Saving Tips: Buying a Car Amid Inflation

With its exposure to supply chain disruptions and dependence on semiconductors, the automotive industry is particularly vulnerable to a global recession. Auto inventories remain short, even with growing demand post-pandemic. This doesn't help ease inflationary pressure, making finding a new or second-hand car very difficult. At a time like this, it's a good idea to protect your new ride with the best car warranty you can find.

A vehicle inventory shortage has several implications. We are in a seller's market, so competition for new vehicles is cutthroat, and they come with a sticker shocker. The price hike has hit used cars too, with couple-of-year-old vehicles costing as much as new models only one or two years ago.

Yet that doesn't mean all is lost. You can still make an intelligent car purchase with a few tips and tricks. Consider the following:

Sort Out Your Finances

The high competition doesn't mean you should splurge or stretch your borrowing.

Remember that the vehicle is a depreciating asset, and overstretching your finances may not be worth it. That is unless you buy it for business and you're sure to recoup the amount quickly.

Ideally, don't be quick to sign on the dotted line for a loan with excessive rates. Experts warn against predatory loans in a recession.

A small number of percentage points can save you thousands in repayments. However, with a great credit score in tow, the rates shouldn't be anything above 6-8%—above this puts you at risk. Organize for financing before you can go shopping, and make sure you have the best loan deal.

With this information, you'll know which vehicles are affordable and snap up something that seems suitable for the price. Prepare in advance and be realistic about the capability to pay the installments.

Do Your Search First 

One mistake most car buyers make is to go to the car lot without a particular car in mind and without a clear budget. They probably think they're looking for something they like and isn't too expensive, but they're really just shooting in the dark. You may be setting yourself up for impulse buying (getting a vehicle you didn't need in the first place).

If you have a specific automobile in mind, you may waste time and money going around dealerships that don't have it. Call the local dealerships with your questions on hand, and browse the cars they have on their website.

Don't stop there. If the dealership has the vehicle you like, create a shortlist, check its reliability, and get the road test results. Also, determine how safe the car is and how satisfied you are with it.

Extend the Search To Other Areas

Sometimes, the local dealers may not have what you want or the price you're most comfortable with. It doesn't hurt to go beyond your comfort zone and extend your search to other areas. You never know—you may scoop your prize at the most reasonable price.

While you shouldn't box yourself in one area, be reasonable with the expenses that pile up with the search. Extending the search to far-away areas may cost you more than you anticipated. Do the math.

Negotiate for Better Prices

Expect the dealerships to drive a hard bargain, especially in a seller's market. But that shouldn't stop you from trying to negotiate.

Knowing the type of car you want very well is an excellent way to tip the scales. What is the going market price, and what is the cost of a comparable model? Do your homework and close all the possible loopholes the salesman can use to squeeze a little extra margin out of you. If that fails, take the negotiations to the lender and the insurer. Don't get too comfortable with the price or rate you're given. Whatever small cut you get can add up to significant savings.

Read the Fine Print

In some cases, most costs are concealed in the fine print, so don't put pen to paper before you're sure everything is in order. Ask questions where something is unclear, and don't hesitate to pull out if you suspect deception.

Take the loan from a reputable provider after doing due diligence. What types of reviews do they have? Are they transparent? Do other clients have concerns about them, and how did they handle these issues?

Watch out for interest rates, processing fees, penalties, and other costs that may be significant.

Go Electric 

The auto industry's future is electric, and it can save you big bucks by switching to electric right now. Manufacturers and individuals are looking for ways to be more sustainable, so the demand for electric vehicles is steadily increasing.

But how will investing in an EV help you save?

Recently, it seems like gasoline and other fossil fuels have been on a mission to wring us dry through ever-rising market prices. Going electric ensures that you never have to think about gas ever. In addition, electric vehicles are low on maintenance compared to internal combustion vehicles.

Work With a Certified Dealer

You may find that certified pre-owned car dealers are a bit more expensive than uncertified ones, but they are worth it. An accredited dealer will be heavy on reliability and trustworthiness. They can also give you high-quality options.

A certified dealer will provide additional services such as insurance and warranties. These may not mean anything initially, but they will in the long run. The costs may balloon to unsustainable levels if you end up with an unreliable vehicle that breaks down within months.

In a nutshell, buying a car amid inflation need not be a painful process. You can still save with intelligent moves such as thoroughly searching the type of car you need and choosing the best price. Negotiate for better prices with the dealership, insurer, and lender. Look for ways to reduce the cost, and even consider going electric.

This post was produced and syndicated by Wealth of Geeks.

Featured Image Courtesy of Shutterstock.

Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.