3 Steps to Take Before Shopping for a New Car

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Steps to Take Before Shopping for a New Car

With the current state of low supply and high demand, it’s more important than ever to have everything to get what you want when you’re looking for a home. 

The same now goes for looking for a new vehicle. New cars are hard to keep in stock, and used cars are selling for more than they ever have. If you want to enter the market and win, you need to be prepared.

We’ll provide expert tips about trade-ins, financing, and why you should get a car insurance estimate so you can be a step ahead of the car-buying competition and still receive the best deals and rates.

Step #1 – Prepare to Sell Your Current Vehicle

If you hope to get a fair price for your used vehicle, you need to do your homework and see what similar cars are going for. You should certainly check Kelley Blue Book and the National Automobile Dealers Association, but you should also follow your local market, watch what people list their cars for, and pay attention to how quickly vehicles sell.

Trade-In Options

If it’s been a few years since you sold a car, you might have had an experience where you considered trading in your vehicle to a dealer but then changed your mind when they offered you next to nothing.

Times have changed, and used vehicles are in hot demand thanks to the ripple effect of a low supply of new vehicles. 

More dealers are ready to offer fair trade-in values than before, so you should at least consider the option. But don’t let the salesperson know right away that you’re considering a trade-in. 

Instead, check out the cars on the lot and see what kind of a deal you can get. Then, mention that you may have a vehicle to trade.

By finding out what you’d have to pay for your new vehicle before mentioning the trade-in, you can make sure the value the salesperson offers is what it is, and they haven’t increased the sale price of the new car to make it look like they’re giving you a better trade-in value.

Selling a Vehicle Privately

Even with dealers willing to spend more for used cars, you’ll almost always get a better price when you sell your used car privately. 

If you’ve paid off your vehicle loan, selling a car to a private party is straightforward. But if you still have a loan to pay off, it’s a bit more of a hassle to complete a private transaction. If you trade the vehicle in at the dealership, they’ll take care of the busy work of getting your title and paying off your loan. 

It is possible to sell a car you still owe money on privately. You’ll just have to take a few more steps. 

You could make more than you expected in the current used vehicle market and might even have enough to fund your next adventure.

Step #2 – Research Vehicle Financing Options

There are several ways to pay for a car, and one way is not always better than the others.

Dealer Financing

The dealer where you buy your car can often work as a lender. Sometimes their rates are competitive, and sometimes they’re not. That’s why it is crucial to compare dealer financing to your other lending options. You don’t want to pay more every month for the life of the loan just because it was convenient to use the dealer.

If you’ve done your homework and discover that the dealer offers comparative or better rates than what you could get from the bank, you can take advantage of the convenience without worrying you’re making a poor financial decision.

Bank Financing

Banks and credit unions often offer vehicle financing. Credit unions tend to have better rates, but that’s not always the case, and it’s why you should check both. 

If you do most of your banking with one institution but find a lower rate somewhere else, you can ask your preferred lender if they’ll match the competitor’s rate. Often, they will. 

If you prefer to make payments and track your loan on your phone, consider which banks have the best apps when making your decision.

Cash Purchase

It’s hard to beat the buying power of a cash purchase. First, you can often negotiate a lower purchase price when making a cash offer. Second, you’ll save money in the long run because you’ll avoid loan origination fees and interest.

The only downside to using cash to buy a vehicle could be if doing so depletes your savings, so you have nothing in case of an emergency.

Step #3 – Compare Insurance Rates for Different Vehicles

Part of budgeting for a new car should include planning for the cost of insurance. If you’ve narrowed down your list of vehicles you’d like to check out, you should compare the price of insurance between your options. 

Insurance premiums are based on several factors regarding the make and model of the vehicle. The following are some of those considerations.

Likelihood of Filing a Claim

When you compare vehicles, you probably don’t even think you’d be more likely to get in a crash in one make than another. You’re also probably not thinking that if you buy one model instead of another, there’s a significant risk the one you buy will be stolen.

The amount of data car insurance providers gather is astounding. And they have data to back up their claim that some makes and models are more likely to be in a crash. 

Whether it’s because drivers tend to drive some vehicles more dangerously than others or the safety systems don’t perform as well, the fact remains that even similar cars will have different insurance premiums.

Safety Features

Typically vehicles with more and better safety features cost less to insure than similarly valued competitors. Safety features help reduce the chance of crashes and filing a claim. And since insurance premiums are built on risk, the lower you can bring yours, the lower your premiums will be.

Vehicle Replacement Cost

Since insurance is based on risk, it makes sense that higher-priced vehicles will cost more to insure. For example, if a vehicle is worth $20,000, the insurance company faces that value as their maximum loss. But they’ll have to take on triple the financial risk for a vehicle that costs $60,000. 

You can expect higher rates for full coverage the more expensive the vehicle you buy is.

Vehicle Repair Costs

In addition to the vehicle’s value, the insurance company also has to consider the cost of repairs. For example, electric cars tend to cost more to repair because of the risk of damage to their costly batteries. 

Also, some foreign cars cost a lot to repair because the parts are hard to come by and expensive to replace.

Successful Car Shopping

Once you’ve taken these three steps, you’ll be better prepared to score a good deal with the best financing than if you went car shopping naively thinking everything would fall into place. So, spend some time becoming a savvy shopper and enjoy your new car.