Purchasing a new or used vehicle is still one of the higher transactions the average person will make in their lifetime. However, there are ways that you can make the car buying process less expensive. Here are some things to look at if you're looking at the cheapest way to buy a car.
Buy A Cheap Car With Cash
Probably the cheapest way to buy a car is always to pay cash. When you pay interest on an item that actively depreciates, you're not just losing money once, but twice. Take a look at a typical financing deal. If the sales price on the car is $27,000 and out the door, it costs $30,000, but you put $5,000 as a down payment, then you end up financing $25,000. If your interest rate is 6.9 percent, you'll pay over $3,600 in interest by the end of the loan period. But that's not all the extra money you'll pay. The average car depreciates about 20 percent in the first year and then 15 percent in each subsequent year. So this example car will lose about $13,700 in value during that same loan period. In other words, you'll lose about $17,400 total on the deal. If you pay with cash on a used car, you won't pay the interest, and you won't be paying for as much depreciation either.
Get Pre-approved If You Aren't Paying All In Cash
If you don't have all of the cash needed for a new car purchase, then the least you can do is get pre-approved for a car loan before going to a dealership. That will allow you to get competitive interest rates from the dealership versus your pre-approved rate. In terms of the loan itself, it's best to keep the loan to 48 months or fewer, and the monthly payment shouldn't go over 15 percent of your monthly take-home income.
Research Your New Vehicle and Stay Flexible
Try not to attach yourself to only one type of vehicle or one make and model. The more discerning you are, the harder it is to find a good deal. Think of the vehicle needs that you have on an everyday basis, not the occasional want. For example, if you don't regularly haul large items, then you probably don't need a pickup truck for everyday use. It's easy enough to rent a pickup truck when you do need this. Save money on gas by purchasing a passenger car instead.
Find Out The True Ownership Cost
It's not enough to know what the car costs, but you should also know what the cost of owning that car will be. The true cost of ownership includes what you'll pay in gas, insurance, repairs, taxes, licensing, maintenance, and more. You can get an idea of the true cost to own various vehicles by using the free tool on Edmunds.com.
Rent Before Buying
Test-driving a car at the dealership can give you a brief idea about how it feels to own. But the key term is brief. Considering that buying a vehicle is bound to be one of your larger purchases, it's a good idea to be as sure as possible that it's what you want. If you can find the same model at a rental outfit, you might consider renting it for a week to see how it works with your needs and lifestyle. Weekly rental prices have only gotten more reasonable in recent years.
Buy A Car At The Right Time
There are better times than others to get a good deal on a new car. One of the best times is at year-end sales. At this point, dealerships are trying to make their annual goals and get rid of the previous model years left on their lots. However, car sales can be difficult when cold weather yields fewer car shoppers in many places. And at other times, take advantage of dealer quotas at the end of the month, end of the quarter and beginning of the week.
Scope Out Old Car Inventory
Dealerships have to turn over inventory in a reasonable amount of time to stay profitable. Any vehicle sitting on the lot for a long time is likely to be ripe for a good deal. How do you find these vehicles? There are a few clues. They may have unusual paint colors compared to the rest of the cars on the lot. If you look up close, you might notice dust in hidden places that the car lot washers often miss, such as beneath spoilers. Once you find a vehicle that looks like it's overstayed its welcome, open the driver's door and look at the door jamb. The manufacture date of the car should be over three months old for domestics and a bit longer for import cars. Another way to look for slow sellers is to search car ads online and filter the dates.
Consider Membership Warehouses
You may not realize that it's possible to buy a new car at a warehouse such as Costco or Sam's Club. Not only that, but you can usually get a no-hassle price. The reason for this is that they have already negotiated a price on the vehicle. You can look for your vehicle online and then go to the nearby partner dealership and get the car for the preset amount.
Don't Get Expensive Options
Upscale trims and luxury options don't hold much value when it comes to selling the vehicle used. It especially applies to tech options, which become outdated quickly. Not only that, but many electronic options inside the car are just one more thing that can break down and need repair.
Get A Manual Transmission
That especially applies if you're looking for a reliable used car. Fewer Americans than before can drive a manual, so the price is typically lower on these, whether it's new or used. Along with getting a good deal initially, you can usually keep saving with a manual. They generally get somewhat better gas mileage, and they can save on brake wear if appropriately driven. Transmission repairs on a manual are usually far less costly since the main moving part is the clutch. Some estimates say you can save up to $30,000 over your lifetime if you only own vehicles with a manual transmission.
Buy Below Invoice
Car buyers often assume that the invoice price is the lowest price they can get. They think that the car dealership paid this amount for the vehicle and won't let it go for that price and not under it. However, that's not true. The stated invoice price is not necessarily exactly what they paid for it. Not only that, but they may get incentives to sell certain vehicles, which makes it still profitable to sell them under invoice. If a dealership tries to convince you that the invoice price is the lowest they can go, you don't have to believe them. It's also essential to check for manufacturer rebates as the dealership is not obligated to tell you about those either.
Even if you love haggling for a new car, it's generally better these days to shop online first. The dealer internet sales department will often quote lower prices than the lot salesperson. If you negotiate online, it also allows you to shop around and compare prices. You can get a quoted price and then email another dealership and ask if they can beat it.
Deal Separately With Your Trade-In
It's best to look at your trade-in and your potential new vehicle as two different transactions. Letting both be discussed at once is a good way to fall into various purchase price traps. If you have a used car in good condition, especially if it has low mileage, it would behoove you to sell it privately versus taking a dealer trade-in value on it.
Be Ready To Walk Away
One of the best tactics in your arsenal is the determination to walk away from a deal. If you have a firm price that you want to pay, it's easier to do that. There are many stories of people leaving a deal only to get a text or phone call from the dealership saying that they're now willing to let it go for your price.
Keep Your Smartphone Handy
During negotiations, you can use your phone to look up terms you don't understand or to verify market values. You can even use it to compare prices on other lots if available. The salespeople are less likely to make false claims if they see that you have research material at your fingertips.
Always Thoroughly Read The Paperwork
Even though there are incidences where the dealer made a mistake in the buyer's favor, this is usually not the case. If anything, they may try to slip something in that you won't see if you're not paying attention, or if you don't read the paperwork. It's also a good idea to have the person with you read it as well. And always have someone with you when you go to buy a car.
Be Willing to Refinance
You may choose to finance your vehicle through the automaker's credit to get incentives, but you should also see if you can line up refinancing. Start by making sure there are no penalties for this and then get a pre-approval from your lender. One of the cheapest ways to buy a new car is to take sizable rebates in trade for a higher interest rate, and then refinance the loan after 30 days to get a lower interest rate. You then save money in two directions.