How to buy a new car in one of the toughest markets ever – money | CarTailz

Autumn is traditionally a great time to buy a new car at a good price. But buyers face an incredibly challenging new-car market, and no one should expect great deals this year. That means it’s even more important for buyers to be smart about how they go about their car purchase.

According to a Kelley Blue Book (KBB) report on Wednesday, the average transaction price for new car purchases in October was near an all-time high. The average price increased by $187 to $48,281 from September to October. That’s just below the record $48,301 set in August and $1,775 higher than October 2021.

In normal times, buyers are often able to buy new cars for hundreds or even thousands less than the MSRP (manufacturer’s suggested retail price, also known as the sticker price). However, for 17 consecutive months, the average new car has sold above MSRP, KBB reported.

Some experts believe auto prices will fall in the coming months as supply improves and we see the impact of Federal Reserve rate hikes, which have raised auto loan rates and made financing a new car purchase much more expensive. Rate hikes typically reduce buyer demand for purchases that require financing, which could cause car prices to fall.

The Fed is probably not done raising rates and inflation is not yet under control. Car prices are still very high, and the additional financing costs of high interest rates make it difficult for Americans to afford a new car. But there are some strategies to make buying a new car less painful.

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Tips for buying a new car now

Whether you’re looking for the best possible deal during this period of high prices, or just want to make sure you find the model with the specs you’re looking for amid tight inventory, experts say there are several strategies that can help.

Forget year-end discounts on new cars

New model year cars arrive in the fall and dealerships often offer the best discounts on current year models around this time of year as they try to clear excess inventory.

However, new vehicle inventories are currently very tight due to supply chain and production issues, meaning buyers won’t find the blowout discounts, says Ivan Drury, senior manager of insights at Edmunds.

“If you’re looking for really big, deep discounts, don’t look at anything. You’re looking ahead at least a year, maybe even longer, because we’ve been in a state of reduced auto sales for almost two years,” says Drury.

The exception might be cars that underwent major facelifts in 2022-2023, says Aaron Bragman, Detroit Bureau Chief at Cars.com, because most people in the new car market want the latest version. For example, the 2023 Honda Accord will be completely redesigned. So if a 2022 model is available at a nearby retailer, you might be able to haggle with the sales staff and buy it at a lower price.

“An automaker might have a number of older models in stock – nobody stocks a lot of models, but they might want to weed out a few anyway, and as you get closer to the end of the year there might be a deal or two that you can close can buy from a retailer,” says Bragman.

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Your trade-in is “worth more than you think”

Used car prices have fallen in recent months and government inflation data released on Thursday shows used car prices fell a further 2.4% from September to October.

But the recent declines have wiped out only a fraction of the used-car price growth since 2020.

For people looking to sell a car or trade it in when making a new purchase, the increased value of used cars is the best they have.

“If you’re lucky enough to have a trade-in, I don’t care how old it is, I don’t care how many miles you have on it, it’s worth more than you think it is,” says Drury. We have seen some cooling in the values ​​used, but it is far from normal and is not expected to be normal for the next few years.”

Drury says dealers are “hungry” for used cars, so he recommends trying to negotiate a higher value for your trade-in. It may also be worth checking other options, e.g. B. Selling the car yourself or seeing what you could get from a car buying company.

Be ready to pounce

The auto market is now extremely competitive and sales at dealerships are fast and furious. So if you find a car you love at a dealership at a good price, it’s probably best to buy it right away. Don’t count on it being there if you wait even a few days.

“The good thing for buyers in the new vehicle market is that stocks are being replenished to some extent, but it’s nowhere near what you would normally expect,” says Drury.

Low inventories mean cars are expensive, and it also means buyers will struggle if they have their hearts set on something in particular. It’s critical that these buyers act quickly when they find something they like.

If you’re having trouble finding the vehicle and features you want, get online and see what’s available in your wider area, Bragman recommends. Broadening your search will also allow you to compare prices and (hopefully) avoid paying a large premium over the MSRP.

“The days where you actually go to a dealership and you just find a huge crowd full of cars that you can just pick and take home that day really don’t exist right now. A lot of that is behind us,” says Bragman.

Buyers will also have less stress finding desirable cars when they can be flexible, which could mean being open to different appointments or willing to travel.

If you can wait a few months, you can also place an order for exactly what you want. In the past, ordering cars was mostly for luxury cars, but Drury says it’s become a common practice for people to order more affordable vehicles like Toyota’s RAV4.

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Look for the best interest rates

The average interest rate on new car financing rose to 5.7% in the third quarter of 2022, so it has become crucial for buyers to ensure they are getting the lowest interest rate they can get.

Experts encourage buyers to arrange financing in advance before beginning negotiations with dealers. It gives buyers a benchmark, and merchants often try to offer something better because they make money when buyers fund through their partners.

While 0% financing deals have become rare, there are still some of those opportunities when buyers are able to choose a short-term loan of about 36 months instead of a more typical 72-month loan, Drury says.

Most buyers are looking for longer-term financing plans to keep monthly payments down when prices are this high. That might be necessary in this environment, but Bragman says it’s important not to extend the loan period too long. The last thing you want is to pay for a car after the time you’ve been driving it.