Is Now A Good Time To Buy A Car?

The times, they are a-changin’ – especially when it comes to car buying. If a set of new (or used) wheels has been on your mind recently, you might be asking, is now a good time to buy a car? 

The short answer to that question is yes, sort of. “It’s a lot better than it has been,” says Greg Brannon, Director, Automotive Research at AAA. “It’s certainly not the worst time, particularly if you’re a cash buyer.”

If a vehicle purchase could be in your future, pump the brakes, and read on for everything you need to know before you buy. 

SUBSCRIBE: Get the HerMoney newsletter delivered hot and fresh to your inbox two times a week — for free!

PRICES: UP LIKE A ROCKET, DOWN LIKE A FEATHER

Following a spike in consumer demand for vehicles during the pandemic, things have finally leveled off – and that has meant changes when it comes to pricing. 

“There was a ton of consumer demand during COVID and there were no cars, so it drove up both the price of new and used cars,” explains Brannon. “It’s up like a rocket, and down like a feather. That’s what we’ve seen in the market over time. It’s taken a while, but supply has resumed and prices are headed back to what might be a new normal for us.”

What does that new normal look like? Today, the average new vehicle costs $47,870, down 1.7% from the year before, according to Kelly Blue Book data. Meanwhile, a used vehicle will run you an average of $25,172, which is a 6% decrease from a year ago. 

“We’re seeing a more dramatic decrease in the price of used cars,” explains Brannon, who notes that while auto manufacturers have fixed costs to cover in the production of a new vehicle, used car prices are a bit more elastic. “Compared to previous years, I think used cars are more affordable.”

With Interest Rates Dropping, Is Now A Good Time To Buy A Car?

ICYMI, there was some big interest rate news recently, and there’s likely more to come. According to Brannon, the interest rate cut is a double-edged sword. “They cut the rates, the demand will go up, so supply could potentially go down,” he explains. But in the short term, at least, the falling rates are good news for consumers. 

While car loan interest rates haven’t fallen tremendously, they’re likely headed that way, says Brannon. In light of the changing interest rate environment, the most important thing buyers who plan to finance their purchase should do is shop around to find the best rate possible. 

Just keep in mind that the best rate won’t necessarily come from your dealer. It’s important to explore all your options — local banks, credit unions, and online resources — for the lowest rate and best terms. Then, armed with that information, head back to the dealership. While you may want to stick with financing from this outside source, a lower interest rate from a bank or credit union could also be the bargaining chip you need to get a better price from the dealer. 

 “Many times the dealers can offer a better purchase price for the car if you use financing through them because they are given an incentive [to sell you] that financing,” explains Brannon. “It could be that the dealer might be a quarter of a point higher, but they’re able to give you a better price for the car.” So, make sure you do the math before signing on the dotted line. 

BUY A VEHICLE FOR 98% OF YOUR USAGE

Once you’ve answered “yes” to the question “Is now a good time to buy a car?” Brannon says to avoid the #1 mistake he sees people making — which is buying a vehicle to cover 100% of the things you think you might want to do. For example, don’t upgrade to an expensive truck simply because you might want to haul a kayak in it once a year. 

“You are paying in some cases double the operating expense that you would for a vehicle that could, the other 98% of the time, get you to and from work…and around in your daily life,” explains Brannon. “You need to really consider whether or not you need to own or rent a vehicle for that 2% of the time.”

DON’T FORGET ABOUT DEPRECIATION

The other biggie, according to the experts, is forgetting to factor in depreciation. That’s what you pay for the vehicle today vs. what you can sell it (or trade it in) for when you’re ready to get rid of it. “We like to talk about fuel and maintenance, interest rates and all these other things, but the truth is that depreciation is the biggest ownership expense,” says Brannon. 

To help, AAA has an online calculator you can use to break down what depreciation might look like for the vehicles you’re considering. “It’s super important to shop based on that depreciation, because you can have a similar make, model, cost and purchase price for a vehicle and the depreciation can be radically different from manufacturer to manufacturer,” adds Brannon. 

SAVING BY GOING (SOMEWHAT) GREEN

Whenever you buy, you’re going to want to keep efficiency top of mind. According to AAA’s latest “Your Driving Costs” study, hybrid vehicles generally come out on top when it comes to value. 

“Hybrids are the winner over electric vehicles, over gas vehicles, and that is largely because they have lower fuel and maintenance costs than other vehicles,” notes Brannon. 

THE BOTTOM LINE

So, is now a good time to buy a car? Lower prices coupled with interest rates that are trending downward has absolutely improved the market for car buyers. Plus, the selection of cars on lots is much better than it has been in recent years. Once you know you’re ready to take the wheels, the most important thing to keep in mind is triple-checking the price to make sure it fits into your overall budget. 

MORE ON HERMONEY:

• Fed Cuts Interest Rates By Half A Point: What It Means For You
• How To Pay Off Credit Card Debt
• All About Emergency Funds (How Much, Best Accounts, Rules And More)

The post Is Now A Good Time To Buy A Car? appeared first on HerMoney.