Is there a better way to experience America’s freeways than going on a road trip in your own car?
Although the vast majority of Americans own at least one car, it’s a big dream for those who don’t have it. A car is a symbol of personal control and freedom. You can go wherever you want, whenever you wish.
Unfortunately, cars don’t come cheap, especially if you want them new. This is probably why you’re asking, “what is the best time to buy a new car?”
Whether by that you mean the time of the year or a time that’s best for your personal circumstances, we’ve got the answers you’re looking for.
When Your Personal Finances Are Looking Up
The absolute perfect time to purchase a car is when your personal finances can support car ownership.
You see, cars cost money. Not just to buy them from a dealership or individual seller, but also to maintain and run them. There’s the cost of auto insurance, which is about $1,500 per year.
If you aren’t going to buy an electric car, the cost of gas can drive you nuts, especially if you end buying a fuel-guzzling beast. Factor in repairs and other auxiliary expenses and you’ll be looking at a hefty annual bill.
There are two important personal finance factors you must consider:
Unless your parents or someone else will be funding your auto expenses, you need an income to afford a car.
But the big question is: how much income is enough?
It all depends on your lifestyle. If you’ve got a steady job and you always have a good amount of money left after taking care of your living expenses, we can say that you’ve got enough room to support additional expenses, which a car will inevitably introduce.
A lot also depends on the type of care you’ll buy. As you already know, there are cars at every price range. Some cars are pricey to run and others are economical.
As a first-time owner, you want to start out with a car that’s easy on your finances.
Your Credit Score
If you’re anything like most car buyers, you don’t have the money to buy in cash. You’re going to take out an auto loan.
This is where your credit score comes in.
For any auto lender to approve your loan application, they must assess your creditworthiness. This means looking up your credit score and ensuring it meets their minimum lending requirements.
In general, you need good credit (any score above 700) to get an auto loan at a preferable annual interest rate. This isn’t to say that you won’t get an auto loan if your credit score is below this, but you’ll certainly be charged a high interest rate, which will make your car ownership more expensive.
Get a copy of your credit report and know the state of your credit before applying for an auto loan. If bad or poor, build it before approaching a lender.
When Prevailing Market Rates Are Low
If you aren’t a cash buyer, the best time to acquire a new car is when there is a low interest rate environment in the market.
Here’s how most auto loan interest rates work.
When federal interest rates (set by the Federal Reserve) are high, auto loan rates will also be higher, usually a couple of points above the federal rate. Commercial banks borrow money from the Federal Reserve at the set federal rate, so for them to make a profit when lending to consumers, they have to charge a higher rate.
Conversely, when federal rates are low (like right now) auto loan rates are also super low.
The Federal Reserve recently cut the federal rate to zero, so if there was ever a good time to secure an auto loan cheaply, it’s right now.
When Is the Best Time of the Month to Buy a Car?
Car prices typically vary slightly depending on the month of the year, as well as the time of the month. This is largely due to how car dealerships operate.
Dealerships have sales targets they need to meet. These targets are broken do to annual, semi-annual, quarterly, and monthly targets.
Annual targets are the most important.
By the time the year is approaching an end (the third quarter – from September to December), most dealerships haven’t met their annual quota. Or even if they have, they will usually have stock that needs to be cleared.
To achieve this, they run promotions, offering attractive discounts. As such, if your goal is to land on a good deal when buying a car, it’s advisable to hold your impulses until the last quarter of the year rolls around.
If you can’t, at least try to shop for a car at the end of the month. You’re likely to find better deals as dealerships are chasing monthly targets.
When Next Year’s Models Hit the Market
Most leading manufacturers are always producing new models every year.
For instance, we have 2019 Ford cars in the market today, but new Ford cars for 2020 will be introduced into the market at various times throughout the year.
If you’re planning to buy a brand new car, you might be able to make a saving if you buy soon after a newer model arrives. At this time, prices for the older model will likely drop as the new model takes all the headlines. It’s how consumerism works in any free market.
What Is the Best Time to Buy a New Car? It Depends!
So, what is the best time to buy a new car?
In truth, there’s isn’t a simple answer to your question. It depends on a lot of factors, ranging from the state of your personal finances to the state of the auto market. With this guide, though, you have the information you need to identify the right time for you.
Keep reading our blog for more tips and insights.