Making a smart car purchase requires research and ingenuity.
The global shortage of semiconductor chips has made things even more complicated for people in the market for a vehicle. These chips are vital components in the electronics featured in today’s cars.
Supply chain disruptions, partly caused by recent events like winter storms and shutdowns triggered by the coronavirus pandemic, have played a part in the car chip shortage. The average transaction price for car purchases has also risen, according to Edmunds data.
It’s not an ideal time to buy a vehicle, whether you’re interested in buying a car, pickup truck, SUV, minivan or electric vehicle. But there are steps you can take to simplify the car-buying process and get a better deal. We’ll review some tips below.
- 1. Secure your purchase with a down payment
- 2. Cast a wide net
- 3. Be flexible, but not too flexible
- 4. Consider trimming options to offset steep prices
- 5. Make high car prices work for you by trading in your current car
- 6. Buy used instead of new
1. Secure your purchase with a down payment
With diminished vehicle production and many eager buyers, getting the car you want may be more complicated than usual.
One solution is to make a down payment on the model you want before it arrives at the dealership. Once the vehicle is in stock, this puts you at the front of the line and can help you get the model at the top of your shortlist.
You may have to wait weeks, or even months, for your car to arrive after making a down payment. But this probably isn’t the best approach if you don’t have the cash to handle that wait without financial difficulty.
Check local car dealerships for availability once you’ve decided on a model. When you find a dealer with the car you want at a sticker price that you’re happy with, you can pay a deposit and wait for your car to arrive.
2. Cast a wide net
Several factors may have caused you to support a specific dealership over the years. Maybe you’ve been a regular customer because the establishment is conveniently close to where you live. Or maybe a dealership’s high quality of service has encouraged you to buy from its lot consistently.
Those are great reasons for being a loyal customer. But in today’s market, your preferred dealership may not have the car you want. Because of low inventory caused by the semiconductor chip shortage, you may need to cast a much wider net when shopping for a vehicle.
Start by looking for your desired car at other dealerships reasonably close to where you live. Don’t give up if you don’t find what you’re searching for. You may be able to find your ideal car at a dealership that’s 100 miles or more from where you live.
Fortunately, certain dealerships offer perks that can make long-distance shopping easier. Some will deliver the vehicle to your home and allow you to sign the sales documents online (you may be charged an additional fee for home delivery). Be sure to inquire about these perks when deciding on a dealership.
3. Be flexible, but not too flexible
With the car chip shortage causing more vacant car lots in today’s market, a dealer is less likely to have a car that checks all your desired boxes. That calls for a certain amount of flexibility on your part.
To strike the right balance, make two lists: one for your needs and the other for your wants. The needs are nonnegotiable must-haves. The wants are preferences that you’d be able to sacrifice depending on the situation.
For example, if you have five kids and a spouse and are seeking transportation for your family, a vehicle that can fit at least seven people would be a need. Getting that vehicle in your preferred color would likely be a want.
4. Consider trimming options to offset steep prices
With demand on the rise and new car prices climbing higher and higher, it’s a seller’s market in the automotive industry. You can’t change steep car prices, but you can adapt your behavior to suit the situation.
If you want to save money on your purchase, select a trim with a less expensive manufacturer’s suggested retail price. The price difference between trims can be significant. The money you save by selecting a base model can offset some of the added cost caused by increased prices.
5. Make high car prices work for you by trading in your current car
Like new cars, the used-car market has also experienced less supply, higher demand and higher pricing. Fortunately, there’s a silver lining: Trade-in values are high.
It’s an excellent time to trade in your used car at the dealership. The increased value of your trade-in can help offset the steeper price you may wind up paying for your new car purchase.
6. Buy used instead of new
Used cars have seen an uptick in prices because of the car chip shortage. Even though used cars are more expensive than they have been, they’re still more affordable than comparable new cars.
You could save money by choosing a used car instead of a new one. Even a relatively new used car could net big savings since new cars depreciate by an average of about 20% after the first year of ownership. At the very least, a used car could provide a temporary solution to help you get by until market conditions are more favorable.
And if you’re currently leasing and like your car, you may want to consider purchasing your lease vehicle. Higher prices for used cars may have put you in a more favorable position with your lease. With a lease buyout, you may be able to get the car for less money than you’d pay if you bought a similar car at a dealer or from a private seller. Or you may be able to buy out the lease and sell the car on your own.
What’s next? Consider delaying your car purchase.
Waiting to buy a car could be your best bet from a financial perspective. That could play out in a couple of different ways, depending on your circumstances.
For example, if you have an older car, you could choose to invest in repairs and keep it on the road. If you’re currently leasing a vehicle, you could opt to extend your lease a while longer.
The microchip shortage will likely end in time, and things may shift back to normal. If the market improves and the semiconductor industry returns to pre-pandemic production, delaying your purchase may allow you to get better deals.