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How to Get the Best Deal on Your Next Car Purchase: A Comprehensive Guide

Buying a new or used car is a significant investment, and getting the best deal can make a big difference in your long-term financial health. This guide draws from their wisdom and insights to help you secure the best car deal, whether you’re in the market for a new or used vehicle.

Lesson 1: The Changing New Car Market

Lesson 1: The Changing New Car Market
Lesson 1: The Changing New Car Market

The new car market has dramatically shifted in recent years, especially post-pandemic. The days of extreme scarcity are over, and inventory levels are starting to return to near pre-pandemic levels. While the market had previously favored sellers, things are beginning to tilt in favor of buyers. With interest rates starting to fall after a long period of hikes, it’s becoming easier to finance new vehicles.

According to Cox Automotive, inventory has grown significantly, with nearly 3 million new vehicles now available or in transit, compared to pandemic lows of 800,000 to 900,000. As the supply increases, manufacturers are expected to offer more incentives to attract buyers who were previously priced out of the market.

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Lesson 2: The Used Car Market Dynamics

Lesson 2: The Used Car Market Dynamics
Lesson 2: The Used Car Market Dynamics

While used car prices surged during the pandemic, they have since cooled off. Prices have dropped from their all-time highs, but the rate of decline has slowed. The current average interest rate for used cars remains high at about 14%, which can make financing a used car more expensive than a new one. Lease returns, a key supply of used cars, have also decreased significantly, which keeps the prices of two- to three-year-old cars elevated.

Key Takeaway: Prices for used cars are stabilizing, but the lack of lease returns keeps some of them at a premium. Be aware of the interest rate when buying a used vehicle, as it can greatly affect the total cost of ownership.

Budgeting: The 10% Rule

Budgeting: The 10% Rule
Budgeting: The 10% Rule

Before purchasing a vehicle, it’s crucial to establish what you can afford. Ray Schef’s 10% rule suggests that you should spend no more than 10% of your gross monthly income on your car, which includes the car payment, insurance, gas, and maintenance. For instance, if you make $5,000 per month, your total car expenses should not exceed $500.

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How to Calculate What You Can Afford:

  • Determine your monthly gross income.
  • Set aside 10% of that income for your car budget.
  • Use online tools from your local bank or credit union to estimate how much you can finance within that budget.

This approach ensures that you won’t stretch your budget too thin and can afford your car along with all its associated costs.

Lesson 3: Needs vs. Wants – Your Vehicle Assessment

Lesson 3: Needs vs. Wants – Your Vehicle Assessment
Lesson 3: Needs vs. Wants – Your Vehicle Assessment

Another critical step in the car-buying process is understanding your actual needs versus your wants. A thorough needs assessment can help you determine what kind of vehicle will best suit your lifestyle. Ask yourself:

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  • Will you use the car for business or pleasure?
  • Do you need space for passengers or cargo?
  • Will you be driving long distances regularly?

Knowing the answers to these questions can help you avoid purchasing a vehicle based solely on aesthetics or brand appeal. Remember, dealerships will often try to upsell you, so it’s essential to stick to your needs during negotiations.

Lesson 4: Understanding the Electric Vehicle (EV) Market

Electric vehicles (EVs) are becoming more popular, but they may not be suitable for everyone. Important questions to ask yourself when considering an EV include:

  • Can I charge the vehicle at home or nearby?
  • Are there sufficient charging stations along my daily routes?
  • How much does it cost to install a home charging station?

If you decide an EV is the right choice, Ray recommends leasing over buying. EVs tend to depreciate faster than traditional vehicles, making leases a more cost-effective option in many cases.

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Lesson 5: How to Search for Your Vehicle

Once you’ve identified your budget and vehicle type, the next step is to search for your car. Ray suggests starting on the manufacturer’s website, where you can build your ideal car and check for local inventory. CarEdge’s car search tool can also help you find vehicles in your area, providing insights into fair prices, price history, and how long a car has been on the dealer’s lot.

For used cars, consider multiple tools like Carfax, Edmunds, and Kelley Blue Book to compare prices and find the best deals. Using these resources allows you to arm yourself with valuable data for negotiating.

Negotiating Tips: Focus on the “Out the Door” Price

One of the key tips Ray emphasizes is focusing on the “out-the-door” price when negotiating. This is the total cost of the vehicle, including taxes, fees, and dealer-installed accessories. When you contact the dealership, whether by phone or email, request a detailed breakdown of the out-the-door price.

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Avoid getting sidetracked by discussions about monthly payments or down payments until you have a clear understanding of the total vehicle cost. Always ask for a breakdown of all fees and make sure that any verbal agreements you reach are confirmed in writing.

Pro Tip: Dealers are more willing to negotiate towards the end of the month when they need to hit their sales goals, so timing your purchase can give you added leverage.

Lesson 6: Trade-Ins – Separate the Transactions

If you’re trading in a vehicle, remember that your trade-in value is a separate transaction from the purchase of your new car. Before going to the dealership, get multiple trade-in offers from different dealerships or use online tools to see what your car is worth. This way, you can ensure you’re getting a fair value when you trade it in.

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Important Tip: In most states, trading in a car can save you money on taxes because you only pay sales tax on the difference between the new car price and your trade-in value.

Lesson 7: Pre-Purchase Inspections Are a Must

Before finalizing your deal on a used car, always get a pre-purchase inspection. Even if the car looks great, a thorough inspection by a trusted mechanic can reveal any underlying issues. This is your best protection against buying a car that might have hidden problems.

Lesson 8: The Finance and Insurance (F&I) Office – Your Last Battle

Once you’ve negotiated the price, you’ll move to the finance and insurance office, where dealerships make a significant amount of their profit by selling protection products and extended warranties. Ray advises buyers to be cautious during this stage and to ask for the “buy rate,” which is the interest rate the bank has approved for your loan. Dealerships often mark up the interest rate for additional profit, so knowing the buy rate can save you money.

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If you’ve already secured financing from a bank or credit union, ask the dealership if they can meet or beat that rate. This puts you in a stronger position and prevents any last-minute surprises.

Conclusion: Be Prepared and Stay in Control

The car-buying process can be complex, but with the right information and strategy, you can navigate it successfully. By following Ray Schef’s expert tips from Deal School, you’ll be well-equipped to get the best deal on your next car. From setting a budget to negotiating with confidence, each step of the process will be smoother when you’re prepared.

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Team Dal Motors
Team Dal Motorshttps://dal-motors.com
DAL Motors is the exclusive distributor for a range of international commercial and passenger vehicle brands in Sudan. The company was established in 1994 with its appointment as sole distributor for Mitsubishi Motors. The success of this initiative lead to DAL Motors being selected as the distributor for a range of further vehicle brands such as Mercedes-Benz, KIA Motors and Fuso. These partnerships have paved the way for DAL Motors to become the country’s leading automotive business.

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