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How to buy a new car in a high-cost environment Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive tools and financial calculators as well as publishing authoritative and original content, by enabling you to conduct research and compare information for free – so that you can make decisions about your finances with confidence. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies that pay us. This compensation may impact how and when products are featured on this website, for example such things as the sequence in which they appear within the listing categories and other categories, unless prohibited by law. This applies to our mortgage home equity, mortgage and other home loan products. However, this compensation will not influence the information we provide, or the reviews that you read on this site. We do not contain the vast array of companies or financial offers that may be accessible to you.
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4 min read Published March 03, 2023
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the details of using loans to buy an automobile.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to take control of their finances by providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.
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The purchase of a new car comes with the added perks of personalization, the most recent technology and the sought-after fresh car smell. However, over the last few months, buying new has also carried record high prices. Up 11.9 percent from this time last year, the average purchase price (ATP) reached $48,000, as reported by . So, if buying a new car is likely to be in the near in the near future, it’s best to take into consideration the best practices prior to going to find a dealer. Five strategies to save money while buying a new car while costs are expensive when you are making a major purchase, the most effective way to save money is planning. It is essential to conduct some research prior to beginning your buying a car, and then lock your financing through and budget accordingly. In addition, with the cost of cars increasing, this could be a good time to consider or even purchasing a vehicle instead of new. Along with our experts, Brian Moody, executive editor at Autotrader offered his suggestions for saving money regardless of the overall car buying climate. 1. Research before heading to the dealership. Online resources have transformed the process of buying a car and let you be aware of the exact inventory dealers have on the lot prior to visiting the dealership. This is particularly important when there is the fewer inventory options available. Make sure you check the availability of vehicles in your local area prior to visiting in person. In the event that you are pressured to purchase a vehicle that you’ve not done enough research on, Moody recommends “doing the bulk of research online well before visiting a dealership in person.” Pay close attention to any extras or deals dealers might offer. Two dealerships could offer the same car, but one may offer more benefits like free maintenance or discounts on car accessory items, Moody explains. 2. Request a loan preapproval. It is a crucial step to take in the purchase of a new vehicle. It confirms your planned monthly costs with a possible lender before buying the vehicle. Then, you can shop with a firm understanding of the amount you can spend. However, you must think about it the same way as you do when shopping for a car — you need to compare lenders and don’t sign off on the first option you are presented with. As Moody explains, high prices mean that loan preapproval important to save money. Moody also suggests getting preapproved at your local financial institution or credit union. 3. Keep your budget in check the cost of a vehicle reaching $50,000 you must consider your budget as a guide when shopping for a car. While it is certain that regardless of environment it is wise to stay within your budget, with prices that high, there’s not much flexibility. To figure out how much you’re able to spend you can afford, use an application to calculate your monthly finance cost. Don’t forget to take into vehicle expenses, like and . 4. You might consider leasing for a short-term if you have your sights set on a particular car you can’t find on the dealer lot, could be a viable option to continue to take the steering wheel. “While leasing for the long term will cost more than leasing for a shorter term can help a buyer obtain the car they desire at a reasonable cost,” Moody says. At the time that the lease ends the market will likely be different, and you could be able to buy a brand new vehicle. 5. Consider buying a used car if you’re flexible and are willing to spend money on a vehicle instead of purchasing a brand new one can be an alternative. It will not only ensure that you can actually get around in a vehicle and not have to worry about parking, but it can also save you money. “Those seeking a good bargain should check out pre-owned cars,” Moody says. With such high demand for vehicles and low availability, prices for new cars will continue to be expensive. The current state of the automobile market high vehicle prices are dependent on a variety of variables, including inventory availability and supply chain issues that remain and . All of these affect the cost that you are charged at the dealership. But Moody says that the biggest influence right now comes down to demand versus supply. “There are just about one million brand new cars in dealerships across America.” Moody says. “The used inventory of cars is more than double that. That low supply of new cars combined with strong demand is forcing prices to rise.” On top of this, actions made by the make borrowing money for your new car expensive also. The fourth quarter of 2022 saw motorists taking out loans for 4 percent more their vehicles, according to . In the 4th quarter in 2021,, people taking out auto loans have financed on average $39,834against the average of 41,000 that owners of cars are financing in 2022. Due to the combination of the high rates of interest and the cost of automobiles, you could be expected to spend more on an expensive new car. Will vehicle prices return to their normal levels? The issue of prices for vehicles returning to normal is a slightly more complicated question. But, according to Moody, new inventory should start to stabilize by the spring of 2023. “There are numerous new models on the way and some supply chain issues will be solved by then,” Moody says. In the meantime, you’ll have to be prepared to do more research than you normally would and perhaps settle for less than your dream car. But just because the inventory isn’t as plentiful does not mean that you cannot drive off the lot happy. The point is that when you’re able to wait on buying an automobile this could be worth it to save money. But if you’re like most Americans, waiting may not be an option. Instead enter car buying with more caution and be prepared to pay an extra amount even if you leave with a good deal. Find out more
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Authored by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ways and pitfalls of borrowing money to purchase a car.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping their readers to manage their finances with precise, well-studied information that breaks down otherwise complex subjects into bite-sized pieces.
Auto loans editor
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