Short of buying a home, many consumers will never spend more money than they do when purchasing a new vehicle.
According to the automotive resource Kelley Blue Book¨, new-vehicle prices increased by 2 percent between April 2018 and April 2019, rising to slightly less than $37,000 in that period. With so much money at stake, car buyers’ decisions in regard to which car to buy and how to finance the purchase are significant. Some financial variables, including sales tax, may be set in stone. However, buyers can make the process of buying new cars more affordable.
1. Pay the taxes upfront. When buying a new car, buyers will receive a rundown of all of the costs from the dealership that’s selling them the vehicle. Sales taxes will be included in that rundown. Buyers who are financing their vehicles can save money over the long haul by including the sales taxes in their initial down payment. Doing so means buyers will only pay interest on the vehicle and not the vehicle as well as the taxes going forward.
2. Use a cash back credit card when making your down payment and paying taxes on the vehicle. Some lenders may not allow down payments to be made in anything but cash, while others accept credit card payments. Car buyers who have cash back credit cards can use those cards when making down payments and/or paying the taxes on the vehicle to reduce the initial costs of buying the car. For example, if a credit card rewards card holders with 2 percent cash back on every charged purchase, buyers can then lower the cost of that down payment by 2 percent by simply using their cards when making the payment. Just be sure to pay the balance in full when the bill is due, as credit card interest charges can negate any savings you might earn.
3. Carefully read the service contract. Many dealerships now offer service contracts that can be rolled into monthly payments. These contracts may cover certain maintenance costs as defined in the agreement. Each auto service contract is different, and some may just be offering duplicate coverage already provided by the manufacturersÕ warranty. Buyers always have the option to decline the service contract and should never agree to it without first reading the entire contract.
Requesting to do so can be difficult, as service contracts are often proposed as buyers finalize their financing agreements, and many packages must be accepted on-site before the loan is finalized. But buyers have the right to take their time and read the contracts. New cars are expensive, but buyers can employ various strategies to save money before signing on the dotted line.