With new and used car prices continuing to decline and potential Federal Reserve interest rate cuts on the horizon, now might be a prime time to consider purchasing a vehicle. According to Edmunds.com data, the average transaction price for new cars in June was $47,616, down 0.7% from June 2023. Additionally, buyers enjoy larger discounts from sticker prices, with an average discount of $1,819 compared to $704 a year ago. Used car prices have also fallen, with the average price dropping to $27,277 last month from $29,573 a year ago.
Despite these price drops, automakers are not expected to offer many deals this year. “Even brands holding onto more days’ supply, like many Stellantis brands, are keeping incentive spend in check,” said Erin Keating, executive analyst at Cox Automotive.
Preparation is Key
Research and Preapproval: Before heading to a dealership, thoroughly research your options. Understand the specifics of the new vehicle, the value of your trade-in, interest rates, and what is negotiable. Ivan Drury, director of insights at Edmunds.com, advises getting preapproved financing from banks or credit unions for new and used vehicles.
Dealership Financing: Even if you have preapproved financing, let the dealership explore loan options for you. Dealerships often have long-standing relationships with financial institutions and may secure better rates.
Negotiation and Financing
Out-the-Door Costs: Focus on the total “out-the-door” cost, which includes all fees and taxes. Some fees may be negotiable, and dealers might make adjustments if they want to close a deal.
Captive Finance Offers: Manufacturers’ captive finance companies can offer attractive financing rates. Evaluate whether these offers save more in interest than other discounts available.
Shopping Tips
Trade-In Vehicles: Avoid trading in a vehicle shortly after purchase, which can lead to negative equity or significant depreciation costs. Choose features that improve daily driving experiences, such as heated seats or advanced parking aids, but avoid less-used options like a moonroof.
Weather Considerations: Test drive in adverse weather conditions to understand how the vehicle performs. For used cars, inspect them in bright light to spot imperfections, and drive them in the rain to check for leaks or foggy lights.
Test Drive Essentials
Detailed Evaluation: During a test drive, assess the car’s acceleration, vibrations, shifting, and brake performance. Ensure you are comfortable with the car’s controls and features, which will be integral to your driving experience.
Practical Tests: Sit in all seats, test whether the child seat and stroller fit, and consider bringing your pet to see if the vehicle suits your needs. Always get a pre-purchase inspection by a trusted mechanic and obtain a vehicle history report.
Final Advice
Know When to Walk Away: Take your time and avoid making hasty decisions. If a deal seems urgent, it might be worth waiting to ensure it meets all your needs. Automaker incentives do expire, but a well-considered purchase is crucial for long-term satisfaction.
By following these expert tips, you can navigate the car-buying process more effectively, ensuring you get the best deal and the right vehicle for your needs.
