4 Ways to Save Money if You're Planning to Buy a Car This Year

Car prices have skyrocketed, making it nearly impossible to find a good deal. But if you have no choice but to purchase a new car this year, there are still a few ways to save.

Let's face the facts: It is not the ideal time to purchase a car. Whether you're searching for a new or pre-owned vehicle, you can expect to spend quite a bit in 2022. According to a December 2021 report from Kelly's Blue Book, "most buyers paid at or above sticker price," and "even subcompact sedans—typically the most affordable vehicles on the market—saw their prices rise by an average of 16.7 percent between November 2020 and November 2021."

While it may be tempting to try to hold on to your old car for a few more miles, make sure it's not costing you more money than it's worth. After all, when you need a car, you need a car. For those who live in sprawling suburbs or far away from the workplace, public transportation may not be a reliable backup. And extreme weather conditions might prevent a year-round biking commute. Although car buyers might feel financially stuck right now, these four tips offer hidden savings—yes, even in 2022.

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Beat the alternatives.

What with the availability of Rideshare and Car Share, if you've come to the realization that you truly need a car of your own, chances are you know the cost of all the available alternatives. Of course, it's easy for frequent Lyft and Uber rides to add up—but owning and maintaining your own car can also be a costly endeavor.

If price savings is of the utmost importance, you have to be realistic about what you can truly afford. That might mean buying a smaller car than planned, or going gas-fueled over an electric vehicle. If you're browsing for true value, don't peg the price of your car to how much you make—or to the kind of vehicle you like. Instead, add up all those taxi receipts, subway tickets, and rental car invoices over the past year. Add in a 7 percent upsell for inflation. That's the number to beat. Any shiny objects that are above that figure are likely out of your optimal savings range.

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Determine financing: Cash, bank loan, or dealer.

Bankrate released a guide to choosing the best auto loan, and as of January 2022, rates were as low as 1.9 percent APR and as high as 8.99 percent. Because a car is a depreciating asset—it loses value over time—a high APR just adds insult to injury. If you have to finance a car purchase, shop around for the best interest rate available. Chances are that will come from a bank that you already use. Before submitting a formal loan application, pick up the phone and talk with a loan officer to run the numbers before they run your credit report.

Also, be open to dealer financing—if you're prepared to read the fine print. It can be easier and simpler to go with the loan product the dealer is offering, but because repayment timelines and interest rates are fungible, it is important to make sure that you read your contract thoroughly. Your terms may vary greatly from advertised terms and rates. Even if you get an interest rate that seems low, don't underestimate compound interest. Use a car loan calculator to determine the grand total of the car, including loan interest and the purchase price. Compare it to the number you calculated above to see if the financing is really as good a deal as you originally thought.

And it should go without saying, but if you have the amount needed to pay for the car in cash, it is best to ditch the financing altogether and buy the car outright.

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Search online and on the lot.

If you haven't bought a car in the past five years, then you're in for a treat. No longer are you stuck haggling with a used car salesperson in a vast lot of overwhelming choices. Instead, you have online options that will let you browse privately, at your own pace, and without the pressure of someone trying to seal the deal within the hour. Online shopping through sites such as CarMax, AutoTrader, and TrueCar offers some buyers the opportunity to price compare for savings in a way that they just wouldn't be able to negotiate in person. They also will show the cars that are available in your area, as well as in others you select. Spare yourself the cost of gas hopping from city to city in search of a steal. You can now do much of this online—for free.

That said, if you know what you're looking for and you have the poker face to pull it off, don't underestimate a visit to the smaller dealerships. Because their bottom line is so deeply affected by a missed sale, they may be willing to make deals you didn't think possible. Even better, if you can browse their lot with your own mechanic (or negotiate to have a three- to five-day period when you can take the car to your mechanic for a once-over before final purchase), then you might be able to make a win-win deal from a local business in a pinch.

And for car experts who know how to diagnose and repair their own vehicles, check out government auctions, which can be a hotbed of savings.

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Shop around for car insurance.

Jerry, a website that uses AI to compare car insurance, analyzed over 1 million points of driver data from August 2020 to August 2021 and found that the pink tax applied to car insurance too. The findings showed that "on average, women pay $142 per year more than men for car ownership, and can pay up to $7,800 more during the length of ownership; pay $117.12 more than men when buying new cars; and pay $22.94 more than men for car repairs."

While women reportedly paid less than men for car insurance overall, there were generational differences. Millennial, Gen X, and Boomer women pay more than their generational male counterparts in 36 states. So, while insurance is an unavoidable expense, it is important to recognize that even that expense can be biased.

Not only should you shop around for different rates for yourself, but you should also ask age mates in your city to share what they're paying and from which companies. Using the knowledge of comparator rates across demographics, you can use transparency as a tactic to negotiate better rates for yourself. In addition to identity factors, consider coverage totals, deductibles, and whether the company offers lower rates for taking defensive driving courses.

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