- Set a budget and exercise self-discipline to stick to it. Don’t get tempted by more expensive models or bells and whistles you don’t need. It’s very easy to lust for higher trim levels that aren’t a necessity. And skip the aftermarket products and accessories. Remember that a car is a depreciating asset and spending more on options won’t proportionately increase the residual value of the vehicle (with the exception perhaps of an automatic transmission).
- Don’t focus exclusively on just one vehicle. Having a couple of choices you like and could happily live with will help keep pricing near the forefront of your decision-making.
- Explore different ownership methods. Don’t make any assumptions about one method being cheaper than another. Leasing – despite often providing the lowest monthly payment – is usually a more expensive method of ownership in the long run. And don’t assume that promotional “0% financing” rates are the least expensive way to own or finance your vehicle (I cover this in-depth in this post). The least expensive way to own is usually by purchasing a well-maintained pre-owned vehicle and driving it to the end of its useful life.
- Perform your due diligence. There are many free or inexpensive resources on the internet that will tell you the invoice price (that’s the price a dealership pays for a new car). With this info, you can make an offer at a reasonable mark-up of around 3-5% above the invoice price. If buying used, you should be able to find average asking prices for a specific make and model online by examining used listing sites which you can use as a baseline.
- Shop around. Not all dealerships and salespeople are created equal. And the largest and most lavish dealerships aren’t necessarily the most expensive (as moving larger volumes can help keep individual unit prices down). But sometimes being willing to travel to a dealership that’s more eager to move a unit could save you money, so don’t limit yourself to the nearest dealerships.
- Considering using a car broker. A car broker is to vehicles what a real estate agent is to homes. Finding a trustworthy car broker in your area that can provide you with reliable advice about cars and dealerships can prove invaluable. They might even be able to help you get a better deal with their dealership contacts and expertise. Just make sure you’re engaging a car broker whose revenue model aligns with your best interests (i.e. you pay for their services rather than allowing them to collect undisclosed commissions from the dealership).
- Gas and insurance costs are part of the expense of owning and operating a car. Once you’ve got a short-list of cars you’d be happy owning, call your insurance provider to find out how much each will cost to insure. And call a few different insurance companies or brokers as the rates can vary greatly as can the coverage. Calculate the amount of gas you’re likely to use every year based on your annual driving and the estimated fuel economy. Factor this into your decision-making.
- Say “no” to the aftermarket add-ons and accessories. The dealership will probably try and sell you a plethora of extra services or products like special wax jobs, rust proofing, extended warranties etc. to increase their revenues on your transaction. Most of these aren’t worth the premium, but if you feel something would be of great benefit to you, shop around! Chances are you could save hundreds of dollars if you buy the product or service elsewhere. Or negotiate with the dealership on price of the product or service; knowing how much other providers sell the item for will help with your negotiating leverage.
- Maximize the value of your trade-in. If you have a vehicle that will be part of the transaction, ensure you’re getting the best possible price for your vehicle. The dealer’s first offer on your trade-in may not be their best. Shop your vehicle around to a few dealerships to be sure the price you’re being offered is fair, otherwise you might be paying more for your car than necessary. Read this post for more info on how to determine your car’s value.
- Take care of your investment. Stick to the recommended scheduled maintenance. Never neglect oil changes and filter replacements or your could be driving your vehicle to an early grave. The better you take care of your investment, the longer it will last, the better it will treat you, and the greater the resale value it will achieve. This can be especially true if leasing as many car manufacturers impose costly penalties for failing to adhere to the maintenance schedule. If leasing and you require bodywork or painting done, check with the dealership or car manufacturer for preferred vendors as inferior paint jobs could cost you thousands at the end of your lease – so saving a few bucks to get the less expensive bodywork or paint job will likely cost you much more when you return the car at lease end for inspection.
By following these tips you should be in good shape to keep your long-term vehicle ownership costs down. Never over extend yourself or buy more than you can afford.
If you decide a car broker is your preferred route, I’d be happy to assist in finding you your ideal car for the best price.