Time to Buy a Car?

Car dealerships have a great selection, and the salespeople are friendly and persuasive. Shutterstock

New or used? Dealer or online? Buy or lease? Loan or no loan? Best time? There are many questions when it comes to buying a car, as this is a big commitment.

Here, we delve into those questions and offer information to help you make car-buying decisions that are right for you.

Best Time

The traditional advice about buying a car at the “best” time includes:

• at the end of the year
• during holidays, such as July Fourth, Labor Day, or Memorial Day
• when dealers are trying to meet their sales quotas
• on weekdays, when dealers aren’t as busy
• when dealerships are offering additional perks and discounts

But times have changed.

The pandemic disrupted supply chains so severely that both new and used cars skyrocketed in price. I, for example, paid $20,000 to buy a brand-new Honda HRV in 2019, but was offered about this same amount in late 2022, even though I had almost 50,000 miles on my car by then.

About the time the supply-chain logistics were getting sorted and cleaned up, inflation hit hard, and interest rates were the next to skyrocket. So for several years, car prices and loan interest rates resulted in many car purchases loading up the buyer with monthly auto loan payments of more than $1,000. And the loan periods were going out to 84 months (seven years!) to afford the cash flow.

As prices began to fall back to planet Earth, some of these car loans resulted in the owners being “upside down”—meaning they owed more than the market values of their used cars. The Tesla electric vehicles, for example, had lost as much as half their new car value in depreciation in just three years.

New or Used?

New cars allow for picking specific options that you want, and they also come with the latest technology, but they are more expensive, and the front-end depreciation can be a big financial hit. Used cars are less expensive and depreciate more slowly, but may require some compromises in terms of features and functions, while also having higher maintenance costs.

Used-car prices are down by almost 11 percent from last year, according to data from the Bureau of Labor Statistics. Compared to the peak in February 2022, prices for used vehicles are now down by almost 20 percent. Used-car prices had risen by more than 40 percent in 2021, and again in 2022. Prices for used cars and trucks are still 17 percent higher than they were in July 2019, so it may be prudent to wait even a bit longer before you buy.

Used Car Checklist

• Vehicle History Report from Carfax to look for prior accidents, title issues, or other concerns that show up. (carfax.com)
• Inspect the car to identify any rust, dings and dents, or mismatched paint.
• Check the interior, the seats, the dashboard, and throughout the inside to make sure everything is in good working order and appearance.
• Take the car for a test drive; pay attention to its handling, braking, turning, and so on.
• Have a mechanic inspect the car for things you may have missed or couldn’t find yourself.
• Verify the mileage on the odometer, which can also be done by looking at the maintenance dates and miles from your Carfax report.
• Be sure the Carfax report includes a list of the regular servicing that has been done.
• Check if the car had any recalls and if these have been corrected.
• Compare the price with the Kelly Blue Book market value.
• Be sure you have considered the estimated costs of insurance, gas, and maintenance.

Buying Versus Leasing

The decision of whether to lease or buy often depends on two factors: total expected mileage per year, and the total monthly cash you can afford to pay for your car. Although a monthly lease payment may be less than a loan payment, if you exceed the mileage limitations, you could end up owing much more at the end of the lease term.

Leasing involves paying taxes, title and licensing fees, dealer documentation, and prep charges at the front end when the lease is signed. You may also be required to make a down payment and fork over an acquisition fee. All this adds up. Monthly payments over the life of the lease are intended to cover the costs of the vehicle’s estimated depreciation (the calculation also has an estimated “residual” value, the market value expected when the lease expires, and you are expected to return your car to the dealer in good shape). Warning: Terminating your lease early can be expensive!

Loans for Car Purchases

Experian’s State of the Market report is a good source of information. Subprime borrowers, those with credit scores in the 500–600 range, averaged payments of $597 ($586 for those with FICO credit scores higher, at 781–850). Consumers who purchased and financed new cars are paying from $717 to $749 per month, depending upon those same credit score ranges.

While loan interest rates vary based on your credit score, the lender, and several other factors, it’s prudent to shop around and compare offers from different lenders to find the best deal. As of September, new-car loans averaged 6.84 percent, with loan terms ranging from 36 months to 84 months. A minimum credit score of 620 is required for these terms, however. Used-car loan rates averaged 12.01 percent.

Where to Buy

Car dealerships have a great selection, and the salespeople are friendly and persuasive, but they are also adept at squeezing the most out of you in terms of the price you pay for your car. New models with warranties and financing options can all be viewed and handled at one single dealership. And sometimes, the dealers will run special promotions.

Online car shopping websites such as Carvana, Vroom, and TrueCar allow you to review many cars and make your purchase online. Some will even deliver your car to you.

Websites such as Craigslist and Facebook Marketplace facilitate buying directly from private sellers—which can lead to better deals—but they require more careful research and digging to ensure you are getting what you think you’re getting in terms of a roadworthy and maintenance-free ride.

Both online and in-person car auctions are possible alternatives, but these are mostly specialized car buyers with a lot of experience, so I don’t recommend these for the average car buyer. My own recommendation is CarMax. Based on my research, CarMax is among the best places to buy or sell a car in 2024. The CarMax offer, however, may be more than the Kelley Blue Book value when you sell your car to the company. If you buy a car, there are financing options available through its lending providers.

Summary

The five most important factors you must take into consideration when shopping for your next car are safety, cost of ownership, quality (see JD Powers), reliability, and suitability. Each of these means something different to each car buyer in terms of priority and weight in their final purchase decision, but these factors are the most important by far.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.