Buying a car is a major financial decision. In fact, outside of your home, your car may be your most valuable possession. Before you head into the dealership to start shopping for a car, make sure you do your homework. Research current buying conditions and possible demand and supply chain hiccups to prepare for what you can expect.
With an understanding of the current market in addition to some guidance and planning, you can find a great car at a great price, and get a loan that fits your needs. Before you shop for a car, take some time to read this guide to learn what you need to know about cars and car loans.
- Best Time to Buy a Car and Get a Car Loan?
- What Is MSRP and How It Impacts the Sales Price
- Finding the Best Car and Car Loan for You
- Selecting the Best Used Car and Car Loan for You
- What You’re Missing in Your Search for the Best Car Loan Rates
- What You Should Know When Using an Auto Loan Calculator
- Looking to Refinance Your Car Loan? Here’s What You Need to Know
- Auto Loans with America's Credit Union
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Best Time to Buy a Car and Get a Car Loan
Once you have a handle on your local buying conditions and external factors that may impact your car buying journey, you may not be able to wait to base your purchase around a certain time of year.
If you discover that shortages and supply chain issues are causing less than an average number of cars on the dealership lot, or if you do not have the luxury of waiting a few months to buy your next vehicle, your car buying strategy will greatly shift.
In order to beat the competition and save time, be sure to drill down on your preferred models while remaining flexible. This strategy helps reduce the amount of time you’ll spend walking car lots and taking test drives. It also proves useful as you navigate through what is available on the lot.
Your flexibility must continue to your features wish list. In addition to keeping your eye out for energy-efficient vehicles which may feature possible incentives, be sure to understand that the vehicles on the lot may or may not have the exact features you are looking for. Some vehicle makers may build models without heated seats due to missing parts but will install them retroactively once they become available. Make sure to research various models because external factors impact the industry differently.
If you do have the luxury of time, you can see if timing your purchase around the calendar will help lower the price. Here are the typical times that result in extra savings.
Choose the Right Month
First, consider the month you shop. Typically, October, November, and December are normally the best time to buy a car. There are two reasons for this. First, dealerships are nearing the end of their quota calendars at this time, and they are motivated to reach their annual sales goals. Second, dealerships are anticipating a flood of new vehicles for the coming calendar year. The current year's model will be discounted to account for this because they need to move them out
Choose the Right Time of the Month
Dealerships have quotas not only for the year but also for the month. If they are not close to meeting their goals, they may offer better pricing or incentives if you shop towards the end of the month.
That said, the very last day of the month may not be the best time, but rather a few days before the month's end. Each dealership has its own time frame for quotas, and they may not sync perfectly with the calendar month.
Choose the Right Day of the Week
Finally, the day of the week you shop has an impact on the price of your vehicle. Weekends are prime shopping time for car dealers, so you can't expect a good price on a vehicle if you shop on the weekend. Instead, consider shopping early in the week, when the salespeople are starting to look for new sales to increase their income for the coming week.
Holidays can also bring discounts on new vehicle purchases. Three specific holidays tend to bring big discounts on vehicles, including:
- Memorial Day – If you're going to need a car in the summer, shop during Memorial Day sales for the best price.
- Black Friday – Skip the lines at the retail stores and shop for a car instead on the busiest shopping day of the year.
- New Year's Eve – New Year's Eve brings many dealerships to the end of their calendar years, so you have a holiday sale working with quotas to help you get a good price.
Timing Your Car Loan
Timing has less of an impact on your car loan than it does on your vehicle purchase. However, if a lender receives commissions on car loans, shopping toward the end of the month can help you get a slightly better rate or faster approval.
For more tips and other factors to consider while searching for your new vehicle, review our most recent blog on the best time to buy a car.
What Is MSRP and How It Impacts the Sales Price
Once you've chosen the right time to buy your car, the next step is to learn about the prices you will see when you walk into the dealerships. If you understand the pricing on the sticker of the cars you're looking at, your negotiation skills will increase.
What Is the MSRP?
The MSRP is the "sticker price" on the vehicle because it's the price listed on the window sticker on the vehicle as it sits in the dealership. MSRP stands for "manufacturer's suggested retail price," and that's exactly what it is. This price is what the manufacturer suggests the dealership sells the vehicle for. This does not mean it is the selling price. It also does not mean it's the price the dealership paid for the vehicle.
What's Not Included in the MSRP?
The MSRP is simply a suggestion. It gives the dealership and buyer a starting point for negotiations. It does not include several things that impact the total cost of purchasing the vehicle, including:
- Destination charge – If the dealership had the vehicle shipped to the lot, it must pay the cost of that shipment.
- Dealer-installed options – If the dealership adds an anti-theft device or other option to the vehicle after arrival, that increases the price.
- Taxes, fees, and registration – These fees, mandated by the state, are non-negotiable but will add to the cost of your vehicle.
- Dealership fees – Some dealerships charge additional fees, such as document prep fees, dealer prep fees, and advertising fees, which may be negotiable.
How MSRP Helps BuyersThe MSRP is a good tool used to compare vehicles and apply for your car loan. It gives you a ballpark for what the vehicle will cost and allows you to compare the cost of similar vehicles to each other. While it may not be your out-the-door price, it is a good benchmark to use as you shop.
The MSPR also gives you a starting point as you negotiate. If the dealer is highly motivated to sell, they will negotiate below this benchmark. However, you may actually pay more than this price. If you're shopping for a vehicle that's in high demand, the dealership can put an asking price on it that's higher than the MSRP. Remember, MSRP is nothing more than a suggestion.
For more information on how the recommended selling price impacts your car loan application, review our most recent blog on MSRP.
Finding the Best Car and Car Loan for You
Now that you understand the pricing and timing for your vehicle, it's time to start shopping. How can you find the best cars and the best car loan rates to make that vehicle affordable? By carefully considering your needs and then shopping based on those needs, you will quickly find the best car loan and vehicle for your situation. Here is a step-by-step guide to finding the right car.
Step 1 – Consider Your Needs
The first step is writing out your needs. What, exactly, do you need in your new vehicle? Does it need to carry a certain number of passengers? Do you need to be able to haul a trailer? Is technology, like a backup camera or in-vehicle movie players, important to you? Make a list of the things you know you need in your vehicle, then make a list of the things you might want.
Step 2 – Set a Budget
A budget is helpful before you begin shopping. Typically speaking, your car payment should not be more than 15% of the money you bring home every month. You can find cars that are more or less than this amount but keeping your budget in mind will help you shop smart. If you're not sure what the monthly payment would be for a specific price range, use an auto loan calculator to help.
Step 3 – Research Costs of Ownership
As you consider the vehicle that's right for your needs, you must consider all of the costs of ownership. Some things that can vary from one vehicle to the next include:
- Gas mileage
- Cost of Insurance
- Cost for major repairs
- Vehicle depreciation
If you're trying to decide between a few similar vehicles, weighing these costs of ownership can help make your final decision.Don’t forget to consider costs for additional coverage or insurance when considering your overall costs. If you are unsure if Gap Insurance is necessary, review our recent blog that explores five reasons why you may need Gap Insurance.
Step 4 – Take Some Test Drives
Before deciding on the best car for your needs, take some test drives. Sitting behind the driver's seat of a vehicle and feeling the vehicle's responses to your driving habits will help you find one that not only fits your checklist but also feels great to drive.
Schedule some test drives before you start shopping in earnest. If you can, take the vehicle through some of your typical driving experiences, such as freeway driving or rural driving, depending on your commute. Look over the location of the various controls, listen to the sound of the engine, and even take time to listen to the stereo and sound system. Sometimes a test drive will help you rule out a vehicle you thought you'd love, and this will make your search for a new car easier.
Step 5 – Find a Car Loan
A car loan is an important part of the shopping process. You have three basic choices for your car loan. These are:
- Get a car loan through the dealership
- Get a loan through a credit union or bank
- Get a car loan through another lender, such as an online car loan company
If you choose to get a loan through the dealership, you will want to remember that car loans are a major part of their income. They are going to try to fit you into a monthly payment versus focusing on the rate.
Instead, consider working with a credit union or a bank. Get pre-approved for a car loan early in the process, then shop knowing what you can afford to spend.
The one exception may be when shopping for a new car. New car incentives often include a car loan in the overall incentive package. Zero-percent financing or large cash rebates can make your new car purchase more affordable. Keep in mind that these types of incentives often come at a cost somewhere else in the process, such as a higher sales price or less value for your trade-in, so do your research before signing the loan documents.
A search for the best cars available and conducting due diligence does not have to be a stressful or uncertain process. For more tips on how to save time and money, be sure to review our recent blog on finding the best car and car loan for you.
Selecting the Best Used Car and Car Loan for You
If you're shopping for a used vehicle instead of a new one, you may have additional considerations. While you will still want to follow the previously mentioned steps, including the test drives, vehicle research, and needs estimations, you will need to dig a little more deeply to avoid buying a lemon. Here's how you can protect yourself.
Know Where to Look
If you're shopping for a used vehicle, you don't have to shop only with the dealership. You can also look in classified ads or shop online to find private sellers. If you buy from a private seller, make sure you carefully research your options and the seller to avoid scams. There are several steps you can take to ensure that the vehicle itself is worthwhile as well.
Check the Vehicle History Report
A Vehicle History Report is invaluable in your search for a used car. The best used cars will have few owners and no accidents in their history. If you notice serious flaws in the Vehicle History Report, the price should reflect that. CarFax and AutoCheck are both popular websites that let you see the car's full history based on its VIN.
Have Your Mechanic Check it Out
If you get serious about a used car from a private seller, ask if you can have your mechanic check it over before you purchase. A reputable seller will be willing to let you do this, provided they can come with you to the appointment. If the seller isn't willing to let you have your mechanic check the vehicle, chances are they are hiding something.
Get a Used Vehicle Car Loan
Like new vehicles, used vehicles offer similar car loan options with one difference being you have fewer incentives at the dealership because the special financing offers are rarely available with used vehicle purchases. Due to this large difference, the best used car loans are typically through a credit union or a bank, rather than at the dealership.