Are you in the market for a new—or new to you—car this year? You’re not the only one. That’s why we’re here to help you get the best deal possible and walk away with a new car (and a GOOD mood).
- Trends that may impact the value of your new car
- Financially savvy car-buying advice
- Negotiation tips
- Helpful resources
Car Trends to Watch
2020 was not the ideal year for car sales—after all, people stopped making major purchases and started saving. However, things picked up steam toward the end of the year, with GM selling 5% more in the last quarter of the year, despite sales being down 12% the rest of the year.
The cash cow of the year? Electric vehicles. EV shares soared in the market, and companies like Tesla sold 36% more in 2020 than in 2019. Whitney Tilson, former hedge fund manager and investor, explains that electric vehicles are getting cheaper and cheaper, faster and faster. In 2017 they predicted EVs would be cheaper by 2026, now it’s projected to happen in 2022.
When you can get a cheaper car AND charge it, rather than paying for gas, why would you go for a combustion vehicle?
The other trend to watch is the rise of self-driving vehicles. Most new vehicles already have some kind of driving assistance built in—whether it’s an alert for passing vehicles, or cameras that help you stay in your lane.
Now might be the right time to buy a car with these driving features, to up the resale value of your vehicle. Cars with fewer safety features and gadgets are becoming obsolete.
If resale value is an important factor for you, taking these trends under consideration will help you in the long run.
How Much Will You Pay?
Credit Karma reports that the average monthly car payment for new vehicles rose to $538 in 2020, while the rate for used cars rose to $397. And, the most common loan period is 72 months…or 6 years!
Per the 12 Principles of Prosperity, it’s important that not only do we weigh the COST of the things we buy, we weigh the OPPORTUNITY COST too. When you buy a car, you’re not just paying the cost of the loan, interest, taxes, etc. You’re also losing the opportunity to do something ELSE with that money (like earning a percentage on it). You can check out the video below, from PEM co-founder Todd Langford, for a demonstration of this idea.
How to Get a Deal You Can Celebrate
Here’s what you should keep in mind when shopping for your new car.
1. Price Range
If you’ve been saving money, don’t lose that momentum! It’s important you decide what you can comfortably pay before ever stepping foot in a dealership. This will help you manage your expectations, and ensure that you don’t get coerced into something that’s difficult to afford. You can also leverage resources like Kelley Blue Book to make sure you’re getting a good price and quality car.
It doesn’t make much sense to pay cash for a car when financing below 5% is so doable. Rather than dropping a big chunk of cash (don’t forget Opportunity Cost), try investing that money and using the cash flow to make payments. Once paid off, you’ll have your cash AND the car.
3. Rebate or Low Rate?
Sometimes, you CAN have your cake and eat it too. If you can secure your own financing before going to the dealership, they can often negotiate a better price for you. A pre-approval with a local bank or Credit Union can give you competitive rates and better negotiating power.
4. Buy ALMOST New
You’ve heard it before—cars lose value the moment they drive off the lot. By looking for nearly new cars, only a year or two old, you can get what you want for substantially less. And certified pre-owned (CPO) cars are still under warranty, have passed rigorous inspection, and can often qualify for better financing.
5. Negotiate Correctly
In Busting the Interest Rate Lies, PEM co-founder Kim Butler describes one of the most efficient ways to negotiate with dealerships. Most dealers will push you to focus on payment, however, we recommend focusing on price, then trade-in, THEN financing.
6. No-Haggle Options
Not a haggler? Some companies offer no-haggle options with competitive pricing, so that you don’t have to. Believe it or not, Costco is one such option.
7. Maximize Your Trade-In
Are you getting enough for your trade-in? This can significantly lower the cost of your new car. Check out this article from Kelley Blue Book for more tips.
8. 0% Isn’t Always 0%
We’ve seen people pay more in the long run because they got sucked in by the promise of 0% interest. In reality, that interest is built in, because the dealership wants you to finance with them—it’s how they make their money. Don’t believe us? Here’s the math.
9. Say No to Extras
Once you’ve got the car, forget the extras. Often things extended warranties, gap insurance, and service packages are going to be extra expenses. If you save or invest that money, you’ll be prepared for unexpected costs.
10. Keep Your Car
The best way to save money on cars is to buy cars less often. Can you keep your car past the “paid-off” mark? When you factor in the opportunity cost, you’ll see that keeping your car for longer can put six figures back in your pocket over time. (Though we get it, sometimes the maintenance on an old car is more of a drain than getting a new car–that’s why you have to do what’s right for you.)
The 2021 Car Buying Guide: Resources!
- TrueCar is a great tool for comparing price points on cars to make sure you’re getting the best deal
- Carvana specializes in car “vending machines” and 7-day test drives.
- Vroom helps you find and finance a used car, and they deliver!
- Costco offers competitive pricing on select cars to their members.
- Edmunds does instant car appraisals and connects buyers to cars.
- Carfax ensures that you’re not buying a car that’s been in an accident.