How to save money when buying a car

Life Lessons

How to save money when buying a car

Buying a new-to-you car is often the second biggest expense you’ll experience. It’s easy to let emotions rule your decision-making process and end up buying a car that will either bust your budget or fail to meet your needs.

Thankfully, we’re living in a great time to buy cars. There are more resources than ever to help you save money and find the right car for your situation. If you’re searching for a new car this year, keep some of these tips in mind to keep more money in your pocket.

Know when to buy your car
Car buying is seasonal. Take advantage of those seasonal changes to save money. Buying at the end of the model year, such as in September or October, and during holiday sales events are often the best times to find savings, according to Kelley Blue Book.

Those are only the tip of the iceberg for savings. Sonia Steinway, president of Outside Financial, gives additional tips to increase savings:

  • Shop at month-end, and even a day or two into a new month as dealers are trying to meet sales quotas.
  • Shop in the fall when sales are typically slower.
  • Shop on weekdays, when there aren’t as many shoppers at the dealer.
  • Make sure you’re well-rested and well-fed to make clear decisions.

A key to remember is to not be in a hurry when buying a new car. Communicating to a dealer you need a new car today leaves you prone to sales tactics and entices you to make a decision you might later regret.

Start shopping before you even look at a car
The act of buying the car is just one part of a larger process. You’ll likely need an auto loan to buy the car you want. Yes, you probably can get a loan through the dealer, but that may not always be the best deal you can get.

If you know a car purchase is imminent, start shopping around to find competitive rates. Start with your local bank as it might be able to offer a good rate, and select at least one or two other financial institutions.

“External financing is never a bad idea,” says Adam Roberts, financial consultant with Capital District Finance. “Weighing favorable options to ensure a competitive rate is the responsibility of the buyer. Many lenders can provide this information expediently both online and by phone.”

You can check rates with multiple lenders and have little impact on your credit, so long as they’re all done within a 14-day window. The dealer may be able to offer a lower rate, but securing financing ahead of time gives you power to make a decision in your best interest.

Just remember not to extend your loan too far out — that’ll end up costing you significantly more over the life of the loan.

Work dealers against each other
Car buying is a competitive business. Take advantage of that as a consumer to find the best possible deal. Use the Internet to research and determine the kind of car you want, and to have dealers compete for your business.

Steinway encourages car buyers to contact at least three dealers by email, or phone if you prefer. “Ask for their best ‘drive away’ price in a ‘buyer’s purchase order’ (for new cars) or ‘book out sheet’ (for used cars),” says Steinway. This information gives you power in negotiating with other dealers.

Car sales are competitive, and you never know what one dealer might offer when they know they’re working against another offer.

“Even if you think you found the ‘one,’ you can save by using the price for similar vehicles offered by other dealers as a starting point for negotiations,” Steinway says.

Keep things separate

Buying a car often has multiple, moving parts. Not only must you buy the car, but you might also need to trade in or sell a car, besides secure financing. You might think it makes sense to wrap all those situations into one larger transaction with your dealer — but that might hurt you in the overall process of buying a car.

You can avoid pressure from the dealer to roll everything into one transaction by stating you want to discuss financing, for example, when it comes time and not when you’re discussing the price of the car.

The same holds true when you have a trade-in. Deal with the price of the car you’re buying first, and once you have an agreed upon price, discuss your trade-in. This will help get you the lowest price on the purchase and secure the best price on your trade-in, which is what you want. Just remember to arm yourself with information for each step to put your best foot forward.

Buying a new car can be an emotional – and expensive – experience. With a little work and a clear head, it’s possible to keep more money in your pocket and out of the dealer’s hands.

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