat with a helpful teammate for details. With a suitable credit score, you may be able to get a letter stating the amount you are approved to borrow. Getting pre-approved is helpful for keeping your budget in mind and can be beneficial when negotiating prices.
Doing Some Legwork to Get Your Wheels
It’s an essential car buying tip to be as informed and prepared as possible before heading to a dealership or approaching a used car seller. Go to manufacturer’s websites to learn about new features and other details. Before you visit a showroom, make a list of ‘must have’ features and extras that you would like but can do without. Check the Kelley Blue Book for market value of any cars you are interested in before talking with a salesperson. Your first visit to a dealer should be to test drive any vehicle you are interested in. But tell the salesperson you are just looking, and don’t need to buy anytime soon.
Car Buying Tips for Negotiating a Fair Price
After you’ve found a car you’d like to buy, it’s time to negotiate. You should visit the dealer armed with a price range you are willing to pay, based on your financial situation and your research. (This is precisely where our earlier car buying tips about pre-approval come in handy).
Many salespeople begin negotiations with the MSRP (manufacturer’s suggested retail price), or ask what you want to pay each month, and if you are looking to trade in a current vehicle or finance the new car. This gives them the advantage of combining the car’s price, any trade-in allowance, and financing costs to come up with the amount you name. That means you could end up paying a higher base price. Ask them to give you a written quote for the price only, before moving on in the process or offering to let them value your current vehicle.
Be sure to tell the dealer you are pre-approved for a loan, and may consider financing, but want to discuss a cash offer first. Start with your lowest, fair offer. The dealer may say they cannot meet your price and may counter. The most important thing is to stick to your pre-determined price range when making your own counteroffer. Just know you may have to walk away and play the waiting game or visit other dealers before you achieve your goal.
But it will be worth it when you drive your new car off the lot, knowing you’ve closed a fair and affordable deal that works for your budget. Consumer Reports has additional tips for negotiating a car purchase.
Improving the Odds for a Lower Price
If you can’t yet afford a new car or your credit score is a challenge, FFCCU is a great place to start. Come in for a Dare2Compare free account review. We’re focused on helping people meet financial goals, and a Dare2Compare can help you map out a personalized plan for your situation.
We hope these car buying tips have alleviated some of the pain and set you on the right path to owning a ride you love! Check-in on the FFCCU blog regularly for updates on car buying trends and other financial tips and guides.
Posted In: auto loans, Guest Blog
