End-of-season car sales are upon us as dealerships hope to clear out old inventory this summer for the incoming 2020 models. According to Edmunds senior analyst Jeremy Acevedo, “August and September are when we generally see automakers make the most decided transition into the new models. These summer months correspond with a bump in incentives, particularly low APR financing on the outgoing model year vehicles.”
With attractive sales and nice weather ahead, many consumers will find themselves in the car market this summer. Vehicles are often among one of the largest expenses a consumer will have and thus carry some important decisions. Here are some tips to be on the right track when buying your next ride.
Check the used and pre-owned markets
Before diving into the details of your new vehicle, consider what the plan is for your current one. Will you be handing it down to a family member, or are you hoping to get some extra cash towards your new purchase? Many dealerships offer a trade-in program to help customers get rid of their old ride without the stress of selling on the used car market. However, this often comes at a cost with a lower payout. Though dependent on the condition and type of vehicle you will be trading in, instamotor.com indicates that the average consumer will get $2,250 less by trading in versus selling on the market.
It is also wise to check the used car market in your area to try to score a discount on your desired model. You may have heard the saying that cars lose 10 percent when they “roll off the lot” and data from Carfax shows that a new vehicle’s value can drop by more than 20 percent after just the first 12 months of ownership. These savings can make opting for a used model very attractive as long as the vehicle is in good condition.
Lease or own?
If you have your sights set on a new vehicle instead of a used model, the next biggest decision will be how you purchase. Both leasing and owning each have pros and cons for new car buyers.
When leasing, you are not stuck with your vehicle choice for a long-term – most leases will run just two or three years. Additionally, leased vehicles will generally have a lower monthly payment than an auto loan and you do not have to worry about trading in or selling your car later on when moving to a different model. That said, eligibility for lease contracts typically requires a very stable and predictable source of income. When leasing a car, you will also have to follow a set of defined rules such as mileage restrictions, required maintenance expectations, and the need to purchase additional insurance. These costs can add up and surprise many leasers.
By owning a vehicle, you are able to avoid the restrictive terms of a lease contract and make the car your own. You can customize the car as you wish and take as many long road trips as your heart desires. For owners who aim to own their car for an extended period and are eligible for good financing terms, this option is often worth it.
Grab good financing terms
For consumers set on owning a new or used vehicle, obtaining a good financing rate will be crucial in the long-term.
Do your research on different financing options before heading to the dealership. While most dealerships will offer an easy financing option that can be arranged right on location, this may not be the best deal available. Many dealerships act as a middle man in the car financing process and slightly mark up rates to turn an additional profit.
Even if the dealership is offering special financing terms and turns out to be the best option, it is worth knowing what rates your local banks and credit unions are offering.
Many dealerships will run promotions offering $0 down financing, especially on holiday weekends like the Fourth of July and Labor Day. While this may be attractive on the day of purchase, paying a sizable down payment can be significantly beneficial in the long term. Simply put, the lower the amount that you are financing, the lower the total interest charges will be. Experts typically recommend a down payment of at least 20 percent, but the actual car buying average is about 12 percent according to Edmunds. Consider your current financial situation and understand the long-term impacts that different financing options will have.
Beware of costly upgrades
While many consumers are aware that dealerships will often offer different upgrade options or warranties to turn an additional profit, these can still be deceiving. Dealerships take advantage of the large numbers being thrown around at the time of purchase to make add-ons look less expensive. Consumers see the total purchase price in the tens of thousands and think tacking on a few hundred is not bad. Whether it be a paint coating, a different set of tires, or a pumped-up entertainment system, be sure to research how much these modifications would cost to have done by a third party. Rarely will a dealership have the best price in town for aftermarket upgrades.