Keep Car Costs Out of the Fast Lane

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Pandemic-related supply chain disruptions are impacting consumers across the globe. Buyers are seeing price increases in many classes of goods — particularly automobiles. Both new and used car costs have risen considerably. According to Kelley Blue Book, the U.S. standard for car pricing, the average cost for a new car rose to more than $40,000 in 2021, peaking at more than $45,000 in September, a 12.1% increase over the previous year. That means the same make and model of a new car might cost you as much as $4,800 more. And the average cost of a used car has risen to nearly $30,000, so there’s not much relief there. It’s a challenging time to be in the market to replace your ride. But there are a number of things you can do to keep the costs for your new — or used — vehicle out of the fast lane.

Shop nationally, not locally. Tempting as it might be to simply head to the dealership down the road and drive off the lot with a new SUV, resist the urge for immediate gratification. Use the reach of the internet to find the best available prices in your region or even the nation. Dealers will compete for business, and many will transfer cars to your area for a fee. There are even some completely virtual dealerships that can offer competitive pricing and delivery right to your door.

Shop early. If at all possible, don’t wait until your current car is on its last legs. Put time on your side to increase your chance of finding the best pricing on the make, model and mileage you want. The longer your time horizon, the more opportunities you’ll have to find a better price on the vehicle you’re looking for.

Be flexible. Does your new ride really need to be cherry red with aluminum alloy wheels and an upgraded sound system? If you can be happy with a few different colors and accessory packages that are readily available, you may save a few dollars.

Check insurance rates. Certain car models cost significantly more to insure. And you’ll be paying those premiums for as long as you drive the vehicle. Sportier cars, even used ones, can cost more than sedans when it comes to insurance coverage. Higher car costs can also mean higher replacement value in case of a collision — and higher insurance rates.

Research loan options. A longer-term loan may give you lower monthly payments, but the total interest you’ll pay will make that new car more expensive over the long term. According to Experian, more than 30% of new vehicle loans in the second quarter of 2021 fell into the 73- to 84-month range. Exceedingly long loans can carry higher interest rates and increase your risk of eventually becoming “upside down” in your loan. Bottom line: Find a payment plan that fits your budget within the shortest time frame you can manage. And don’t just take the loan the dealer offers — shop around. Consider prequalifying for a loan at your bank or credit union, or shop nationally for the most favorable terms.

Drive Your Car Budget in the Right Direction

Inflated automobile prices won’t last forever, so if you can wait a while before you make a purchase, being patient could work to your advantage. Talk with your financial professional to help determine your buying power in this market, and find out how much car you can afford while keeping your financial goals on track down the road.

Sources

https://www.forbes.com/wheels/news/new-car-price-tops-45000/


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