6 Car-Buying Strategies That Can Lower Your Costs for Years
The moment you buy a car is only the beginning of what you'll actually pay for it.
Insurance, financing, maintenance, and unexpected repairs can add thousands of dollars to the cost of ownership over time. And that's just the expected expenses and not things like fuel and charging costs, cleaning and more.
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Fortunately, auto industry experts offer several strategies that can help keep those costs down before you ever sign on the dotted line.
1. Shop for Total Cost of Ownership
The biggest mistake buyers make is treating the purchase price as the only number to pay attention to, when it’s just the starting point. Joel Isfeld, auto dealership professional with Ringlead Automotive, recommended, "Focus on total cost of ownership.”
Total cost of ownership includes “financing, depreciation, maintenance, insurance, fuel costs, and how long you realistically plan to own the vehicle,” explained Alan Brown, managing partner of Galleria Chevrolet in Dallas.
Over the past several years, those variables have shifted enough, Brown added, “The cheapest vehicle on day one often isn't the least expensive vehicle five or eight years later."
To see just how much those costs add up, Ryan Salata, marketing director of Specialty Auto Parts USA, Inc. explained that a truck bought at $28,000 with $4,200 in annual fuel costs and $1,800 annual insurance holds $36,000 in hidden expenses over six years above the purchase price.
2. Buy the Car You Need — Not Just What You Can Afford
Just because you can afford a bigger or more expensive car, doesn’t mean you should buy it. Isfeld said there is such thing as buying “too much car” when it comes to total ownership costs.
Brown urged caution, too, in accepting up-front deals that add back-end costs.
“I've seen customers work incredibly hard to negotiate another $1,000 off the purchase price, then finance the vehicle for an extra year at a higher interest rate or buy something with significantly lower resale value," he explained.
That up front decision erases whatever savings they thought they were getting.
3. Make Reliability a Bigger Priority Than Lower Price
A great price doesn’t mean much if the car isn’t reliable, and reliability is key, Brown said, because it makes your auto budget more predictable.
“Unexpected repairs are what throw family budgets off course," he added.
However, reliability doesn’t mean a car won’t break down, Isfeld said. This makes warranties extra important, especially in an era where the costs of parts have been rising.
“Cars are complicated machines with thousands of parts, and are highly computerized today,” Isfeld noted.
4. Compare New, Used And Certified Pre-Owned
The old rule that buying used cars always saves money doesn't necessarily hold up in today's market, Isfeld said. For buyers paying cash, one- to two-year old vehicles can deliver decent savings. But if you’re financing, sometimes new is the “smarter financial choice,” he said, plus it typically comes with a full manufacturer’s warranty.
Salata suggested that the best strategy may just be purchasing three-year-old certified pre-owned Hondas or Toyotas and driving them to 200,000 miles.
“Someone else took on 30% to 40% depreciation, you get to keep remaining factory warranty and are driving [cars with] track records," he said.
5. Consider What the Car Will Be Worth When You Sell
A vehicle's resale value can have just as much impact on your finances as its purchase price.
"A vehicle that depreciates more slowly may give you thousands more in equity when it's time to trade,” Brown said. If it also has lower maintenance costs and reasonable insurance premiums, you've created a much stronger financial position over time.
6. Ask Questions That Reveal the Car's Real Cost
Rather than negotiating only on price, experts recommend asking some important key questions:
"What's my total out-the-door cost?"
"What interest rate am I actually qualifying for?"
"Are there manufacturer incentives I'm eligible for?"
"What's the expected resale value after five years?"
"What should I expect to spend on insurance and routine maintenance?"
Since the auto market has changed, it’s important to look beyond today's payment and think about where you'll be five or eight years from now.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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