Looking for an eco-friendly subcompact or the thrills that come with a sports car? Perhaps the practicality of a sedan or a spacious SUV better fits your needs? No matter what type of vehicle is calling your name, planning your purchase can help you save as much money as possible.
Consider these six savings tips while shopping for your next car. Whether you’re concerned about upfront, monthly or long-term costs, there’s something here that can help you.
1. Look for a fuel-efficient car. Buying a hybrid or all-electric vehicle rather than a gas guzzler could help you save money on long-run fuel costs. Plus, state and federal tax credits might give you some additional upfront savings.
If you’re sticking to a fully gas-powered car, you can still save money by choosing a fuel-efficient model. Once you pick a class of car and determine your budget, use the Environmental Protection Agency’s miles-per-gallon rating for each vehicle to estimate and compare the monthly fuel costs.
2. Compare the long-term costs of different cars. In addition to fuel, consider the long-term costs of maintenance, repairs, insurance, taxes, depreciation, fees and financing.
To help you with the calculations, Kelly Blue Book has a 5-Year Cost to Own tool that lets you compare long-term costs for 2015 and 2016 models. Edmunds’s True Cost to Own® tool does a similar thing for 2010 and newer models.
3. Buy a “new-to-you” car. Buying a used car rather than the equivalent brand-new model can usually save you money. However, you’ll want to look at each used car on an individual basis. Consider how it feels during a test drive and its history if you can access it.
You may be able to buy a warranty for your used car, or you could purchase a certified pre-owned (CPO) car from a dealership. Dealers inspect CPOs before selling them with a manufacturer’s warranty. If you’re not buying a CPO, you could hire a mechanic to perform a pre-purchase inspection. It’s not a guarantee, but the inspection can help ensure you won’t get caught off guard by any unexpected issues.
With the right deal on a used car, you might be able to buy the car outright instead of financing the purchase. By paying cash, you avoid accruing interest, making monthly payments and worrying about loan-origination fees.
4. Negotiate the purchase. Most people don’t enjoy haggling with a car salesperson, but even non-confrontational negotiating tactics can help you save money.
For example, once you pick a make and model, you could shop online for available vehicles at nearby dealerships. Reach out to each dealer’s internet sales team and ask for their best total cost, inclusive of taxes and fees.
Take the lowest offer and ask the other dealers if they can beat it. If one of them can, take your new lowest quote and again ask the rest of the dealers to go lower. Keep going until you get a price that works best for you.
You could use the same tactic with dealerships outside your area. However, you may have to travel and pick up the car or pay to transport it.
Another helpful resource is negotiation services like Authority Auto, which negotiates competitive prices on new and pre-owned cars. For a fee, the online service negotiates each part of the process to get you a better deal and take some of the stress out of the car-buying experience and only charge a percentage of what they save you.
5. Consider leasing instead of purchasing. Taking out a lease is similar to purchasing a long-term rental. You’ll have to return or buy the car at the end of the lease, and you may have to pay fees if you drive too many miles or damage the vehicle.
The lease down payment and monthly payments will be lower than buying the same car outright. However, you can still save money by shopping around and negotiating because the down payment and monthly payments depend on the vehicle’s sale price.
If you like to drive a new car and always want to be under warranty, starting a new lease every few years could make sense. On the other hand, there’s more long-term value in buying if you tend to have a lot of wear and tear on your cars.
6. Use alternative means of transportation. Forgoing the purchase of a car altogether might not work for everyone, but it’s worth considering if you live in a city or don’t regularly drive long distances. Instead of owning a car, you could get around with a mix of carpooling, public transportation, walking and biking. You could also still have access to a car if you join a car-sharing program or use a ride-sharing app or taxi service.
Bottom line There are many ways to save money on your next car, and you should almost certainly plan your purchase before signing any dotted lines. Start by researching all your options, including living without a car, buying used and leasing. If you decide to purchase a car, you can compare the long-term cost of different makes and models and save money upfront by haggling with sellers.
Nathaniel Sillin directs Visa’s financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney.