Saving Money

8 Smart Tips to Save Money When Buying a Car

Written by Madison Mazer

Buying a car is one of the most important financial decisions you’ll make. Whether you are a first-time buyer or have been planning your next purchase for years, most people end up spending way too much money on cars. 

According to Experian, American auto debt has reached an all-time high, increasing from $80 billion to $1.37 trillion between 2019 and Q4 2020.

Although prices are on the rise, there are simple ways to save big on expenses and get a car without having to pay off a decade worth of loans. 

Here is everything you need to know to get the best deals on the right car. 

1. Do your research

If you want to buy a car, you’ve got to do your research. For example, if you have a large family and are looking for a minivan, a smart buyer would explore various models—they might even find information on other medium-size sedans or SUVs. 

Start by determining your budget and making a list of features that your ideal car would have. From there, you can browse online and find which specific brands and models fit your personal and financial needs. This goes for used cars as well as new ones. 

There are tons of factors that can play a role in the money you spend or save. Here are a few to help you start your list:

  • Year: Newer cars likely have the newest features, which makes them the most expensive. Keep in mind the price of vehicles tends to drop the older the manufacturing date gets. 
  • Make: Of course, the brand of a car will affect its price. Although you might have a specific car in mind, it’s always helpful to consider a few other options. If your dream car is too expensive, it might be best to wait a few years and lease a cheaper alternative.
  • Type: Do you have kids? Then you probably need a truck or SUV. It’s important to consider all types of cars and how they could influence how much you pay. 
  • Features: Extra features such as cruise control, backup cameras, automatic emergency braking, and Bluetooth all come at a heavy cost. If you can keep additional features to a minimum, you could save thousands of dollars.  
  • Mileage: If you’re buying a used car, take note of how many miles it has on it. A car with more mileage normally means a lower price tag—but be cautious because a car with excessive mileage could possibly be unsafe.

Online comparison sites are going to be your best friend when it comes to finding the right car. Auto Trader, Consumer Reports, and Kelley Blue Book are a few great recommendations that are just one click away.

2. Shop online or at least start there

The retail automotive industry is changing. What used to take countless hours in a dealership can now happen within minutes online. Shopping online for cars has become extremely popular, especially during COVID-19. According to BusinessWire, over 80% of Americans now shop for cars online, as opposed to the 50% pre-COVID-19.

Although they both take place online, don’t confuse this step for research. You should only actively look to buy after you know what kind of car you want—and how the inventory in your area stacks up. The research sites previously listed, particularly Blue Book and Auto Trader, can tell you exactly where the car can be located, or in contrast, if it isn’t available near you. The more inventory in your area, the more leverage you have as a buyer.

Sometimes you’ll find the same car by the dealer or third-party sellers listed in multiple places. Check vehicle identification numbers (VIN) and photos to verify its authenticity then use the lowest listed offer as your starting price.

If you are looking to buy through a dealership, check out their online sales department. There you can schedule test drives and negotiate costs over the phone or through emails—sellers are more likely to accept deals this way as opposed to in-person. Occasionally the price offered on the dealership’s website will also be lower than the floor price by a significant amount.

3. Try to skip the loan 

One of the biggest things you can do to save money, in the long run, is buying your car outright, rather than get a loan. When you can, paying upfront and in cash is your best bet. Not only will you save money by skipping interest payments, but some dealerships will even offer all cash discounts.

4. Finance before you get there

If you have to finance a car, be smart about it. Don’t just apply to your bank, apply at several. Make sure you do this in a two-week window so the inquiries count as only one knock on your credit. Take the best pre-approved rate when shopping.

Because cars are a depreciating asset, the second you drive out of the dealership, your car goes down in value. This would mean after a year of financing a car, you might still be owing large fixed payments that are more than what the car is actually worth.

Although this isn’t ideal if you do have to finance a car, be sure to calculate your down payment. The more you put down upfront, the lower your monthly payments could be. With that being said don’t take out loans just to put down as much money as you can. Pick a realistic amount to spend upfront, Nerdwallet suggests at least 20% for a new car and 10% for one used, and be sure to keep up with the ongoing payments.

5. Shop your trade-in

There’s no rule that says you have to trade in your car at the same place you bought it—they may not give you the best deal anyways.

If you aren’t in a pinch, take your soon-to-be ex-vehicle to a number of dealerships and get quotes on a straight sale of its make and model. To get the best estimate, bring all necessary information such as:

  • Car title
  • Auto loan account and receipts
  • Driver’s license
  • Vehicle registrations
  • All car keys

Make appointments with more than one dealership in order to get a fair appraisal. You can also check out sites like CarMax to get a no-haggle seven-day offer for trade-ins at local dealerships.

When going to a dealership to finally trade your car, keep the previously quoted prices in your pocket—and don’t mention the trade-in until after you’ve agreed on the cost for the car you’re buying. After you’ve agreed on a purchase price, then ask what they’ll offer for your used car and negotiate based on all those deals you got prior.

6. Buy at the end of the model year

You’ll save on a new car by buying late in the calendar, when the next year’s models have arrived and the ‘old’ ones are still current, but taking up room on the lot. 

December is the best month to buy a car, according to the auto appraisal site, Edmunds. If you stick to purchasing at the end of the year, you could get an average of 6.1% off the manufacturer’s suggested retail price (MSRP).

Can’t wait until the end of the year? At least wait until the end of the month when dealerships are trying to make their numbers.

7. Consider buying Certified Pre-Owned

Buying a certified pre-owned car is a popular route for many people. It costs much less than buying a brand new car and having a factory-backed warranty will give you peace of mind that your “new” car is protected after the transaction. 

Certified used cars have also been inspected for any damaged or worn parts, then repaired and certified by the manufacturer. This is a particularly good plan if the model you want isn’t significantly different from last year’s model. If the car has low miles and a good warranty, you’ll save thousands. 

Although a car is certified, perfection isn’t guaranteed, so be sure to do your own research too. Get a comprehensive vehicle history report from sites such as Carfax and AutoCheck. If you can fit it in your budget, hire an independent mechanic to make sure you’re not paying for any unidentified damages.

8. Don’t pay fees

Take a close look at the itemized bill. More than one expert has spoken out against the fees that dealerships include and most agree you can talk them down.

Some negotiable fees to note are the advertising fee and dealer prep fee—aka the cost of making your car pretty and smell nice before you take it home.

Also, look out for a doc fee or conveyance charge, or the cost of doing paperwork. Eleven states cap this fee—some as low as $75—but in other states such as Florida, this fee can run up to $800. The salespeople will say this isn’t negotiable, but the advice here is, insist or walk away.

About the author

Madison Mazer