With new and used car prices continuing to fall and the possibility of interest rate cuts from the Federal Reserve looming, now may be a good time to consider buying a car. According to data from Edmunds.com, the average transaction price for a new car in June was $47,616, down 0.7% from June 2023. Additionally, buyers were able to get bigger discounts off the list price, with the average discount being $1,819 compared to $704 a year ago. Used car prices are also falling, with the average price falling to $27,277 last month from $29,573 a year ago.
Despite the price cuts, automakers aren't expected to offer many specials this year. “Even brands with heavy inventory, like many of Stellantis' brands, are holding back on incentive spending,” said Erin Keating, executive analyst at Cox Automotive.
Preparation is key
Research and pre-approval: Before you go to the dealership, thoroughly research your options. Know the details of the new car, trade-in value, interest rates, what you can negotiate, etc. Ivan Drury, director of insights at Edmunds.com, recommends getting pre-approved financing from a bank or credit union for new and used cars.
Dealer Financing: Even if you've been pre-approved for financing, have the dealer review your financing options. Dealers often have long-standing relationships with lenders and may be able to secure a better interest rate.
Negotiations and Funding
Out-the-door costs: Look at the total “out-the-door” costs, including all fees and taxes. Some fees may be negotiable, and the dealer may make adjustments if they want to close the deal.
Captive finance offers: Manufacturer captive finance companies can offer attractive financing rates. Evaluate whether these offers will save you more on interest than other discounts available.
Shopping Tips
Trade-ins: Avoid buying a trade-in vehicle too soon after purchasing a new vehicle, as a trade-in can lead to negative equity and significant depreciation. Opt for features that will improve your daily driving experience, such as heated seats and advanced parking aids, but avoid less commonly used options, such as a moonroof.
Weather considerations: Test drive the vehicle in inclement weather to get an idea of how it performs. If it's a used car, inspect it under bright lights to spot any defects and drive it in the rain to check for leaks or cloudy lights.
Test Drive Essentials
Detailed Evaluation: During the test drive, we evaluate the vehicle's acceleration, vibration, shifting and braking performance to ensure you are familiar with the vehicle's controls and features that are essential to the driving experience.
Hands-on test: Sit in all the seats, test car seats and strollers for fit, and consider taking any pets with you to make sure the vehicle suits your needs. Be sure to get a pre-purchase inspection by a trusted mechanic and get a vehicle history report.
Final advice
Know when to give up: Take your time and avoid hasty decisions. If a deal seems urgent, it may be worth waiting to see if it meets all of your needs. Car manufacturer incentives have time limits, but making a wise purchase is key to long-term satisfaction.
Following these expert tips can help you navigate the car buying process more effectively, ensuring you get the best deal and the right car for your needs.