How to Save Money When Buying a New Car: Budget-Friendly Tips

Are you ready to purchase a new car? Whether you are planning to go on cross-country camping trips or need a more reliable commute to work, your car plays a key role in your everyday life and financial choices. Unfortunately, buying a new car can be stressful, with the unknowns of choosing a dealership offer, rising car payments, and deciding which car is right for you. While these obstacles can be overwhelming, it is essential that you are equipped with the resources you need to make a sound financial decision. In this blog, we’ll give you tips for how you can save money and manage your budget for a seamless car-buying experience.

What Are The Best Strategies for Saving Money When Buying a New Car?

Buying a new car is a significant step in your financial journey, whether you’ve done it before or if this is your first time. Here are some practical ways you can strategically save money.

1. Create a Budget

We’ll dive into more details later, but having a budget is a necessary first step when buying a car. Take a look at your overall expenses, savings, and current debts that impact what you can or can’t contribute to your new car.

2. Make a List of Your Top Picks

Do your research about what kind of vehicle you would like to have and get a general idea of how costs vary depending on the make, model, and year. There might be a unique color or tech feature you want, but it may not be available with certain brands or models.

3. Take a Test Drive

Once you’ve narrowed down some options, it’s time for a test drive. Driving the car will reveal so much more than any website or review could tell you. It can reveal whether a car is the right size, style, or feel you are looking to own.

4. Don’t Fall for Impulsive Decisions

While you’re shopping, it is essential to have boundaries for yourself. Don’t ever purchase the first car you see or let a dealership talk you into buying a car if you haven’t had enough time to think through your decision. You should only purchase your car if you feel ready.

5. Assess Durability

Every car will have something break or fail. Depending on the vehicle, repairing a necessary piece, such as the tires, could vary significantly in cost. Consider each of the following when thinking through your choice:

• Tires
• Paint colors
• Keyless entry
• Electric vs. gas

6. Consider Buying a Used Car

Just because a car is used doesn’t mean that it is falling apart. Think of buying a new home; it’s far more likely that the home you’re searching for isn’t a brand-new construction. This principal can be applied to cars – it’s still a nice car if you get a model 2-3 years old. It doesn’t need to be brand-new to keep you safe and have the features you want. There might be a few cosmetic touch-ups, but overall it’s a reliable vehicle at a significantly less price than a current or even future year.

7. Be Willing to Travel

Since there are so many options for cars, there are many dealerships that can vary in what they sell, especially if they are used vehicles. Broaden your search outside of your hometown to statewide or even regionally to see what deals you can find. Let’s say you live in West Tennessee, and you find the car you want in North Carolina. While you might have some travel costs, spending $200 dollars on travel expenses will be worth it if it means you are saving thousands of dollars on a vehicle you need.

These are just some of the ways that you cans save strategically. Keep them in mind as you begin car shopping.

How Can You Calculate A Budget for Purchasing a Vehicle?

Making a budget is crucial for ensuring you are taking care of your financial health. It can be easy to underestimate how much the total cost of a new car can be, whether it’s right off the lot or used.

Auto Loans vs. Paying in Full

You’ll need to decide if you can pay for the vehicle with cash in-full, or if you’ll need to take out an auto loan. Depending on your own financial situation, you may be in a position where you can’t afford to pay upfront, so finding how much your car payment will be each month is crucial. A useful tool to find these numbers is to use a loan monthly payment calculator. This calculator can help you predict how long it will take to pay off the car, account for interest, and what your monthly payment will be. Aside from knowing how to organize your budget, the calculator can also be used for comparing different vehicles’ costs and financing options, so you can narrow down which ones have the best rates.

20/4/1 Rule

Another thing to consider for your car budget is how much you’ll want to contribute to a down payment. A down payment is a great way to save by lowering your loan payment overall, so consider budgeting 20% of the price of your car to put down. If you’re not entirely sure how to organize your budget, consider the 20/4/1 rule: spend 20% for the down payment, have a 4-year or less repayment plan, and strive to use only 10% of your income on vehicle expenses.

Timeline to Buy

One key factor to consider for you to finalize your budget is to know what season you’re planning to buy in, since it can have an impact on sales and prices. There are specific times that dealerships will be offering more flexible prices due to reaching their sales goals, such as the end of the month or year. Holidays are also a good time to look out for unique deals. December is one of the best times to buy because of Christmas, New Year's, and the end of the sale year for dealerships.

Once you’ve established your budget, it’s time to shop!

What Are Some Hidden Costs of Buying a New Car You Should Consider? 

As you consider how much money you’ll need to afford your car, you’ll want to be aware of expenses that could make an impact on your financial plan. Here are some expenses to look out for:

Maintenance

Whether you’re buying a brand-new vehicle or an older one, you’ll want to account for any repairs it will need. For example, you may find a used car at a great price, but it will need a new set of tires. Be sure to keep those kinds of details in mind before purchasing.

Registration

Once you’ve purchased your car, you’ll need to register it with the government. Registering your vehicle is essential because it serves as the official identification for your car by declaring ownership, so if it gets stolen or you're in a crash they will be able to know that the car is yours. The fee for registration can vary depending on the size of your car, what emissions are affiliated, your state, and other factors.

Gasoline

Since different models of cars have different sizes and features, your expenses for gas could also vary. You’ll want to consider which vehicles have better gas mileage, so you can save more over the lifetime of your car.

Electric Necessities

If you’re choosing to purchase an electric vehicle, you need to include the essentials that your car will need to function, such as an at-home charging station.

Sales Tax

Sales taxes could affect how much more you’ll need to pay on your vehicle. Tennessee has a 7% sales tax, so that would mean you would pay $2,800 in sales tax on a vehicle worth $40,000. The states with the lowest sales tax in the Southeast are Alabama at 2% and North Carolina at 3%. It might be worth taking a short trip to save even more on your car

How Do Insurance Costs Vary Based on the Type of Car?

Insurance is crucial for your vehicle and peace of mind for unexpected events like accidents or hail damage. However, the price for insurance can range. Here are some things to keep in mind for insurance if you’re trying to save money.

• Used cars will be cheaper since the value has gone down significantly, the loss on the car won’t make as a significant impact to replace it with another one.
• Minivans, cross-overs, and SUVs are also on the lower end for insurance since one of their main selling points is safety.
• Electric vehicles, luxury SUVs, and sports cars have higher premiums because of their exclusivity and higher quality.
• Any new cars will have higher insurance premiums because of their value. It will cost way more to replace a brand-new vehicle that is right off the lot compared to an older model.

Buy Your New Car with Leaders Credit Union

While making the decision to purchase a car can feel like a leap in your financial journey, we want you to have a smooth and stress-free experience. Our Financial Champions are happy to help you with questions about budgeting, finding the right auto loans, and how to save money while car shopping. To narrow down your choices, look at our free Ultimate First-Time Car Buyers Checklist.

Leaders is federally insured by the NCUA.