If you find yourself in the market for a car, you’re likely feeling a bit squeezed. The good news, however, is you’re not alone! Inventory is historically low across the U.S., and as a direct result to a stretched demand, car prices can be high, with the usual incentives and sale events noticeably absent. While there’s plenty to navigate on top of an already traditionally tricky transaction, Carvana is here to serve up some key car buying tips to consider before shopping for a vehicle. By following these six easy tips, you can ensure a better car buying experience for yourself every time!
Do your homework
Perhaps the most important tip when it comes to buying a vehicle starts well before you begin talking numbers. In fact, it begins even before you start perusing vehicles. It’s important that consumers not only do in-depth research, but move through the transaction of buying a new vehicle at their own pace. In our opinion, there are three equally important components to the car buying process: the vehicle itself, the trade-in, and the financing. It’s critical that shoppers think through each part of the process before making any decisions.
Historically, breaking down the transaction into these three parts allows dealers the opportunity to size up a consumer and attempt to figure out which of the three is most important to you. From there, they define the rest of the transaction based on those priorities. It can be tough in a live interaction to sit back, carefully view things from all angles, and make sure it really makes sense for you. You find yourself resisting the urge to lock something in because an offer looks good at face value. The best thing consumers can do at the onset of the car buying process is to go slow and take their time—plus, to be able to do it from the comfort of their own home on their computer or mobile device is a convenient added bonus, as it can be easy to be swept up in this hot market.
Know your credit score
The second most important tip, and perhaps the most under-appreciated part of the transaction, is having a thorough understanding of your credit score and the kinds of rates you qualify for. While there are plenty of resources for researching sticker prices (see Kelley Blue Book), the financing side can be murkier to navigate for uninformed shoppers. There are several online tools that provide this information for free, or other digital resources like Carvana’s car loan calculator, that can help determine what a consumer might be qualified for before the purchase process is even underway. Consumers can also consult their bank or local credit union for this information. Consulting one of the free credit reporting services out there is another solid way to prepare for a vehicle purchase. Ultimately, knowing where you sit in terms of your credit score can be uber valuable prior to buying.
Don’t play the fees game
The sticker price is the last major component a car buyer needs to be aware of when heading into the purchase process. One very common practice in the auto industry is seeing the dealer try to win a customer over with a more attractive sticker price than a competitor. This can be an easy trap to fall into, simply because it’s all too common to see a lower sticker price draw a potential customer in, only for them to be duped with additional fees further along in the transaction. Additionally, the further along a shopper is within the car buying process, the harder it is to turn around and back out of something when those surprise fees do crop up.
One of the most common fees is the documentation fee, or “doc fee”. In fact, in states like Florida, dealers can charge up to $1,000 in documentation fees. Some states have no limit for the amount of fees a dealership can charge a car buyer. Unfortunately, fees like these are incredibly common in other retail spaces—for example, you’ll see these fees when booking a hotel room and being surprised with a $50 per night resort fee. Often, the car buyer doesn’t really know these fees are coming until they’re deeper in the purchase process. When negotiating that final price, be wary of those last minute added costs that dealers tend to tack on. Moreover, understanding that while there are some transactional costs associated with a car purchase, like tax and title, shoppers shouldn’t feel pressured to pay fees they do not fully understand. While Carvana has become known for the transparency in our pricing and user-friendly comparison tools, historically it has been much more difficult for shoppers to see past sticker prices and look at the larger transaction from a wider perspective.
Avoid paying fees over time
The MSRP, or manufacturer suggested retail price, is stated on the window sticker, where you can see all of the features and specs the MSRP includes. Be sure to compare the window sticker to the final contract before you sign, so last-minute fees aren’t snuck in. And while it may seem convenient to wrap these added, unsubstantiated fees into your loan and pay them off over time, consumers would be wise to remember that they’ll be paying interest on that principal over time, so it’s best to negotiate removing the unnecessary fees altogether. Simply put, you don’t want to be paying interest on bogus fees that just got wrapped into your loan terms.
No wiggle room? No problem! Know your trade-in value and get multiple offers
On the purchase of a used car, consumers may find it difficult to negotiate in this current market. While Carvana’s pricing is a straight-forward, no-haggle model, smaller auto retailers, where there used to be some room for negotiation, have made the back-and-forth a bit trickier. That’s because some dealers who may have been more keen to negotiate in order to move a surplus of inventory off their lots in the past, are currently unable to do so due to their limited inventory. However, consumers do have a lot more leverage now when they are trading in a vehicle. Having a current trade-in allows the consumer to act as both the buyer and seller in a transaction. At the moment, many dealers are struggling to find inventory, thus pushing them to pay the desired price for your trade-in can be something you can use as leverage.
Avoid the noise with late model used vehicles
One phenomenon the auto retail industry is currently experiencing is that we are not seeing quite as many new cars on the market as we have in the past. This has pushed consumers to pivot or substitute, as those normally in the market to buy a new car are now considering late model used vehicles. Recently, there has been a recent spike in demand for late model used vehicles, particularly due to the substitution effect of people who’d normally buy new, substituting their typical buying habits to seek out used vehicles instead. The used car market is crazy, but perhaps a little less crazy is the corner of the market where late model used vehicles are found.
