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Prices of everything from utilities to groceries are skyrocketing. Car markets are also affected by exorbitant price hikes. The costs of buying a used car increased by a record-breaking 30% during the months leading up to May. New car prices aren’t doing any better, with the average transaction cost increasing by a whopping $47,148.
These facts might dissuade you from investing in a new vehicle in times of a recession. Most people would wait and buy when the prices are better suited to their budget. Yet, what do you do for urgent cases?
Use these eight tips on purchasing a car amid inflation.
Tip #1: Order Your Car From the Manufacturer
There are various ways car dealers can make money. Two of those ways are price markups and retailer add-ons.
For example, car dealers typically buy warranty policies from car warranty companies at a discounted price. This is possible because they have something that most companies consider valuable to their business: purchase volume.
After purchasing all these warranties, car dealers then sell them to customers at a marked-up price. This means more money for the dealership and fewer savings for the customer.
A great way to avoid markups is to order your car directly from the vehicle manufacturer. They don’t charge you the fees that retailers and dealers typically would. Plus, you can customize your vehicle to fit your preferences and needs.
Tip #2: Do Your Research
Most people who decide to buy a car take out auto loans. While there’s nothing wrong with taking out a loan, it can be risky, especially during a recession. Experts caution customers against taking out loans with predatory interest rates. Typical rates offered to customers with great credit scores range from 6% to 8%. Anything higher than that puts the customer in risky territory.
Research everything you need to know before buying your car. This includes which dealership offers the best prices and which lender gives the best rates. List all your findings and base your decision on this information.
Tip #3: Double-check Documents
The deception is often hidden in the fine print. Before signing any document or contract, make sure to review every page carefully. While it’s generally recommended for customers to solely take out loans from reputable providers, there are still some providers who take advantage of their customers’ trust.
Be wary of interest rates, penalties, and processing fees that might not be outwardly stated by the lender. These fines can end up costing you more than your loan amount if left unaddressed.
Tip #4: Look for Certification
For those looking into used cars, choosing a certified pre-owned car dealer is important. It might be more expensive to work with these companies, but they offer you services that you won’t find with most uncertified providers, such as car warranties and insurance. They can also give you higher-quality options compared to other providers.
Tip #5: Consider Buying Electric
There are now more electric cars being sold worldwide than there have been in the past 10 years. As more companies try to make production more sustainable, the demand for electric vehicles has steadily increased over the past couple of years. Investing in an electric vehicle is a great way to save on fuel and maintenance costs. Studies show that those who drive electric vehicles save over $14,000 on fuel.
Tip #6: Consider Home Deliveries
Your car loses around 20% of its value as soon as you drive it off the dealership. One way you can continue to preserve its value is by getting your car delivered directly to your home. This prevents you from incurring unnecessary mileage on your vehicle by driving it from the dealership to your home. It also protects it from getting into any type of accident while on the road.
Keep in mind that delivery costs may differ between providers. So, get an estimate for delivery before you proceed to get one.
Tip #7: Negotiate for Better Prices
Most dealerships drive a hard bargain, which is why customers don’t bother to negotiate their prices with a salesperson. Before you settle for what the dealer is offering, try to get the price to where you feel most comfortable. This will save you thousands of dollars in the long run.
If not, consider asking your lender or car insurance provider if they have discounts or rewards that could bring your car costs down.
Tip #8: Stick to a Budget
Going over budget during a recession could be the worst thing that you could do to your finances. Thus, you must avoid overspending at all costs. One way to avoid overspending is by choosing a suitable car down payment. With the right down payment, you’ll incur less interest over time and minimize your monthly expenditures. If you have a budget set, you should do whatever you can to stick to it. That way, you won’t be incurring any debt that you aren’t properly equipped to handle.
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