The cost of new cars right now is through the roof. But what if you really need a new car (or even just really want one) and really can’t wait until the prices come down? Is there any way to curb the price tag on a new car in today’s economy? You may be surprised to hear that there are a few ways to save some money when you head to the dealership. It may take a little extra preparation from you and some willingness to compromise, but there are ways that you can cut down your new car’s monthly bill.
Car costs have been incredibly high for the past year and a half, but why exactly? It’s a classic case of demand outpacing supply. When the pandemic essentially shut down our economy for a year, demand for new cars dropped drastically. This in turn caused dealerships to cut down on their inventory to reduce any losses (after all, car sales dropped 30% between summer 2020 and summer 2021). And when dealerships reduced their volume, carmakers reduced their orders for semiconductors, which are vitally important to many parts of the car from entertainment systems to advanced warning systems (in fact the average car can have anywhere from 50 to 150 semiconductors in it).
While demand for these chips declined from automakers, the demand increased for these chips in the technology sector. Personal computers and electronics used the chips, and by the time automakers were ready to resume normal production levels, there was a full blown shortage in semiconductors. This caused auto production to slow down drastically.
On top of this supply and demand issues with chips, inflation is also affecting car prices drastically. Plastic, steel, and resin costs have all increased significantly, contributing to a perfect storm of high prices.
Car prices will most likely reduce in the next few years as the supply catches up with demand. But until then, there are steps that you can take to ensure that you get the best deal possible when shopping around for a new car.
The best thing you can do when getting ready to buy a new car is make sure your finances are in order. Check your credit score and request a copy of your credit report to see if there are any inconsistencies. The reason is simple: the better your credit score is, the better the financing deal you get will be. Your credit score is the single most important factor that goes into determining your car loan APR, so you want to be sure it is as good as possible. If your score is a little low, take a few months to strengthen it before looking to finance a new car.
You should also be sure to have your down payment ready to go. Experts recommend putting down 20% on a new car to curb the depreciation and keep your car loan from becoming upside down. (Don’t ever dive into your emergency fund to make a down payment though; find money elsewhere to use for your new ride.)
Prepare additionally by shopping around extensively for the car you want. Look at multiple dealerships in your area, and consider looking at dealerships that are farther away (you can always have the car delivered to you).
The flip side of the supply and demand imbalance for new cars means that the demand for used cars has also increased. If you are looking to trade in your old car for a new car, this means your trade is worth more than ever before. Be sure to do your research ahead of time however: the dealership will still try to lowball you. Check Edmunds or Kelley Blue Book to get a good sense of what your car is worth. Knowing your car’s value will ensure you get the best (and fairest) deal possible.
The demand for new cars also means that you might be less likely to get the exact car you want. Try to be flexible about the car you want and focus on the things that are truly important to you in a new car. Is it fuel economy? Dependability? Look at other makes and models and see what’s out there. You might get a great deal on a car you didn’t know you wanted.
Keep in mind that with the rising price of cars, the price of add ons is also increasing. Being flexible with what additional features you would like can also help you save money on that final price tag. All of these add ons– from all weather mats to the upgraded sound system–will roll into your financing and ultimately cost you extra every month.
Don’t simply go to the dealership and acquiesce to their financing terms. Do your homework ahead of time and get prequalified with a number of lenders beforehand. This will help you negotiate at the dealership as well, since you will have a benchmark of the car loan APR that the dealer will have to beat. And if you find the car you are looking for AND a good financing deal, don’t wait to act. The car market is very competitive, so be sure to arrive at the dealership not only with pre approved financing, but with proof of insurance and a checkbook as well.
After you finance a new car, there isn’t really a way to “undo” it. So if you blew a little too much money on your new car, you might feel a little hopeless (especially if money is tight every month). But there is a way to get out of your high car payments: auto loan refinancing.
When you refinance a car loan, you are essentially paying off one loan with another loan. If you are able to find a car loan with a lower interest rate than your original loan, this can save you a lot of money.
So how do you know that the time is right? Consider auto loan refinance if any of the following apply to you:
The market interest rates are better than they were when you initially financed your car (they probably are better, despite the rising Fed rates)
Your credit score has increased since you originally financed your car
You need a little breathing room in your monthly budget
You want to add or remove a co borrower from your loan
Refinancing a car loan can save you money in two ways. First, if you refinance to a lower car loan APR, you can save money in interest immediately. Second, if you refinance and extend your repayment period (say from 36 months to 48 months), you will stretch out the amount of time you have to pay the loan back and reduce your monthly payments significantly.
The good news is that car loan refinancing is super simple. And with Auto Approve, it couldn’t be easier. To get started, simply request a free quote. Fill out some basic information and one of our refinance experts will reach out to show you exactly how much money you could be saving. From there, we use our relationships with lenders across the country to secure you the best financing deals possible. We then help you compare offers, complete the paperwork, and sign on the dotted line. It’s that simple! We even handle the pesky DMV paperwork so you don’t have to.
With a 4.7 out of 5 rating on Trustpilot, our clients can testify to how easy and effective car loan refinancing is with Auto Approve. One client noted “The process was simple and I felt guided through the process the entire time. I am happy to be saving $100/month and to not have a payment for several months. Some users report cutting their interest rates by as much as 6 points. At Auto Approve, we aim to make this process as easy as possible and save you money. Those are our two main goals, and our clients' testimonials show that we get results.
Don’t let a bad financing deal run your life. Because although you can’t simply “undo” your financing decision, you can refinance, which is just as good.
We hope this will help you navigate buying a new car in these expensive times. And if you have already purchased a new car that has you overwhelmed with monthly payments, consider refinancing your car loan with Auto Approve. Get your free quote today and see just how much money you could be saving!