5 Tips for Savvy Car Shoppers

A lot of car payments now are what house payments used to be. We see it, too.

According to Experian, the average monthly payment for a new car was $735 at the end of the first quarter of 2024. That's a big chunk out of anyone's monthly budget, especially when you consider that over 18% of those new car buyers were paying over $1,000 each month. Used car payments, while somewhat more affordable, averaged $523 per month for that same period and be sure to ask the dealer if there are any manufacturers' rebates or special financing rates available for the vehicle you are interested in.

However, there is reason for optimism as we look ahead. The Federal Reserve will meet again Sept. 17 and 18, 2024 and is expected to discuss the possibility of lowering interest rates. If you're in the market for a new vehicle, or just looking for ways to save on the cars your family has already financed, we've got some simple tips to help you make your money go further.

1. Shop Around - Doing research on the vehicle you want can help you negotiate a fair price and avoid paying more than a vehicle is worth. This can be especially helpful for used cars. Online resources like Kelley Blue Book (kbb.com) and TrueCar.com are a good place to start. Just don't forget that you should also shop around for your financing. Auto loan rates and terms can vary a great deal. Make sure you compare your options ahead of time.
2. Take Advantage of Free Resources - Auto buying services can take some of the pressure off by streamlining the search and negotiation processes to help you get a better deal. Find out if your local financial institution offers free resources like these to help you shop more efficiently and potentially save time and money.
3. Get Pre-Approved - Having your financing ready to go before you walk into a dealership can be another huge time saver - not to mention a big stress reducer. Visit your local credit union or bank's website or talk to a representative about getting pre-approved for your next auto loan. They can advise on your credit history, what rates and terms you qualify for and your monthly payment options.
4. Consider Refinancing Existing Loans - If the Fed does cut interest rates this month, then those cuts are likely to trickle down to consumers in the form of lower rates on loans. If you've taken out other, higher-rate auto loans, you may want to shop around and see if you can refinance them with your local financial institution to lower your rates and/or your monthly payments.
5. Plan for the Unexpected - To protect your investment, you may want to consider Guaranteed Asset Protection (GAP) insurance, which will cover the gap if your insurance doesn't fully cover what you owe on the loan and you're in an accident that totals your car. This may be available from your local bank or credit union lender, just like extended warranties and other options, so be sure to shop around for these items as well.

Shopping for the best car loan - not just the best car - can really pay off over time through potentially lower monthly payments, lower interest rates, a shorter term or less expensive options like extended warranties or GAP insurance. Over the life of your loan you could save thousands of dollars!

Chuck Eads

Chief Lending Officer

Abound Credit Union