It’s a tough time to buy anything right now. Grocery prices are going up, gas has gone through the roof, houses keep selling for more, and cars are at levels never before seen. In fact, there are reports of used cars selling for more than the new versions of the same model. Low or no inventory has forced people who absolutely need a car to bid up available cars, resulting in this upside-down scenario. However, if you’re in the market for a new ride, there are some steps you can take to come away with the best deal possible.
Reset your expectations
Just like the housing market, the car market isn’t what it was even a couple of years ago. Low inventory has put dealers in the driver’s seat. The days of comparing below-MSRP offers on the same model are gone. Edmunds released a report in February 2022 stating that more than 80% of new car buyers had paid above MSRP. They noted that “the average transaction price for a new vehicle climbed to $728 above MSRP in January 2002, compared to … $2,684 below MSRP in January 2020.” If you’re going in with the mindset that you can purchase a car at or below MSRP, you may be severely disappointed.
Consider if you can wait
I need a car now. If you just totaled your only car, waiting probably isn’t an option. However, if you still have a car that’s functional, would you be okay with waiting a few months so you can order the exact car you want? Even if you totaled your car, is renting an option for a few weeks while you finish your research?
I want a car soon. Longer term, can you hold out for a year? Right as COVID was beginning to shut down the world, I had thought of purchasing a used electric car. The prices were low, I don’t drive a lot – it seemed the right time to buy a car. Fast forward two years and I’m still driving the same car I was before. I’m hoping it can keep chugging along until this market loosens up a little. If you are in the same situation, baby your old car. Take it in for an inspection, make sure you’re doing regular maintenance; do what you can to keep it running until the market turns.
Do your research
At the very least, have an idea of the car and options you want along with the absolute must-haves. In other words, if you want a new Accord, would you be okay with a Camry? Is a four-door reliable sedan the must-have, and the Accord the want-to-have? What about options? Can you live with the bottom tier engine and less connectivity if you have power windows and AC?
Once you’ve narrowed it down to the model, start looking at dealerships in your area. Unfortunately with the lack of inventory, dealerships that once advertised the actual price of a car online now just list MSRP. Remember – that’s Manufacturer Suggested Retail Price. You may arrive to find that the price is MSRP+. Try to discern the amount of inventory they have. If you find a dealership with 20 of your dream cars, there’s a better chance you’ll receive a decent deal than if they only have two.
I’ll take anything
I’m someone who will drive pretty much any car as long as it gets me where I need to go. If you’re like me, consider out-of-favor types of cars, like station wagons or larger sedans. While you probably won’t see the deals of two years ago, you may be able to receive a sub-MSRP price if you’re willing to take a slow-mover off the lot.
Contact dealers before you visit
If you locate several dealers with ample inventory, give them a call. Ask about the car you’re looking for, tell them that you’re serious about purchasing, and ask them for a ballpark on the price over the phone. Some may give you an actual price, some may say something general like we’re seeing prices about $xx over MSRP, and some will tell you to come in. If you can receive any kind of feedback on pricing it will help you with negotiations.
Don’t be afraid to contact out of town dealerships
I live in a large metro area with multiple dealerships for every mainstream brand. For Honda alone, I’m within an hour of 8-10 dealerships. However, just over an hour out of town there are smaller communities that also have Honda dealerships. In fact, one car we purchased was ordered from a dealership 40 miles away.
Put your financing in order
In any car purchase, it’s better to have your financing already approved when you walk into the dealership. Interest rates are going up but you can still find car loans at competitive rates (especially through credit unions). Having the loan pre-approved doesn’t mean you must go with the bank. If the dealer offers you special financing that beats what you have in your back pocket, congratulations!
We’re in a weird place right now in the car market. Due to factory shutdowns and limited parts, there simply aren’t enough cars coming into dealerships. If you can postpone your purchase, consider waiting to see if the market changes. If you can’t, you can find a car today; just know it won’t be at the price you could have purchased it for two years ago.
Photo by Gustavo Fring