The Auto Loan Calculator Edge: Smarter Buys, Bigger Savings
If you’re thinking of buying a new or pre-owned car but aren’t sure how much of a monthly payment you can afford, ...
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If you're in the market to purchase a car, you are likely looking for ways to save. After all, it’s not every day you spend several thousand dollars on a vehicle. And buying a car is not something to do without careful thought. Before you head into the dealership to start shopping for a car, make sure you do your homework. Research current buying conditions and possible demand and supply chain hiccups to prepare for what you can expect.
Once you have an understanding of the current market conditions, it is time to look for ways to save on your actual purchase. Depending on the shopping environment and your timeline to make a purchase, the best time to buy a car may be the day you find your ideal vehicle make and model at a dealership on the lot. But if you have time on your side, car buyers can save by timing their car purchases. By buying your car and getting a car loan at the right time, you can save substantially. Here are the secrets to helping you save through proper timing on your car purchase.
What Are the Best Months to Buy a Car and Take Out a Car Loan?
If you're in the market for a new car and you don't have an immediate need for a vehicle, buying during certain months can help you get a great price.
According to Edmunds, the end of the calendar year commonly features year-end sales events. Shopping in December can potentially yield an MSRP discount on outgoing model-year vehicles if the supply has been consistent. Automakers and car dealerships also like to end the year with strong sales numbers. Be sure to do your research before heading out to see what inventory is expected at the time you plan to shop.
With December being the best month to buy, discounts tend to follow the release of new models. If a dealer has more old-model vehicles on the lot, you can expect a better chance at additional savings. Here are the potential discounts you can expect to receive based on the month you decide to buy.
Minimal Discounted Months: January - April
Better Discounted Months: May - September
Most Discounted Months: October - December
Other Good Times to Buy a Car
While October, November, and December are excellent months to buy a car, you may need a car outside of this three-month period. Another way to time your car purchase is to shop around major holidays, when dealers may offer holiday sales. Car dealers often offer discounts on these holidays:
- Presidents' Day – February is the month with the smallest discounts off MSRP, so Presidents' Day sales may help you save.
- Memorial Day – Memorial Day is famous for car deals, so plan some car shopping after your barbecue.
- Fourth of July – There should be a mix of old and new model cars available for negotiations surrounding this holiday.
- Labor Day – Although September may not have the highest savings numbers, you'll most likely have more vehicles to choose from.
- Black Friday – Car dealers are retailers, and they are often motivated to offer incentives on the biggest shopping day of the year.
Early in the Week is the Best to Buy a Car and Get a Car Loan
Not everyone can shop on major holidays. If you need a car and don't have the benefit of a flexible calendar, consider the timing of your visit that week. If you can shop early in the week, when dealerships tend to be slower, you may be able to snag a better deal. In fact, shopping on a weekday, with Monday being the best, can save you on the cost of your vehicle and offer a more relaxed shopping experience. The fewer shoppers there are competing to purchase a car, the better your price will be.
Enjoy our money and time-saving tips for your car-buying journey by downloading our free guide:
Other Factors for Best Times to Buy a Car and Get a Car Loan
In addition to the overall competition and dealer motivation, the type of vehicle you're shopping for may impact the timing of your car loan. Data has shown that certain types of vehicles sell for better prices at certain times of the year, such as:
- Compact cars – November
- Midsize SUVs – May
- Full-size and small SUVs – December
- Trucks – October
- Midsize cars – November
You should also consider the timing based on your financial status. This has a direct impact on your car loan and may be a more important factor to consider when deciding the best time to buy a car.
Save for Your Down Payment
A down payment lowers the cost of your vehicle and the amount of interest you pay over the life of your car loan. The more you put down on your vehicle, the more affordable it will be. A good down payment can also make your car loan more affordable by opening the door to a greater number of loans at a better interest rate.
Clean Up Your Credit
The best time to buy a car is when you are able to afford the car and the loan, and your credit rating impacts that significantly. A strong credit rating means a more affordable loan. If you have had time to clean up your credit rating, you are in a good position to buy a car.
Get a Car Loan Pre-Approval
Finally, before you decide that it's time to buy a car, talk to a lender. Get pre-approved for your car loan before you start shopping. This will help you stay within a reasonable budget that fits your needs.
How Much Car Can You Really Afford?
Carefully consider your budget before heading to the car dealership. How much can you really afford to spend on a car? A good rule of thumb is to keep your monthly car payment within 15% of your monthly take-home pay. This will protect you from buying more than you can really afford.
Keep in mind that cars cost more than just their monthly payment. With any car you buy, you'll need to plan for:
- Gas or fuel
- Repairs
- Insurance costs
- Taxes or registration
Some of these, like the fuel costs and insurance fees, vary from car to car. Take into account all of the costs of car ownership as you decide what you can afford to spend on a car.
Watch the Dealer Add-ons
Having your budget in mind before you head to the dealer is essential, but you still need to proceed with caution. Dealers make a commission on the total price of the cars they sell, but they may make more of a commission if they add on to your purchase. Be sure to check with your local lender for pricing options when comparing extended warranties, loan protection, and gap insurance.
In addition, be careful not to share your bottom-line monthly payment amount with the dealer, no matter how hard they ask for it. This is a negotiating tactic dealers use to try to fit you into a car, rather than allowing you to find a car that fits your budget. They will push the numbers around, extending the term of the loan, for instance, to make the car fit your monthly max, and you can end up with a far more costly vehicle and car loan than you planned on.
Understanding the Bottom Line About Timing Your Car Purchase
So what's the bottom line? When is the best time to purchase a vehicle? The answer depends on your needs. When you're financially prepared, know what you can afford, and have money for a down payment, then it's a good time to buy a car. Timing your purchase around the calendar can also help you save, but it's far more important to be financially prepared for the purchase, so take time to tighten up your finances and secure your car loan pre-approval before you start shopping.
