If you are trying to save money while car shopping, you should consider how, when and where you are planning on buying your next car. These few things alone can significantly change how you save money and what methods will work best for you.
A Few Things to Consider
Depending on if you are buying a new or used car, the car buying process, the fees, and what you need to do overall will differ. Therefore, how you save money while car shopping will also differ.
If you are buying a used car from a private seller versus from a dealership, you will generally need to handle getting your own paperwork sent to the DMV since there won’t be a dealership doing this for you.
General Money Saving Tips
The same exact make and model of an older year will have cheaper property taxes than a newer model. So, if you are looking to save money while car shopping, go with the oldest model year that has all the features you are looking for.
If you are able to afford to pay for the car in full, it might still be a good idea to get financing for the car if there is a 90 days same as cash option.
Sometimes the financing discounts that are available for financing are better than the cash discounts. It would also help you credit to have another account, especially since you already have the cash on hand to pay it off as soon as you get the first bill.
You Need to Know
If you finance the car, your insurance company will generally require that you get full coverage on the car. This is usually double or triple the cost of the basic coverage, but it could be more than that depending on the car you are insuring, where you live, and some other factors.
Depending on your state and county, if your car has tinted windows, when you get your car inspected, it might be subject to a window tint fee depending on the window tint level. You more than likely won’t need to worry about this fee until you need to get an inspection to renew your registration.
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Make a Budget
This is one of the best ways to make sure that you are able to completely afford the car you are buying and everything you will need to pay for to keep the car legal.
Having a budget will also impact some of the other points that I make later, so make sure you complete this step.
Make Sure You Know What You are Getting
It is better to research the car you are interested in on Kelly Blue Book, Car Complaints, and CarFax.
These sites are great for reading reviews on the cars you are interested in buying. This will give you a better idea of the issues you are going to deal with at various milage points. It can also help solitify your car choice or it can send you back to the drawing board depending on what you find.
What and How Much are You Paying?
It is better if you understand how much you can afford to pay monthly for the car payment, insurance, and the annual property taxes, title, and registration.
Some insurance companies will allow you to get a quote for a car that you don’t own yet, some act funny when you tell them that you haven’t bought it yet.
Generally you won’t know exactly how much your title, registration, and property taxes will be; however, you can look on your state’s DMV webstite to use their estimators and add that amount to their standard title, registration and other fees you will need to pay.
Make a Few Selections
Especially if you are looking for a used car, it is better if you decide on a few makes and models of vehicles instead of hoping that the one car you are interested in will be available. This will also be helpful if there is a car shortage or the price of a car you are interested in is higher than you were expecting and there are other cars that will also suit your needs.
Are you Buying New or Used?
Other than what car you are interested in buying, deciding if you are getting a new or used car is probably the most important question you need to ask yourself.
There are many aspects of the car buying process that differ depending on if you are buying a new or used car.
Buying a New Car
A new car will generally have a better interest rate because the dealerships are trying to interest you in buying a new car. However, just because the interest rate is better doesn’t mean that it is a better deal.
You need to consider the depreciation of the car as soon as you buy it will be greater with a new car than a used car. That combine with the fact that you don’t want or need the additional features that are available on the new car, might make the new car a bad buy.
Even though there are generally only special discounts and other special finance options available if you are buying a new car, you really need to decide if these things still make the car worth it.
Buying a Used Car
A used car is great because it has already depreciated significantly. The dealership will charge more for a used car than a private seller would because of their overhead and because people generally prefer to buy from a dealership because of the financing options and the purchase protections that they carry.
Car Insurance Companies
Like I’ve already mentioned, if you are financing the car, you will generally be required to get full coverage car insurance. Don’t assume that the car insurance company you are currently with will have the best rate.
Feel free to shop around for new quotes and see if you are actually better staying with your current company, even if you are already bundling items and getting a discount.
Get Pre-Financed from the Bank
Bank Only Financing
You will generally get a better rate if you get pre-financed from a bank instead of waiting until you get to the dealership and getting financed then. You should get pre-approved for the most you think you will need in order to buy the car you are interested in.
Some banks will also give you a better auto loan rate if you have certain special accounts with them, if you are able to get these accounts established before you apply for the auto loan, you will have money on the amount of interest you will need to pay.
Bank and Dealership Partnership Financing
Some banks only offer their financing through the dealership, so you would have to ask the dealership if they would let you get pre-approved before you attempt to buy a car, so you know the max you are able to spend and plan out your purchase better.
Consider the In-House Financing
Sometimes the in-house financing that is offered by the dealership will be a better option because of the special discounts that are availble.
Sometimes, dealers have a 90 days same as cash or a certain amount of money off your purchase if you use their financing.
If you are buying a car because your previous car was totaled in an accident, the 90 days same as cash option might be a good idea if you are waiting for your insurance company to send you a check after an accident and they have already told you how much you are getting back.
Have a Down Payment
One of the most beneficial ways to save money while car shopping is to have a down payment. It is a great way to help you minimize the amount of interest you are being charged each day for taking out the loan.
Just make sure you down blow all of your cash on your down payment. If you are able to keep a couple months of payments in a bank account for emergencies, that will help protect you should life happen.
Setup Autopay
This will help prevent you from having any missed payment issues. Life gets crazy and you won’t want to have to pay penalty fees or worse, have your car repossed or deactivated because you forgot to pay your bill.
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Pay More Than the Minimum Payment
If you are able to, try to pay more than the minimum payment, this will help cut down on the amount of interest you are paying during the life of the loan. Especially if you are paying less than you planned on each month.
Even if you are only able to pay a ONE penny more each month, that is better than nothing. Obviously, pay as much extra money as your budget and lifestyle will allow, but you get my point.
Utilize Your Paydays
If you get a bonus, a tax refund or any other payday, it is a great idea to pay extra on your loan so you will pay less interest and pay the loan off faster.
Don’t Let Tricky Wording Get You
Some banks will let you either pay ahead a maximum number of months, usually three months. This is NOT the same as paying strictly on the principal of the loan. Even if you pay ahead a certain number of months, you will still be charged interest on loan despite what their wording says.
For each day you have the loan, you are charged a certain amount of interest that varies depending on the principal balance. Every time you make a payment, you must pay this interest amount first, before any money can be applied towards the principal balance.
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Don’t Get Tricked
At some point while you are paying on your loan, you might get a letter saying that since you have paid your loan responsibly, they will lower your bill amount each month.
This is more likely happen if you are paying extra on your loan each month. This is the bank’s way of trying to get you to pay more in interest each month because you are paying down your loan faster than they would like.
Keep paying the original amount that you have been paying so you can get rid of the loan faster. If you can pay even more than you were paying before, that is great too, as long as you aren’t overextending yourself.
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