As Los Angeles County continues to open up, car buyers might be having a hard time finding a bargain. According to the Consumer Federation of America (CFA), record numbers of buyers are trying to buy cars. Also, a global computer chip shortage is slowing down car production. Vehicle inventory is down by about 30 percent, so car dealers have little incentive to negotiate, especially for the most popular models.
It’s more likely than ever that if you want to buy a new car, you might end up paying manufacturers suggest retail price (MSRP) or even more.
Simply put, if you don’t have to buy a new car right now, you should probably wait. However, if you don’t have that luxury and you need to buy a car soon, the Department of Consumer and Business Affairs and CFA are sharing these tips to help you manage this car sellers’ market:
Consider less popular models: Lots of people are buying SUVs and crossovers. You might find a better deal or incentives with a smaller car or sedan.
Shop around online: Some dealers, even if they are farther away from your home, will offer internet deals. Use that information to bargain with a local dealer or even take the longer trip to get the best deal. You can still service your car closer to home.
Skip upgrades and extras: Most options come in packages, so you can’t always pick and choose. But consider any items you can do without and look to base models to save yourself 10 or 20 percent on some vehicles.
Look for “no-haggle” dealers: Your time and your well-being are valuable, too. If you are uncomfortable negotiating with a professional dealer, seek a dealership that offers a non-negotiable price on the vehicle.
Test drive the car: Not every car is the right fit for every person. When you test drive a vehicle, you can see how it handles and if you are comfortable driving it. Dealers have COVID precautions in place to protect consumers during the test drive, so ask how they handle it. Some dealerships offer a virtual test drive option, which you might prefer.
Consider a lease: If you don’t want to make a long-term commitment and might want another car in a few years when prices settle down, leasing may be a good option. Car leases often require a smaller down payment and can save you money in the long run.
Consider selling your used car yourself: The market is hot for both new and used cars. You can often take advantage of this by selling your used car for more than the dealer will pay you on a trade-in. Those extra dollars can help make up for the higher prices you’ll see in the new-car showroom. Also, check out the national chains that offer to buy your vehicle with a price that’s good for seven days.
- If you are buying a used car from a private party, check that the seller is listed as the owner on the vehicle’s title. Contact the DMV to make sure there are no outstanding liens against the vehicle. Ask a mechanic to inspect the used car before you buy from either a private party or a dealer.
Shop around for financing: Knocking a point off the interest rate by shopping around will save you hundreds and lower your monthly payments. Check with your bank or credit union to see what interest rates they can offer you on a loan. Their deal might be better than what a dealer can offer. Keep in mind, very few people qualify for the often-advertised zero-percent interest rates, so don’t get your hopes up.
Beware of using longer loans to reduce your monthly payments: While smaller payments may sound attractive, you will pay much more in overall interest costs, and you’ll probably be “upside down” for the first year or two. That means if the car is totaled or you must sell it, you’ll have to make up the difference between your insurance payment (or sale) and the balance on your loan. And beware of deferred down payments. It might sound like a good bargain, but these payments are still typically due before your first payment and can be a big shock to your wallet right as you get used to your new car.
Don’t rush into signing the sales contract: Take your time and read the sales contract carefully so you understand all the terms. Make sure the price, interest rate, fees, and add-ons listed on the sales contract match what you discussed. Also:
- If you and the dealer primarily negotiated the vehicle sales contract in Spanish, Chinese, Tagalog, or Korean, you must receive a contract in the negotiated language.
- Remember, there is no cooling-off period for new car purchases or used car purchases. If you change your mind after purchasing the vehicle, you cannot simply return the vehicle and unwind the sale. (For used cars under $40,000, dealers must offer you the option to purchase a two-day contract cancellation option agreement.)
- Dealerships must prominently display a Buyer’s Guide on every used car for sale and provide the Buyer’s Guide to the consumer at the time of purchase. The Buyer’s Guide contains important information about the vehicle such as warranty information or if sold as is.
Decline the extended warranty: Standard warranties that come with new cars are usually quite good. Extended service contracts, however, are expensive and are big money-makers for dealers. You are better off saving those extra dollars for your next car or working to lower any other personal debts, such as credit cards or other loans.
