How to Save Money on Your Next Car

Car buying can be a confusing and high pressure environment, but the stakes are very high.  You do not want to be stuck paying more than you should for years because you did not know the smart way to make this purchase.  This can add up to thousands of wasted money.  The timing of when you buy a car is one of the most important factors.


For most car models, the new models are released in the fall, around October or November.  This means that the dealer is ready to get rid of last year’s models.  If you wait until the end of the calendar year and buy a model from that same year, you will get the best deal.

Also, ask the dealer for any demo cars they may have for sale.  These are cars that have miles, but have never been titled so are still new.  These will have large discounts that go above and beyond the manufacture rebates.

If you are not able to wait until the end of the year to purchase, then try to wait until the last weekend of the month.  The dealer has to pay a fee for every car that remains on the lot every 30 or 60 days.  They are usually willing to give more of a discount at month-end on cars that have already been on the lot for a long time.

You should not wait until you NEED a car to buy one.  Taking the time to plan ahead and purchase BEFORE you need a car plays a huge part in getting the best deal.  In desperation, you will not be as rational as you need to be for such an important purchase.  I will go more into this when we get to the negotiation section.


Before making any large purchase, you need to know as much as possible about what you are buying.  For those of us who are car people and spend years planning for our next car, this part is easy.  If you do not fit into that category, this step may not be nearly as much fun, but it is very important.

Take the time and figure out exactly which car that you want.  The make, model, color, trim and anything else unique to the car.  You can do this by going onto the manufacture’s website and using the build your own tool.  From this screen, you can search for similar models in your area.  Sites like Get A Free Dealer Quote At Edmunds are a good place to go to do all your research in one place.

Locate your car at multiple dealers in the area and see which dealer has the best prices.  You will want to find multiple cars at that dealer that you like.  In my experience, the car that you’ve just seen on the website will have been sold shortly before you got to the dealer.  Have a couple backup cars.

When you get to the dealership, ask if they have any demos that may fit your needs.  Although these cars may have a few thousand miles on them, they will be heavily discounted.  They also are still considered new, which makes them eligible for a lease and any rebates that are available.



Where you choose to buy your car from plays a big role in you getting the best deal.  You should choose a dealer that is fair and reputable.  The differences between dealers is more important when you are shopping for a used car.

There is no way to easily compare prices on used cars because they are all different.  You should always buy used cars from new car dealers or from large chains, like CarMax.  Do not buy cars from independent “We Finance” dealers, aka, “Tote the Note” dealers.

These dealers are not able to give you the best deal because they bear all of the risk in the car deal.  They own the inventory and they’re responsible for the financing and servicing of car loans.  New car dealers can usually make a decent profit because of volume, but independent dealers have to make up the profit elsewhere.

You will typically have to pay a much higher rate of interest when you buy from these dealerships.  The car prices are also much higher than you would pay for a similar car at a bigger dealer.  They tend to target buyers who do not have established credit and have trouble getting financing from a finance company.

One huge downside is that these dealers do not always report your payments to the credit bureaus.  So people with limited or bad credit who buy cars from there will continue to have limited or bad credit.  It’s important to have your car loans reported to the credit bureaus to help you build your credit.  See my post about Improving Your Credit Score.

If you feel like you do not have sufficient credit to go to a new car dealership, you may want to reconsider.  There are options for subprime lending through reputable dealerships and the interest rates will not be predatory.  You will also be able to get a more fair price through a reputable dealership.


You probably know that negotiation is a large part of car buying.  However, if you execute the first two steps in this post successfully, this step will be easier.  When you have already determined that the car is at a price you are ok paying, little else needs to be negotiated.  If you have a trade-in, there may be a little negotiating, but dealers do not usually budge from their initial quote.

The common advice is to check Kelly Blue Book for what your trade is worth.  This is false.  Every time I have traded in a car, the dealer uses their wholesale guide to price your trade.  My quotes have consistently been 10-20% lower than the most conservative KBB estimate.  Be prepared to be disappointed.  Do not rely on your trade to help you afford the car deal.

The most important rule of car negotiation is not to tell the salesperson what you want your car payment to be.  If you tell them $500, they will make it $499, even if it could have been $450.  The dealer’s responsibility is to give you the best price on the new car and a fair price on the trade in.  The payment amount will work itself out based on the interest rate that you qualify for and the term.

While you are going back and forth with the salesperson on price, pay attention to all of the numbers being presented.  I cannot tell you how many times I have asked the dealer to discount the price of the car, and they just increase another number to make up for the discount.  Car dealers do not have the best reputation regarding transparency and honesty, so it is important to pay attention.

To summarize…

Timing of your purchase makes a big difference.

Do your research.

Choose your dealer wisely.

Be ready to negotiate.


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