Why buying a car is more difficult in 2022
With housing prices going up, it’s no surprise that car prices are skyrocketing. In addition, consumer inflation rose to 7% in 2021 and is not going down anytime soon.
Inflation isn’t the only culprit, though. Car manufacturers have been struggling to source parts - so even people ready to buy can’t find their new car ready-made for them.
A new and trendy alternative to avoid markups and supply issues is to order your car directly from the manufacturer.
5 ways to save when buying a car
Now more than ever, saving money where you can is a better move. The future looks uncertain, and gaining traction somewhere will help you navigate the climate.
That’s why we recommend maximizing your savings however you can when buying a car.
Here are our 5 ways to save when buying your next vehicle.
1. Avoid dealerships’ hidden fees
Dealerships tend to have a lot of hidden fees. Check out this list of hidden fees:
- Delivery fee - If you are getting the car delivered (or sometimes not), a delivery charge and a destination charge may be due. This is a duplicate charge. You should only pay one.
- Documentation fee - This is for processing paperwork, licensing, and legalities. These can be inflated.
- Dealership preparation free - You should stand firm on not paying this one: it’s overhead costs for a test drive like changing fluids, cleaning, etc.
- Extended warranty free - Think twice: you can pay for an extended warranty now, or wait until your basic warranty is expired.
Some dealerships will also try to charge you for paint sealant and rust protection. Sure, a shiny car that doesn’t rust is what we all want, but shouldn’t that be included in the basic price? Also, buying anti-theft protection from a dealership can often cost double as much as third-party installers.
2. Use alternatives to dealerships
Some alternatives to dealerships include friends, Facebook groups, Craigslist, auctions, or other online sources.
A private seller probably doesn’t have a quota to meet, and this may be the only car they have to sell, so they may be more open to negotiation. It comes down to you being able to negotiate your price.
3. Compare new to recent models
New models will always be more expensive, no matter when you’re buying. So do you really need the latest designs and built-in gadgets? Is it really worth the extra expense?
On a used car, try not to exceed 10 years or 100,000 miles. The best option would be a 5-year-old car with around 20,000 miles that is in your budget.
A newer car may look more flashy, but if you just need something to get from point A to point B, look for a reliable car within your budget.
4. Look for better financing options
Financing a car can be a smart move. It can be a great way to build up your credit, especially with a low interest rate and with payments that land within your monthly budget.
You have two options when financing a car:
- Loan. A loan will detail your APR and your monthly payments. And get this - interest rates are higher for a used car than a used one.
- Lease. With a lease, you’ll probably still have a down payment and pay interest. Sales tax is usually charged to the monthly payments, too. But you don’t own the car, you can’t resell it and you’ll have the option to buy it or return it at the end of the lease.
Search around various banks and private lenders for an auto loan. Most leases are offered by car dealers, but you might find some from banks. Determine which has the best rates and terms, and check out the fine print for hidden fees and penalties. There may be stipulations that complicate what you can afford.
5. Build your savings first
The best way to buy a new car is to pay in cash - or as much cash as possible, to avoid the costs of loans and leases, including the chance of potentially defaulting.
Ideally, you can save for a car in a targeted fund, and consider a high yield savings account. They don’t pay like they used to, but a high-yield savings account can at least help your money grow.
Plus, separating your money into a savings account, or a fund within a saving account, will help focus your efforts. Try adding small amounts week by week. It starts to add up!
Conclusion
If you’re looking at buying a car, it can be in your best interest to go through alternative routes or to purchase a used car. If you are going to finance a car, make sure you can afford the monthly payments. Never go outside of what you can afford.
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