Buying a car can be considered a major purchase right up there with buying a home. The car you buy will serve you for several years and you hope it will be worth the money. While it is advisable to save as much as you can before you purchase a car, this may not always be easy.
You may need to balance out what you have as savings and what you must borrow. Your credit rating, employment status and other factors will also play a significant role in your car purchasing process.
The important thing to know is where you can save some money and where you cannot. This will give you better negotiating skills. Here we cover 7 ways you can save money when buying a car.
Money Saving Tips for Buying a Car
1. Be Clever With Your Financing and Insurance
Car dealers know this is where they make their bread and butter. If they can get you to purchase a car with terms that favor them, they can be sure of a healthy payout at your expense.
To save money, compare different financing and insurance options from different vendors, not just car dealers. As it is not mandatory to take their F&I options, you can buy the car from them but get more favorable F&I options elsewhere. What most car dealers will do, however, is make it seem like it is the perfect package.
You should make deep research and find when is the most convenient time to buy a car. For example, buying a car during tax season may help you to get the best by purchasing a used car with your income from a tax refund.
Just buy and drive, as the slogan goes. Doing this means leaving money on the table. Do your homework and you will find you can make anything from a few hundred to a few thousand dollars in savings.
2. Buy Certified Pre-owned
Certified pre-owned or CPO vehicles may be another way you can save money. They are usually sold by a dealership and tend to have gone through some tests to certify their condition. The upside is that CPO vehicles are in excellent running condition but come at a lower price.
In some cases, the previous owner may have used the car for only a year or two. Another advantage of purchasing a CPO vehicle is that you can get the title upfront owing to the cheaper price and the possibility to buying it outright. This means you can use the title for other purposes such as getting title loans or any other similar financing.
3. Do Not Trade-in Your Old Car
Trading in your old car at the dealership is easy but does not always offer you good value. Dealers are predisposed to value your trade-in low as they have to add a markup for when they sell it off later.
Instead, try and sell your old car yourself. Put it on the internet and see if you can get a buyer. This way, you can be guaranteed a higher sale price than what the dealer has to offer. Before you do this, first have your old car appraised. Then go to the dealer and see how much they are willing to offer. This will help you determine the best price to sell your old car for.
4. Go For Mid-level Car Models
Every car has low-level, mid-level and top-level models, each attracting different pricing. To balance value and price, go for mid-level models, regardless of the make you choose. Low-level models will mostly be basic and targeted at buyers who are only interested in the price.
High-level models will target those who may be more concerned with luxury and features than with price. Mid-level models will offer you a mix of both. While you may be tempted to purchase the model with the sports trim and Bose speaker system, be careful as these can run you up to $10,000 extra.
Extras are another way car dealers meet their margins so watch out for this next time you are out hunting for a new car to buy.
5. Buy What Is Available
It is always nice to buy a car with all the customizations and extras you picked. There is a feeling of true ownership when you do. If you want to save money, you may have to consider purchasing a car from dealer stock.
These are the vehicles the dealer has available and that come as-is. While this may not be what you hoped for, it will save you money as the dealer is always willing to offload their stock at a lower price.
The other incentive dealers have when selling you existing stock is special orders tend to be complicated to fulfill. It is way easier for them to sell you what is on hand. This means you have quite some negotiating room when purchasing dealer stock.
6. Start With A Manageable Monthly Payment
When looking for a car, you may be tempted to first start shopping around and then seeing if you can afford what is out there. While you may have a final budget of how much you are willing to spend, do you know how much that will translate to in monthly payments?
Calculating this figure will help you know whether what you are buying will be burdensome to pay back. You can get these figures by speaking with your lender to help you reverse calculate your total budget based on how much you can manage to pay each month.
Doing this will help you save money in the long run as you will avoid expensive car purchases that may not fit in with your monthly budget.
7. Balance Value And Savings
It is true that you can buy a car for even a few hundred dollars. But the question is, will that car serve you well? While saving money is important, you must balance value and savings. You want to buy a car that did not cost you too much but at the same time will be reliable in use.
The way you will save money here is in maintenance costs. If you buy a car that is cheap but is not reliable, you may find you have spent what you saved in maintenance costs fast. Look for a car that will cost you little to maintain and that you are sure will also have a good resale value when the time comes to offload it.
Saving money when buying a car is easy if you have the know-how. Doing your research and being patient as you look can help you avoid money traps and save money on the purchase and later in maintenance costs.