Washington, D.C. – As Americans begin to see the light at the end of the COVID tunnel, record numbers of buyers are venturing back into auto showrooms. “The problem,” says Jack Gillis, CFA’s Executive Director and author of The Car Book, “is that vehicle inventories are way down which means it’s a sellers’ market. Limited supply is a price-conscious car buyer’s biggest enemy.”
Vehicle inventory is down by about 30 percent which means car dealers have little incentive to negotiate. “The rule of thumb that nobody pays ‘sticker price’ for a new car has fallen by the wayside as dealers stick to the manufacturers suggest retail price (MSRP) on the vehicle label,” said Gillis. In fact, for some particularly popular vehicles in short supply, dealers are charging prices above sticker price.
Gillis’s advice on the best way to deal with this reality: “If you don’t need to replace your car right now, you should wait.” The widely reported computer chip shortage and other repercussions from the pandemic are expected to ease up by the end of the year or early 2022. “By waiting, you’ll have more electric vehicles to choose from, as well as the 2022 models with the latest safety features,” said Gillis.
Unfortunately, there are many Americans who don’t have the luxury of holding off, and need to replace or buy a new vehicle right now. If you find yourself in this predicament, CFA and Gillis are providing the following tips on coping with today’s market challenges.
Ten Tips on Saving in a Seller’s Car Market
- Shop carefully. You can find some deals and incentives, especially on the less popular vehicles. Everybody is looking for SUVs, but if a sedan meets your needs, you can find some good prices.
- Shop around online. As car buyers become more comfortable with online vehicle purchases, more and more dealers are offering internet specials. Shop carefully and read the fine print, but these offers can be good negotiating tools when you’re in the showroom.
- Widen your search process. If buying from a dealer 70-100 miles away will save you money, consider it. You can still take your car to your local dealer for service and warranty work.
- Avoid the upgrades. Unfortunately, most manufacturers don’t let you pick and choose your options, you must buy them in packages. Skipping the fancy packages on a particular model can save you 10-20 percent.
- Skip the extras. Dealer add-ons are budget busters. Floor mats, cargo containers, luggage racks and fabric treatments, if needed, can always be purchased later and at far less cost.
- Decline the extended warranty. Today’s new car warranties are very good and extended service contracts (they’re not really warranties) are not only expensive, but if they actually paid off for most people, they wouldn’t be such big profit centers. Instead, plunk those service contract dollars in a special savings account to draw on if you need post-warranty repairs. Most likely, you can use this account to build up your down payment for your next vehicle.
- Beware of using longer loans to reduce your monthly payments. While those smaller payments may sound attractive, you will pay significantly more in overall interest costs, and you’ll probably be “upside down” for the first year or two. That means if the car is totaled or you must sell it, you’ll have to make up the difference between your insurance payment (or sale) and the balance on your loan.
- Shop around for financing. Interest charges are one of the most expensive aspects of car ownership. Knocking a point off the interest rate by shopping around will save you hundreds and lower your monthly payments. Check with your credit union or bank to see what they are offering, so you’ll know if the dealer’s offer is a good one. Warning, very few people qualify for the often-advertised 0 percent interest rates, so don’t get your hopes up.
- Check out “No Haggle” dealers. No haggle or posted-price dealerships are becoming more prevalent. These dealerships will post a non-negotiable price on the vehicle, saving you the anxiety and pressure of trying to match wits with a seasoned, professional seller.
- Consider selling your used car yourself. The used car market is hot, and you can usually sell it for more than the dealer will pay you on a trade-in. Those extra dollars can help make up for the higher prices you’ll see in the new car showroom. Also, check out the national chains that offer to buy your vehicle with a price that’s good for 7 days.
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