Car shopping can be an overwhelming task, especially for first-time car buyers. Decisions have to be made: the vehicle type, the features, the price, and the dealership. Should you buy a new or used car? Is this the time to buy?
Taking in tips will help you make a wise decision when shopping for your car.
Are Car Prices Back to Reasonable Levels?
The Kelly Blue Book and Consumer Reports agree that new car prices are rising, but used car prices are falling. New car prices are rising and will continue to rise for some time because there is still a global shortage of microchips inhibiting car production. The slow rate of car production is leaving a lack of inventory, and this causes prices to rise. Add to that situation rising interest rates, which makes your new car purchase more expensive.
Prices of used cars, on the other hand, are falling, although not at a rapid rate. Consumer Reports says that a drop of more than 3% in used car prices occurred recently, and this may offer hope to those looking to buy a used car with cash. However, the problem of rising interest rates affects used car buyers who rely on financing, the same as new car buyers.
The Kelly Blue Book has a more optimistic look at used car prices. They say that the prices wholesale dealers pay for used cars to sell to you dropped more than 14% over the past year. This drop in wholesale prices will help used car prices to fall and continue to fall for the next several months.
Given the recent volatility and car market price trends, you will feel more satisfied if you do a little research when car shopping.
How to Find Out How to Get the Most Car for Your Money
If you need a car now and can’t wait for the car market conditions to improve, you need to do your research to get the best car for the money you want to spend. For example, if you are a Consumer Reports member, you can search for used cars for sale in your area, sorted by the factors that matter most to you.
When you open one of these listings, you will find Consumer Reports reliability and owner satisfaction ratings and a free CarFax report for most vehicles. Knowledge is power, which helps you negotiate a fair deal for a reliable car within your budget.
The Kelly Blue Book is another car-shopping research source that you can tap to find out what you might pay for the car you have your eye on. You can also get a full review written by KBB editors and find details about fuel economy, feature descriptions, and reliability and safety ratings.
Dealing with Rising Interest Rates
If you are relying on financing, The most important tip that Consumer Reports offers is to make sure your credit is as good as it can be to get the best interest rates. Otherwise, more cars you might want to buy will be out of reach, and you’ll have to settle for something less.
Also, if you need to finance a used car, prearrange financing through your bank or credit union. Prearranging financing will help you decide whether the dealership can offer a better deal.
Another way that interest rates don’t have to be a factor in your budget is to buy a new car that may qualify you for a lower interest rate. Many times, manufacturers subsidize financing or offer lower interest rates as an incentive to buy a new car. Right now, a new car is only slightly more expensive than a car that is one to three years old. Given these car market prices, a new car might be a better value than one at a slightly lower price that is a few years old, if you can get a better loan for the new car.
Consider Buying an Older Model Car
If new cars aren’t in the budget, look at older models over newer used cars. The prices on older models have dropped the fastest.
Keep in mind that the 100,000-mile marker is no longer a factor when considering a used car. Nowadays, cars can go more than twice that distance, over 200,000 miles, because of increased durability.
When buying an older model car, pay attention to models that are known for reliability and value. For example, consider the results of a study by iSeeCars, which analyzed over 2 million used cars to find the 10- and 5-year-old vehicles with the highest value when considering the price and lifespan of the vehicle.
The top 10-year-old car that iSeeCars found to have the best value was the Chevy Impala, which has an average price of $9,706 and, after ten years of operation, has a remaining lifespan of 111,996 miles out of a potential lifespan of 230,343.
Likewise, the top 5-year-old car was the Honda Fit, coming in at an average price of $18,486 with a remaining lifespan of 154,826 miles out of a 207,231-mile potential lifespan.
So before shopping for an older model vehicle, view other cars, SUVs, trucks, and minivans on these lists to help you decide on a car that fits your budget. Also, learn what to inspect and look for when considering an older model car.
More Tips on Buying a Car
Refuse the Extended Warranty
Another tip: Don’t purchase an extended warranty or service plan. Save the money for future expenses.
A Trade-in Tip
If you have a trade-in to help with the cost of the car you want to buy, shop the trade-in around. One dealership may not need your trade-in, but a competitor may need your car desperately. So, call around and ask what they might offer you for your vehicle.