Buying a car can be stressful, but it doesn’t have to be outrageously expensive. With the right strategies, you can lower the cost, get a better deal, and spend less on your monthly payments. Sound good? Read on!
5 Tips for Spending Less on Your Next Car
If you’re like the average person, a house is the most expensive purchase you’ll ever make. But vehicles come in a close second. Thankfully, there are ample opportunities to save. Here are a few highly recommended suggestions:
1. Set Your Budget
Start by asking yourself two questions:
- How much can I spend?
- How much do I want to spend?
For some people, the answer to these questions is the same. But if you want to make a fiscally sound decision, you should probably spend less than you can afford to pay.
Once you set your budget, it’s important that you stick to this budget. (And it’s also wise to remember that you don’t have to max out your budget. If you know you can afford to spend $20,000 on a car, paying $17,000 is even better.)
2. Know Where to Find Deals
Sourcing the right deal is half the battle. The same vehicle can cost 15 to 20 percent less than it does at another dealership, but you have to know where to look.
Buying from a private party will almost always yield a lower price. (No added fees and expenses.) And if you’re in a state with high property tax rates, buying across state lines could save you a few hundred to several thousand dollars.
3. Use This Little-Known Email Trick
Tom Niejadlik is in the car business. He’s spent more than 15 years in car showrooms, negotiating with buyers, and mastering the ins and outs of the business. And while he’s seen a variety of negotiation tactics and techniques over this time, there’s one method he says is most effective right now; it involves sending one simple email.
You can read about the process in this article, but here’s the gist of the methodology:
- Do your research and find out the fair market price for the type of car you’re interested in.
- Locate seven to 10 dealerships in your region that have the car you’re looking for.
- Send an email and visibly CC a salesperson from each dealership on the message.
- In your email, include the fact that you’ve selected a vehicle you want to buy, have already test driven it, and are ready to buy. Explain any options that you must have and that you’re aware of all costs associated with these various options. You should also mention that you’re pre-approved for financing, but would prefer to finance through the seller.
- Give the dealers 24 hours to respond with their best offer and promise to provide a credit card deposit over the phone.
Dealers hate emails like this, but many will bite. And the best part about it is that you’re showing the dealers they have competition. Some will ignore your email, but you should get at least three to five responses. You can then use these deals as leverage to negotiate even lower offers.
4. Secure a Low Interest Loan
The purchase price of the vehicle is the first major element you need to flesh out. However, it’s also imperative that you secure the lowest car loan rate possible. This requires shopping around online and comparing various rates from different lenders.
5. Buy Used Over New
Buying a new vehicle might seem attractive when you’re on a test drive and you find yourself intoxicated by that new car smell, but it’s rarely a smart choice. New cars depreciate rapidly in the first year – losing more than 20 percent in the first year alone. Why not buy a pre-owned vehicle with low mileage and let someone else take that hit?
Be an Intentional Car Buyer
Lazy car buyers get taken for a ride every single time. Not only do lazy buyers pay too much for their vehicles, but they also overpay on high-interest loans. If you want to spend less money, you have to become an intentional car buyer. This means carefully weighing the details and paying attention to every little aspect (including budgeting, deal sourcing, financing, etc.). Hopefully this article has provided you with a good starting point to begin your search.