How to afford a car in a difficult economy
Car shopping? The market can be up and down, so it is important to be aware of what you can do to get the best deal on the right vehicle for you in a difficult market.
As consumers, the most common question we ask when thinking about car shopping is “can I afford a car right now?” The answer to this question is a bit complicated as it varies from situation to situation and time to time.
The simplest answer, though, is yes.
Where do I start?
You must know what you want in a vehicle first. Ask yourself things like:
- What features matter most to you in your day-to-day life?
- Who will be using the vehicle?
- Is it just for you or will others be riding with you?
- How much space do you need in the vehicle?
- How often will the vehicle be used?
All these questions can help you determine whether you need a sedan, an SUV, a minivan, or any other type of vehicle so you can narrow your search.
Having trouble figuring out what you are looking for in a vehicle? Check out this 10-step guide to find the right vehicle for you.
Understanding the market
Once you know what type of vehicle you are looking for, it is important to know what is going on in the car market. Like we mentioned earlier, the car-buying market fluctuates depending on a variety of factors ranging from the interest rate environment, inventory issues, and what is trending or popular.
Since the pandemic began in 2020, there have been a variety of supply chain obstacles affecting the economy. For example, the car market has been heavily impacted by a shortage of microchips and other critical parts, which has caused production to slow down. Some vehicle manufacturers have even halted production for the time being due to supply chain issues. Because of this, the average price of a new car is higher than it might have been before these supply chain issues arose.
This brings us to an important question: new or used? If supply chain issues are impacting the market for new cars, how does that compare to the price of a used vehicle? According to Cox Automotive data, the price of wholesale used vehicles has been rising due to the inventory of used vehicles shrinking.
So, what can you do?
Prices vary from place to place and time to time. The best thing that you can do is keep an eye out for the best deals.
It is important to do your research before you purchase a vehicle and know what you are looking for and what you can afford ahead of time. Your research should span multiple sources ranging from different dealerships to company websites. Know what a vehicle is worth and what you can afford before you talk to a salesperson.
Need help figuring that out? Check out this useful tool to help you compare vehicles and find the right car and deal for you.
Once you know what vehicle you are looking for and what deals on the vehicle look like right now, it’s time to evaluate how you are going to pay for the vehicle. Is it affordable to buy the vehicle outright? Is leasing the most feasible option for you? Would an auto loan be the best option for your specific situation?
If you choose to apply for an auto loan, you can try to save extra by looking for a financial institution offering a loan promotion with a lower rate on a loan or deferred payments. For example, at CAFCU we offer interest rate dicounts throughout the year on top of our already-low vehicle loan rates. Be on the lookout for unique offers like this when loan shopping.
There isn't a single best way to buy a car, as every person’s situation is different from the next. You just need to do what works best for you in this chapter of your life and what will set you up for the best possible situation in the future.