Driving toward an auto purchase in today’s market
Posted: August 26, 2021 | Word Count: 706
Among the many impacts of the ongoing COVID-19 pandemic is the rising price of new and used cars. Factory shutdowns during the pandemic, a computer chip shortage, and low inventory are driving up the price of new cars. Given the low inventory of new cars, consumers are turning to used cars, but demand is also driving those prices up. The good news is, there are money-saving opportunities if you are in the market for a new or used car.
Take advantage of low interest rates
Rising prices mean automakers are not offering the same type of incentives they have in the past. Plus, due to high demand, there is little bargaining going on at the time of purchase.[i]
But financing is on your side as lenders are offering rock-bottom interest rates. The average annual percentage rate on a new auto loan – no matter what the length of time – was 4.2% in June. That’s down from an average of 6% in June 2019, and the lowest in five years,[ii] which will help save you money.
Cash in on your current car
If you have a used car to trade in, you might be offered more than you were expecting with prices for used cars rising even faster than for new ones.[iii] Coupled with low interest rates, you could find a good financial deal. If you own your car and plan to trade it in to purchase another vehicle, the first step is to make sure you bring the vehicle’s title with you. Without the title, the transaction can’t be completed. If you still have a loan on the vehicle, look up your balance to see if your vehicle has equity. If your trade-in offer covers your remaining loan balance, you won't have to pay anything additional out-of-pocket. Any extra money left after that can be put toward your next vehicle.
Trade-in offers are typically good for about one week, so don’t feel rushed to accept the first offer you get. Most dealerships accept trade-ins in good condition, and it’s in your best interest to get a few offers from a few dealers.
Do your research
One of the best ways to prepare yourself for the right car and the best deal is to do your homework before you head out on your car search. Ask yourself these questions:
- What size car do I need?
- What is the newest/oldest model I’m willing to look at?
- How much can I afford monthly?
Make sure you go to the dealer or seller prepared and knowledgeable. Spending time on the front end will save you a lot of time on the back end getting questions answered.
It can take some time waiting at the dealer’s office for loan approval, so make sure you are pre-qualified before you start looking. This will save you time and let you know what interest rate you are getting in case a dealer wants to try to beat it.
Golden 1 Credit Union makes it easy to get pre-qualified. Simply visit the auto loan financial portal on Golden 1.com to apply to get pre-qualified to buy a new or used car.
From there, you are all set to start your search.
Refinance your current auto loan
If you don’t necessarily need a new car but you’re looking to save money, consider refinancing your current auto loan for a new, more manageable interest rate, which will lead to lower and more manageable monthly payments.
Even if you can only reduce your car payment by just a bit, that small amount might be worth the effort and up-front expense. For example, lowering your car payment by just $25 per month when you have three years left on your loan can result in $900 of overall savings.
Remember, today’s new and used auto market is different than any other time in recent history. With the right research in hand, you can drive away with a deal – and a car (or new lower interest loan) – that best suits you.