Tips To Save Money On a New Car

If you need to buy a new car, December is traditionally the best time to score a great deal. And it’s not just tradition. According to the car gurus Edmunds, their data indicates that “December’s year-end sales events will give you a ‘perfect storm’ of savings.” That’s because dealers are looking to make room for the new year’s models, and are eager to clear out their inventory.

But don’t go near a dealership without these six tips from Billshark on ways to make sure you’re getting the best deal possible.

1. Decide what you need

Steer clear of status symbols and trends. Figure out first what you need: great mileage? a two- or four-door style? a hatchback or SUV for carrying frequent loads? all-wheel drive for winter driving? a hybrid or electric? Just do yourself a favor and don’t fall in love with any particular car until you do your homework. If you can’t be flexible, you’ll end up paying way more than you should.

The most important factor should be reliability. The smart-money move is to keep your car as long as possible, at least 10 years. You don’t want a car that will start dropping parts along the road before the loan is even paid off. Many people these days are keeping their cars for 15 years or longer. Go for a make and model that can give you that, and you’ll come out way ahead financially.

2. Determine your price

What can you afford to pay? Be sure to factor in gas and maintenance costs, as well as interest on the loan and insurance on all models you’re considering. What monthly payment, plus these additional costs, will fit comfortably into your budget?

And decide how much of a down payment you can scrape together. The larger the down payment, the less you’ll end up paying in interest over the life of the loan, which can result in significant savings.

3. Look around

Once you have a good idea of the basic features you’re looking for, and what you can afford to pay, go all over the Internet to find at least two models that fit your needs. Check not only reliability and maintenance costs over the life of the car but performance, safety and crash statistics. Consumer Reports is a great place to do this type of comparison. Edmunds is also a must-visit site for this type of info.

4. Line up your financing

Look up the value of your current car, if you’ll be doing a trade-in. Kelly Blue Book is the gold standard for this information. Better still, sell your old car yourself, and put the proceeds toward the down payment.

Finally, know your FICO credit score and get pre-approved for a car loan at a bank or credit union. Yes, it’s easier to have the dealer finance your car—and they will offer many incentives to get you to do so—but their interest rates are usually much higher than you can get elsewhere.

5. Take a test drive

Sounds elementary, right? But some people don’t and end up with a car they don’t fit into comfortably. If you’re going to spend years getting into and out of it, you want to know that it suits you. Is the ride smooth; are the seats comfortable? Do you like the controls and the way they’re laid out? Does the car accelerate well and handle responsively? Does it idle quietly? Decide ahead of time what types of features you need, and see how well this particular car meets your requirements. Only then are you ready to talk price.

6. Negotiate intelligently

This means leaving your emotions outside the dealership. Again, if you fall in love with a car, you’ve already lost. Bring all your figures with you, but don’t tell the salesperson you’ve already lined up financing. Don’t mention your trade-in on your old car until you’ve received their final offer. If necessary, tell them you’re planning to sell it to your cousin.

Don’t look at the MSRP (manufacturer’s suggested retail price). That means nothing. Find out what the dealer paid for the car (the invoice price), and decide how much you’ll add to that to allow them a small profit.

Do tell them you’re considering other makes and models at other dealerships, and that you’re prepared to walk if you don’t receive a satisfactory deal. And mean it. Otherwise, they’ll have the upper hand in negotiations. Negotiate on the purchase price of the car, not the monthly payment.

6. Skip the frills

Rust-proofing, undercoating, maintenance plans, VIN etching ... don’t buy them. If you really need any of these, you can have them done later—and probably cheaper—without adding them into the financed price of your car. Also skip such extras as upgraded stereo systems, heated seats, rear cameras ... anything that you don’t absolutely have to have.

The biggest “skip it” is the extended warranty. As Billshark has discussed in the past, extended warranties on any purchase often overlap with the manufacturer’s warranty, and frequently have so many exclusions that they’re essentially worthless. Not to mention that you’ll be financing their cost into your loan, so you’ll end up paying way more than the stated price with the added interest.

Buying a car is the second-biggest purchase you’ll ever make after a house, so it’s worth it to get it right. Not only because of the years you’ll be spending in it, but because of the money, you’ll be putting into it, both up front and down the line. And speaking of that, if you need extra cash for this or any other purpose, let Billshark help you reduce the amount you spend on bills every month.