What you need to know to save money

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Car prices are at an all-time high and consumers are feeling the pinch. According to Kelley’s Blue Book, in June 2021, the average transaction price for a new car was over $42,000. Used car prices also reached a record average of more than $25,000 in June 2021, associated with an average of 68,000 miles on the vehicle, according to Cox Automotive.

So what is causing the price spike? A perfect storm of multiple factors, including a shortage of semiconductors (chips), the inability of automakers to keep up with demand, low interest rates from lenders as well as high credit scores and additional savings for consumers. This drove Americans to car dealerships, and the once-negotiable purchase of a vehicle turned into paying the list price and waiting lists.

If you are looking for a vehicle, you may feel like you have very little power. While experts paint a picture of being at the mercy of your local car dealership, there are several ways to approach the process of buying a car without paying a premium.

Be patient

The automotive market is at its peak and Pat Ryan, CEO of Copilota consumer-centric car shopping app, recommends all buyers to be “patient”.

Since the start of the pandemic in March 2020, the Federal Reserve’s consumer price index for new and used vehicles has jumped 30%. However, affordable days may be on the horizon.

Ryan told Select that we may see a “seasonal downturn” in the fourth quarter, but we’re still “six to 12 months away from a full correction.”

The US Bureau of Labor Statistics released its July 2021 Consumer Price Index results on Wednesday, and price increases for new and used vehicles both slowed significantly. From June to July, prices for new and used cars increased by 1.7% and 0.2% respectively. The price increase from May to June 2021 for new and used vehicles was 2.0 and 10.5%, respectively.

While this recent data may indicate the “tipping point” for car prices, Ryan’s best advice is that if you can wait a few months, it’s the best option for all consumers.

Be flexible in your choice of vehicle

Ryan also suggests that if your ultimate goal is to save money on your purchase, be flexible with the car you buy.

If you’re looking for a “low-cost new car” like a Honda or Toyota, you might find yourself with few options, Ryan said.

He noted that German vehicles, Buicks and RAM trucks are recovering in their supply. According to CoPilot, as of July 2021, nearly new trucks are the fastest-recovering segment in terms of supply. Coupes, sedans and crossovers are also restocking quickly. According to the law of supply and demand, a higher supply could lead to lower prices for these types of vehicles in the near future.

If you are flexible with the type of vehicle and its features, among other details, you are more likely to save money and avoid being stuck on a waiting list.

Look for cars that collect dust

If you’re planning on buying a vehicle relatively soon, try looking for cars that are “gathering dust,” meaning they’ve been listed online for a long time.

On several used car websites, including AutoStorm, you can filter by “oldest list”. By focusing on cars that have been listed longer, dealers or private sellers can be more flexible in their asking price.

Use your credit score to your advantage

As we are all used to hearing about sales and offers from your local dealership, this is no longer the case. “The dealer incentives are weak,” Ryan told Select. These incentives are rebates on the purchase price of a vehicle and low interest loan options.

Mark Reyes, CFP and Head of Financial Advice at albert, reiterated the importance of preparing financially before buying a car. “Don’t just rely on the dealer to get a loan. You may be able to get a lower interest rate and more favorable terms from your credit union or bank,” he said.

Have a good credit score and credit history can help you get favorable terms for your auto loan. Using a credit monitoring service can help you track your score, and some even offer to see your FICO auto-score.

It’s time to upgrade, if you need it

If you have a car worth trading in, Ryan says to seriously consider trading in your current vehicle for an upgrade. “There’s never been a better time to sell your car,” he said. And as dealers struggle to keep supply on their turf, they’re willing to pay more for your trade-in.

If you need (don’t want) to upgrade your vehicle, Reyes suggests “keep the price of your vehicle at no more than 30% of your annual salary while keeping monthly payments at no more than 10% of your monthly salary.” .

At the end of the line

Buying a car at this time is not only a difficult, but also an expensive process. If possible, it’s best not to buy a car and maybe try the car-free lifestyle if you Work at home.

If you need to buy a car, consider all of your options outside of your local car dealership, including: an online listing platform like Facebook Marketplace or Craigslist where locals list their cars for free, or a form of online e-commerce like carvana Where vroom where your car is delivered to your door.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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