How to Buy a Car If You Absolutely Need It in This Inflation-Ridden Hellscape
You may have noticed that the dollars in your wallet are suddenly worth less than a dollar. For this you can thank inflation, a measure of the decline in purchasing power. The current US inflation rate is 6.8% , the highest in forty years. In practice, this means that the things you buy are on average 6.8% more expensive than they were a year or so ago. And when it comes to buying a car, the picture is even bleaker.
Supply chain problems coupled with inflation have made cars incredibly expensive incredibly fast and everyone is trying to catch up. The average used car price is now an astounding $29,000, up 39% from last year. This means that for the first time in history, more than half of the country lacks the income needed to buy an average used car. And new cars are also more expensive than ever,averaging $45,872, up from $39,984 just a year ago .
However, despite the added shock of the stickers, you may have no choice but to buy a car in this inflation-ridden hellish world. If so, here are steps you can take to keep the horror to a minimum.
If at all possible just wait
Step one: take a breath and ask yourself: do you absolutely need to buy a car right now ? Inflation is likely to come down at some point, and the supply chain problems that make new cars so expensive (which in turn increases demand for used cars) will likely eventually be resolved. In other words, at some point prices will come down, at least a little. If you can wait a few months or a year, it might be worth it.
Get pre-approved
If you’re going to use the loan to buy a car, plan ahead and get pre-approved for one. This will help you in many ways: you can look for the best interest rate and other terms instead of having the seller sign the contract on the spot. You will also come to the dealership with “cash in hand” – not literal money, but the ability to buy a car right here and now, giving you more bargaining power. And knowing the terms of your loan ahead of time means the dealership can’t trick you into focusing on monthly payments rather than interest rates or total cost of ownership, so you’ll get the best deal possible.
This doesn’t mean you shouldn’t listen to a financing dealer’s offer – it may be better than your bank’s. But having prior approval puts the ball in your favor.
Do your research
This advice is relevant and helpful even when the economy is booming and you’ve just found a suitcase full of cash buried in your backyard, as it happens: don’t just walk into a car dealership. Do your research – find out which car you want to buy, which dealers have them in stock and how much they charge. You can use sites like Rydeshopper or Edmunds to get a lot of basic information to help you negotiate the best deal.
It’s also worth noting that in such a hot market, you need to be prepared for flexibility and have fallback options in mind. If your first choice is over by the time you get to the dealership, or if you have to change because the price suddenly goes up, having a short list of acceptable substitutes that you’ve also researched will help you stay on track. You are not panic buying.
Maximize your exchange
Cars are expensive, but that can work in your favor. If you’re selling your old car, you have one thing a car dealer desperately needs – more inventory. Trade-in prices havejumped 50% over the past year, and even high-mileage cars are getting huge rates. Make purchases from various dealers and check their prices on sites like Carvana to get an idea of how much your exchange is worth, then work with that asset to the best of your ability. Getting a big bonus when you turn in a new car can make that new car a lot more affordable.
Be decisive
Cars are a hot commodity, so you’ll have to be decisive – if you find the car you want, negotiate a good price, and you get a great trade-in deal, pull the trigger. The average car is parked for only 17 days, up from 70 days a few years ago. The old days of negotiating tactics are gone for now – by the time you get back, your car will most likely be sold.
This is a bad time to buy a car, but you can make it a little less nightmarish if you’re prepared and realistic, although finding a suitcase full of cash can be helpful.