TIME THE MODEL YEAR New models are typically delivered to dealers in the Fall, which gives them an incentive to get rid of the prior model years. So, if you want a 2022 model, get it after the 2023 model is released. Dealers typically discount prices at that time to make room on the lot or in the showroom. Another little known trick? Buy a demo or certified pre-owned vehicle. Demo vehicles are typically used only for test drives or as a loaner. Which means that you can luck up on a demo that has low miles AND a discounted price. Further more, many leased cars are returned with low miles and you may find one that is less than 1 year old when you go shopping.
KNOW THE BEST TIME TO SAVE What is the absolute BEST time to buy a new car? New Years Eve! That’s because it is the end of the month, quarter and year. This means that it’s the absolute last time for dealers and sales associates to make money in the current year. Remember, no more sales commissions for the sales person after today! When’s the next best time? Fall. Like we mentioned, new models arriving drive price discounts. Also, several holidays prompt dealers to run promotions to get those all so crucial sales they need to hit their year end goals. For example, after Thanksgiving is Black Friday, which typically means that there are plenty of deals to be had. Can’t wait until Fall? Well, then month or quarter end are also good days to save as sales associates are often motivated to have a good close to the related period. Best day to buy a car? Monday. The worst time? The beginning of the month or Saturday.
DO YOUR RESEARCH Being an informed consumer really does give you an advantage. It helps you know what price you can expect to pay for a car based on the year, model and the features YOU want in YOUR car. The site we have used for years when purchasing cars is Kelly Blue Book. They are reputable, trusted and pretty accurate. Even the IRS uses their valuations when trying to figure out how much money they can sell someone’s car for after they seize it! But that’s a topic for another day. The main thing to note is that any good dealership will respect what you find on KBB.com and generally come close to hitting the price they say. Now our next two tips are gonna tell you how save through your monthly car note!
INCREASE YOUR DOWN PAYMENT Increasing your down payment by as little as $1,000 or $2,000 can do wonders for your monthly note. Let’s say you buy a $20,000 car, current interest rate of 2.5%, good credit score, finance for 60 months or 5 years with $2,000 down. This is going to give you a car note of about $319/month. Now use the same terms but put $4,000 down? The note falls to $284/month or a savings of $35/month or $420 a year. While this might not sound like a lot, remember that saving money is saving money! Which brings us to the 2nd way to cut that monthly payment
SHORTEN THE LOAN TERM The longer you carry the note, the more you pay the bank or finance company in interest. Most people finance their cars over 60 months or 5 years. You can go longer with 72 or 84 months to get the monthly payment down, but we don’t recommend it. Like we said, the longer you finance, the more you pay in interest. So the better way to “save” is to cut the term. Using our original example, if we cut the term from 60 to 48 months (1 year), we’ll save $233.44 in interest. Cut the term AND put $4,000 down vs. $2,000? You’ll save $337.16 in interest! But the best part of cutting the term? You’ll finish paying off the loan sooner, which frees up that cash to go to something else – like investing.
BONUS TIP – DON’T BUY FROM A DEALER! Now we can just hear you saying “If I don’t buy from a dealer, then I’m not buying a new car!” Yes and no; let us explain. While not new off the lot per se, it will still be new to you. Per the fine folks over at Bankrate, cars lose 15% – 20% of value per year. So remember, the goal isn’t necessarily to get a new/never driven car. It’s really to get a newish car, you know one that is reliable, doesn’t require a lot of maintenance and maybe comes with a warranty. “Yeah guys, I won’t get a warranty if I buy from a private party!” This isn’t necessarily true either:
- When a vehicle is sold the manufacturer warranty follows the VEHICLE and not the owner.
- If the manufacturer offers a long warranty (say 36 – 72 months) the balance/remainder automatically transfers to the new owner when the car is sold.