Buying a new vehicle is exciting, and in many cases, relieving. New vehicles from reputable manufacturers tend to run smoothly and often come with significant warranties that will cover any repairs or maintenance that might be necessary in the first few years. On top of that, new cars are unblemished and come with the latest designs and features—so you can ride around in style.
The downside is that new vehicles tend to be expensive. Fortunately, there are several strategies you can use to reduce the cost of a new vehicle.
1. Choose the Right Model
Your first job is to choose the right model. There are thousands of makes and models to choose from, and many of them will serve your purposes fine without requiring you to spend much money. Do your research in advance, and you’ll likely find a number of models that provide a good balance of quality and cost; the right vehicle should be easy to drive, safe, fuel-efficient, and reliable, without costing too much money.
Luxury cars and sports cars tend to be more expensive due to features designed for comfort, better technology, a smarter design, or more complex mechanical components. If you’re budget-conscious, these features may not mean much to you. Make a list of your biggest priorities in a new car, and review the average costs of models that are capable of addressing those needs.
2. Employ Group Purchasing
Depending on what kind of car you’re thinking of buying, you may be able to engage in group purchasing. In the B2B world, group purchasing is a strategy that allows many buyers to aggregate and leverage their collective buying power. Suppliers are often willing to extend a per-unit discount to purchases of sufficient volume, and group purchasing organizations capitalize on this. Similarly, in this case, you would be grouped with like-minded people interested in buying the same model of car; if enough of you congregate, the supplier may be willing to extend a discount to each of you.
To accomplish this, you’ll likely need to work with a group purchasing organization (GPO). There are several types of GPOs available, some of which charge fees to buyers and some of which charge fees to suppliers. Make sure you understand the nature of the group before engaging with it.
3. Skip the Extras
Most new vehicles come with a wide range of additional features. For example, you might be able to upgrade to get a built-in GPS navigation system, or heated seats. While many of these features will seem exciting and might add genuine value to your driving experience, most of these accessories aren’t worth the extra costs. Dealerships will often justify charging hundreds of dollars for even basic built-in features; if you stick to the minimum, you’ll end up with a much lower cost.
If you find yourself missing these features, or if you want to upgrade in the future, you can usually buy individual accessories and install them yourself much less expensively.
4. Reduce Dependence on Financing
Financing your new vehicle can take its toll on your budget, especially over the long term, due to the power of compound interest. For example, you may find that you’re able to afford a $25,000 vehicle if you borrow $15,000. If you’re paying an interest rate of 4 percent, annually, over the course of 60 months, you’ll wind up with monthly payments of $276. However, you’ll eventually pay nearly $1,600 in interest over the course of the loan.
If you’re trying to reduce the total financial impact of your chosen vehicle, you should reduce your financing expenses as much as possible. You can do this by saving up a bigger down payment (so you take out a smaller loan), or by shopping around for better interest rates.
5. Shop Around and Negotiate
Finally, take the time to shop around and negotiate. Different dealerships and individual sellers may have different promotions or offers, which allow you to get a lower price for the vehicle you want. If you’re willing to make compromises, such as choosing a different model of vehicle or choosing different vehicle features, you may be able to find an even better deal.
Once you find a car you like, research typical prices online and consider negotiating to get a better final price. Negotiation isn’t as powerful as it used to be; thanks to the transparency and research tools available online, consumers are much better informed. Still, you should be able to get a much better price if you push for one.
If you put these strategies to good use, you’ll be able to lower the cost of a new vehicle, hopefully to a point that’s within your budget. If you’re still struggling with affordability, you may want to consider getting a used vehicle instead.