If you’re thinking about buying a car right now, it’s possible that your timing couldn’t be better. Economic uncertainty due to the coronavirus pandemic has caused some favorable conditions for car shoppers.
Money expert Clark Howard expects we’ll see some great car deals over the next few months.
“May, June, early July, it’s going to be a great time for people who are in the market for a vehicle, whether it is new or used,” he says.
Of course, there are many factors to consider with the timing of buying a vehicle. In this article, we’re going to go over five things you need to think about before you buy a car right now.
1. Gauge Your Job Security
While saving money is always great, deals aren’t the only thing you need to think about when deciding whether you should buy a vehicle or not. How are your finances overall?
The questions you must consider are two-fold:
- Do I really need a car right now?
- What is my financial situation projected to be for the life of the loan?
“Even with [the great deals], buying a vehicle is a major decision,” Clark says. “It is the second-biggest expense most of us have.”
Should you buy a car right now, with all that’s going on? Here is Clark’s advice:
“If you are a lucky person who has a job that is secure and you were planning to buy either a new or used vehicle, this is a great time to buy.”
2. Know the Car-Buying Process
Of course, with the ongoing health crisis, the car-buying process has changed quite a bit.
Vehicle marketplaces like Carvana are doing touchless delivery and other direct-to-customer sales. That means they can deliver cars to your doorstep after you’ve shopped and purchased online.
“Since almost everyone is set up to negotiate and complete a deal online, the ability to shop with multiple sellers is extra-easy right now,” Clark says.
3. Find Out Your Trade-In Value
Another thing you’ll want to seriously consider is whether it makes financial sense to trade in your vehicle if you already have one.
If your car is only valued at, say, $2,000 you’ll likely need to come up with additional funds to be able to afford a better car.
Even if your car is only a few years old and worth a lot more, it’s unlikely you will get the same amount for it that you would have gotten before the pandemic.
“It’s a horrendous time to trade in a vehicle. Right now, used vehicle values are down around 11%. That is a giant decline in the average value of a used vehicle,” Clark says.
To find out what your car is worth, check out this Car Value Estimator from Consumer Reports.
4. Decide If You’ll Buy New or Used
Clark says the decision to buy new or used is going to depend on your specific needs, budget and other factors. Let’s discuss both scenarios.
Why You May Want to Consider a New Vehicle
New vehicles were piling up on dealership lots even before the pandemic. As a result, “there’s a big overhang of new vehicles,” Clark says.
The primary reason now is a good time to buy new is because of market forces affecting manufacturers and dealers:
- For manufacturers: There’s a massive backlog of new cars that they’re forced to push to the dealers.
- For dealers: To move inventory, they have no choice but to sell at huge discounts.
“The combination of dealer and manufacturer savings will make this a great time to buy,” Clark says.
Why You May Want to Consider a Used Vehicle
Clark says used vehicles, especially those within a few years old, are attractive right now because they have a double benefit:
- The original owner bore the brunt of the price tag associated with a new car
- As a subsequent owner, you can benefit by paying less than the initial value
The reason, Clark says, is “because values drop so quickly early on that you’re then in a position to buy a vehicle where a lot of the initial value has been absorbed.”
And don’t forget about the inspection: One part of the process that is specific to buying a used car is the need to get it checked out before purchase.
“That is something that is more difficult right now, but it is something that is just as necessary as always,” Clark says.
5. Secure Financing Options
As you may have noticed, interest rates are very low right now. Clark says they’re even lower at credit unions, where you may also be able to find some flexible terms.
Why You May Want to Consider a Credit Union
Here are some of the other benefits you will typically find if you go with a credit union:
- Fewer fees
- Personalized service
- Membership perks
“Finance your used vehicle at a credit union,” Clark says, referring to the low rates.
You’ll also want to research auto financing rates at traditional banks as well as the best online banks to see if they’re cheaper.
Why You May Want to Consider Dealer Financing
“If you’re going to buy new, a situation that has not been true in about 12 years is that your best financing may actually be at the dealer,” Clark says. That is, “if the manufacturer is offering 0% financing on buying a new vehicle.”
Of course, 0% financing is traditionally only offered to well-qualified buyers. Here are some typical requirements or restrictions to get a 0% rate:
- Good credit
- Proof of income
- Manageable debt-to-income ratio
- Only available on select vehicles
- May not be combined with other offers
No matter what auto financing you choose, one thing to keep in mind is Clark’s auto financing rule, which says you should never finance a car longer for more than 42 months.
Remember, you should only consider buying a car if you’re confident in your financial situation.
To make sure your dollar travels the furthest, you’re going to have to compare prices, rates and terms. As always, “It’s ultra-important for you to comparison shop,” Clark says.
Make sure that any price quote you get online or via email includes all the junk fees. Many dealers will quote you one price but leave out the taxes and other charges.
Clark says to make sure you get the “drive-out price” in writing so that you can compare quotes apples to apples.