Buying a Car in an Inflationary Market

The Buying a car market has been in constant turmoil in the past few years. New cars were not built at the same rate, and individual components, especially technology components, have been in short supply. As inflation has grown during the same period, many new cars are now selling for over MSRP, dealer packages are adding thousands of dollars, and used car values rival their original prices when sold new.

Do your research

So, how can you get a good deal in this current market? Research, patience, and confidence are the keys to a good car deal. Follow these tips to get a good car at a good price and avoid overpaying!

Set a Budget

First, figure out what you want and how much you can pay before you set foot on a car lot. Before you even look at cars, the list features that 1) must have, 2) want to have, and 3) don’t care about. Decide what body styles you want and don’t want. Look around where you live and determine where you can have a car serviced.

If you want a new car buying and the closest dealership is 30 miles away, you’ll be frustrated trying to get it serviced and have warranty work done. Once you have your list, search websites like and by the body style and features you want, not by make or model. You may be surprised by some of the vehicles that would give you want!

Second, figure out your budget. What monthly payment can you comfortably afford? Use online loan calculators to determine how much you can afford. You can pre-qualify on sites like Capital One Auto Navigator to customize down payment and interest rates to see your monthly payments. Try to get various pre-qualification offers, including from local banks and credit unions and online sellers like Carvana and Carmax.

Third, if you have a trade-in, you must know how much it’s worth before going to a dealership. Visit Kelly Blue Book to determine a fair trade-in range for your trade. You can also get online appraisals from Carvana and Carmax, which may give you higher offers and will be useful negotiating tools at a dealership. Call your current lender and know your current balance and 10-day payoff to avoid rolling the negative equity into your new vehicle.

Prearrange financing

Once you have narrowed down what you want, have your financing lined up, and know what your trade-in is worth, NOW start looking for specific vehicles. Identify a few cars or trucks that interest you and reach out to the dealerships. If possible, contact them via email or text. Most car salesmen are fast talkers, so it’s best to negotiate in writing so you have proof of what they offer you. Tell the dealership you want a deal sheet BEFORE you come into the lot.

If they say they can’t do that, move on. In this post-COVID era, every dealership has had to learn how to negotiate deals remotely, including appraising your trade-in with the VIN and a few pictures. If they say you have to come in to put together a deal, don’t go. You will not get the best deal if you are already on the lot. They will keep you there long enough to agree to any deal because it’s late in the day, you are exhausted, and you don’t want to do this again tomorrow.

Negotiate an out-the-door price or “OTD” price. Dealerships are experts in the art of arithmetic manipulation. They may offer you an extra $500 on your car but add an extra $500 back in dealer fees. Determine the total amount you want to finance with your trade-in, down payment, taxes, fees, and other costs, and negotiate on that price.

Let the sales manager determine how to put the numbers together to hit that OTD price. During this negotiation process, you can use the online offers for your trade-in to help move the numbers in the right direction. Most dealerships will match online offers when pushed, so don’t let them tell you they can’t or won’t.

Never pay for dealer add-ons or dealer-installed packages. These may include paint protection, fabric protection, location devices, window tint, etc. These are HUGE profits for the dealers. You rarely need them; if you do, it will be like moving mountains to get the repairs done. In many cases, the deductible you would pay for these services will cost more than the repairs themselves!

Instead, save your money and buy some spray-on fabric protectors at the store or have your windows tinted at a local shop where it will cost 50% less. If the sales manager refuses to take these add-on charges off the deal sheet, move on to the next option. Remember, since you are negotiating this from home, you can have multiple negotiations going on simultaneously to get the best deal!

Deal Sheet

Once you have a deal sheet with an OTD price that works for you on a car that you think is a good fit, let the dealership’s finance department try to beat the financing you have already lined up. Never tell the dealership what your approved interest rate is. If you do, they’ll often approve you for just a tiny bit lower APR, when in reality, you might have gotten an even better rate if they didn’t know the APR you already have.

So, you are still at home and have a deal sheet with an OTD number you are comfortable with and financing that fits your budget. Now, it’s time to head to the dealership!

When you arrive, test the car and make sure you like it. If you don’t like it or there is something wrong with it, don’t be afraid to leave. Don’t feel pressured into buying a car you don’t want just because you have spent time working out a deal. Don’t let them try to make you feel guilty or play on some kind of false friendship. You are not friends with the sales associates or managers. In all likelihood, you’ll never actually see them again. This isn’t a relationship; it’s a financial transaction. So, don’t let guilt or emotions guide your purchasing decision.

After driving the car, if you still want it, tell the sales associate you want to review the deal sheet again. Make sure none of the numbers have changed. It can get murky, especially if they know you like the vehicle. When you get to the finance office, tell the finance manager you don’t want extended warranties, GAP insurance, service contracts, etc.

These are always overpriced and almost always cost more than you will ever spend on vehicle maintenance. These are huge profit margins for the dealership, but they don’t create good savings for you. If you are concerned about the risks of future expenses, open a savings account and put the same amount of money each month into savings. If you ever need it, you already have it available. And if you don’t ever need it (which is the most likely outcome), you will have saved a nice down payment for your next vehicle or a fun vacation!

The post-COVID financial world has changed dramatically, and the car buying industry is no exception. But that doesn’t mean you have to overpay for a vehicle or feel pressured into a bad deal. With research, patience, and confidence in what you want, you can still negotiate a good deal on a vehicle, even in a hot seller’s market!


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