SHOPSMART AUTOS – CUSTOMER INFORMATION – JULY 3, 2021 (Part 2)
Save Money With a Great Car Deal This Independence Day
How Do You Know if It Is a Good Deal?
Consumers should never assume that an advertised deal is automatically a good deal. It takes a little bit of homework to analyze a deal, but fortunately, the math is pretty simple. Most people base their car-buying decision on the monthly payment, but that’s an awful way to buy a car. Instead, you want to look at the total cost of the vehicle, including the cost of financing. You’ll want to do the math yourself, as it’s easy for a trained salesperson to shuffle the numbers around to give you a low monthly payment, even if the deal is horrendous. Not considering the total cost of a vehicle is a financial mistake with consequences that last years. To figure the total cost, multiply the monthly payment by the number of months in the loan and add any down payment that you are making, plus the value of your trade-in. If, for example, you have monthly payments of $400 on a five-year loan and put $5,000 down, the total cost of the car would be $400 times 60 months plus $5,000, which works out to $29,000. You can find your monthly payment by using the U.S. News Car Loan Calculator, which is capable of computing interest. The first thing you want to remember is that there are three components to a car buying transaction: the cost of the car, the cost of the financing, and the value of your trade-in. You’ll want to keep them separate, while the dealership will want to lump them all into one confusing deal. In many cases, you’ll have a choice between a cash back special and low- or no-interest financing. Finding which is the best offer is simple. We’ll use a couple of this month’s deals to show you how. The 2021 Chrysler 300 S V6 costs $38,320 and is available with either an 84-month 0% financing deal or $2,500 cash back in some parts of the country. We’ll say you’re not making a down payment and don’t have a trade-in. Since there’s no interest to be paid with the 0% deal, we can simply divide the $38,320 price into 84 equal monthly payments of $456. Opt for the cash back deal, and you’ll knock the $38,320 price to $35,820. However, you’ll have to pay market-rate interest on your car loan. The current average auto loan rate is 4.18%, and that’s what we’ll use for this example. When we plug the discounted price, the interest rate, and the length of the loan into our car payment calculator, it shows us that each monthly payment would be $493. The extra $37 you would pay each month might not sound like much, but if you multiply it by the 84 times you would have to pay it, you’ll see that the rebate deal would cost you an extra $3,108 over the length of the loan. In this case, you would definitely want to take the 0% deal. There are a lot of variables involved with different car deals, so never assume that one type of offer is always going to be better than another. Remember to include the value of your trade-in and any down payment you make into your calculations. It is critical that you resist the urge, or a dealer’s suggestion, to stretch out your car loan past five years to lower your monthly payment or get into a more expensive car. Taking a longer loan puts you in a more precarious financial position and usually increases the interest rate and overall cost of the loan. You never want to be forced to choose between paying for a costly repair on a car that is out of warranty or making your car payment.
Completing the Deal
Once you’ve negotiated an agreement with the dealer, it’s time to sit down and do the paperwork. It may have been a long day of haggling, and you just want to hop in your new car and drive away, but you need to slow down and pay attention to the details in the paperwork. You need to read each page, making sure that the numbers match what you agreed to. Sometimes costly add-ons magically appear in the final documents, and you’ll want them removed before you sign. The most critical numbers to look for are the length of the loan, the price of the car, and your interest rate. Don’t ever sign a document with blank spaces or errors, even if the finance officer promises to fix them later. If they pressure you to sign papers that are incorrect or that you don’t understand, remember that your greatest power is to walk away from the deal. If a dealer offers you the chance to take the car home while they process the final paperwork, you should politely decline. What often happens is that you’ll get a call saying you didn’t qualify for the deal that everyone agreed to, and you have to return to the dealer to fill out new paperwork. In many of those cases, the new financing deal is much more expensive than the original. We research deals based on representative ZIP codes across the country. We strive to keep this list up to date, but offers can change without warning. Some car specials are limited to a certain number of vehicles or a percentage of dealer stock, and inclusion on our site does not guarantee that a particular deal will be available at your local outlet. The easiest way to find out if you can take advantage of an offer is to click the red “Find Best Price” button next to the car that you’re interested in, and we’ll search for a great price at a local new car dealer. Our best car deals include purchase deals for Toyota, Nissan, Ford, Honda, Chevrolet, Hyundai, Kia, Dodge, Ram, Jeep, Mazda, Buick, GMC, Subaru, Volkswagen, Acura, Cadillac, Porsche, Mercedes-Benz, Audi, BMW, Lincoln, Volvo, Infiniti, and Lexus vehicles. Our expert researchers and journalists also search the market for this month’s best lease deals and best used car deals. We’ve done the research to help you find a great ride at a great price.
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