A new car is the second most expensive investment you’ll make, right behind a house. That’s why it is important that you investigate carefully and time your purchase to get the best deal.
Some of the 2017 cars have already arrived on the lot, making last year’s models less desirable and less expensive. By purchasing a 2016 vehicle, you will pay 10 to 20 percent less for a car that is just a few months old. Unless there is a major change in the model, the older car is a bargain.
Car dealerships have quotas for the month and for each quarter. So, the closer you are to the end of the month or the end of the year, the better the prices will be. If you can put off the purchase until December, those prices will continue to drop, but you risk having a smaller selection. If you have your heart set on a certain color or special options, you might want to make your choice while there are still many to choose from. My husband bought a truck a few years back the last week of the year. Though he got the options he wanted, his only choice of color was white or bright blue as there were only two left.
It’s also a good idea to be shopping for cars when others aren’t at the dealership. That means that you should avoid weekends and shop in the middle of the week. You’ll get more help from the salespeople and the prices will be negotiable.
Don’t start shopping until you know what you want. Investigate online and know what features you want and what you can expect to pay. My favorite online websites to investigate cars are kbb.com (Kelley Blue Book) and edmunds.com. Either of these sites will give you an estimate of value of both new and used autos, operating costs of vehicles, and they will even give you a summary of cars for sale.
Know what features you want, both the must-haves and the ones you want to have. Don’t pay extra for features you don’t want.
Now that you have selected your car and negotiated the price, there is more money to be saved on the financing of the vehicle. Reducing the cost you pay is the goal. So, negotiate for the best interest rate. Check with your bank or credit union before you start shopping so you can compare with the financing rates offered at the car dealerships.
In addition, the shorter the loan term the less interest you will pay. A longer loan repayment will cost you more. Let’s compare a $20,000 loan at 4.75 percent rate. A 36-month term will cost $597 per month for a total of $1,498 in interest over the life of the loan. If you increase the loan to 48 months, the monthly payment drops to $458, but interest will cost $1,999 over the length of the loan. A 60-month payoff will cost you more than $3,000 for interest. The real problem is that at the end of the loan, you’ll have a five-year old car.
Another question is how much down payment is needed. In general, the larger the down payment or the higher the trade-in, the less you’ll have to finance and the lower the payment. Financial experts recommend paying as large a down payment as you can afford to reduce monthly costs.
Buying a new car is exciting. Make sure you do your homework and make sound financial decisions to keep the price tag low.
Roxie Rodgers Dinstel is associate director of Cooperative Extension Service, a part of the University of Alaska Fairbanks, working in cooperation with the U.S. Department of Agriculture. Questions or column requests can be e-mailed to her at mailto:email@example.com by calling 907-474-7201.