Buying a New Car: 5 Facts You Need to Know

There are plenty of resources that take you step by step through the entire car buying process. But most don’t go into detail on specific parts of the process that may make the difference in your entire decision making.

Below, there are new car buying facts detailed to give you a fresh perspective and honest advice on buying a new car. From depreciation to leasing to trade-in value, this piece is all about changing how you think about buying a car and helping you become a more-informed car buyer.

Here are the best facts about buying a new car that you need to know!

Some Vehicles Depreciate More Than Others

Everyone has heard the saying “a new loses value the second you drive if off the lot.” This is true of every single car, with the exception of some very limited, very exclusive million dollar supercars with badges like Bugatti and Ferrari.

But there’s more to this saying than most buyers know. Many simply assume that new cars all lose the same percentage of value over time, but that couldn’t be further from the truth. In fact, depreciation can vary greatly from brand to brand, even within the same vehicle segment.

For instance, a Fiat 500L loses more value in one year than the average Toyota Tacoma or Toyota 4Runner do in three years. In fact, the Tacoma only depreciates 38.9% in the first five years, which is clearly why it’s the #1 in residual value according to Kelley Blue Book.

There’s no beating time when it comes to car depreciation, but if residual value is a big concern you should research the top vehicles in the segment you’re purchasing from and pick your favorite!

Leasing isn’t for Everyone

Car buyers today are always looking to save money, and if you’ve purchased a car in the past decade or so you know that monthly payments can have huge differences when comparing leasing vs. financing.

In general, leasing is the most affordable from a monthly payment perspective; however, buyers who plan to buy the car after the lease would likely be better off financing traditionally. This is due to the fact that your vehicle has to change hands from one financing company to another, and there are fees involved in the initial purchase and the subsequent purchase of the leased vehicle.

With good credit, you can secure low financing and have more say on the selling price of the vehicle when you decide to finance traditionally. While you may be tempted by lower monthly payments, that doesn’t mean you’re necessarily getting the best deal overall.

Finally, should you need to sell your leased vehicle for any reason, you may also be hit with extra fees or have a higher payoff than you might otherwise have when financing traditionally.

Leasing is a great option for buyers who want to take the stress out of car ownership and have a fresh car waiting every 2 or 3 years, so ask yourself if you want to save money or have less worries. Like most things in life, that’s often the choice it comes down to.

There Really is a Best Time to Buy a New Car

Every year, there are hundreds of articles published advising car buyers on “the best time to buy a new car.” Almost every month of the year is listed for different reasons. Holiday events, new model year clearance, slow winter months, and on and on.

But the truth is, the best time to buy a new car is before you need a new car. Regardless of crazy incentives, buying a new car before your current car has a major issue that requires costly repairs will save you a ton of money. If you can somehow tie that in to the time of year when manufacturers are ramping up the savings on new vehicles, even better.

The point is, don’t wait for a specific sale to buy a new car if you’re ready. Many aging cars are ticking time bombs, and unless you plan on paying the repair bills and driving each car you own into the ground, make sure you don’t have to “push, pull, or tow” your vehicle to the dealership!

Your Trade-In is Probably Worth Less Than You Think

Speaking of your current car, it’s probably worth less than you think. That’s not what car buyers like to hear, but it’s the unfortunate truth. No matter what KBB says, each market is different. Some are more competitive, which drives down used car prices. Others are not as competitive, so the average market price of a used car may be higher.

And despite what you might think about car dealers, in order to stay in business they need to make profit. Try asking your realtor to take no commision and you won’t have a realtor for long.

Unless you want to park your car and try to sell it on the side of the road or on Craigslist, the convenience of trading in a car in a matter of hours and driving off in a new vehicle is going to cost something.

But if you want the best shot at getting the most for your trade, have an idea for how much a vehicle like yours is listed for in your area’s market currently. Ask the dealer how close they can get to that price and see what they come back with.

Keep in mind that is what the vehicle sells for, so you’re very unlikely to get that. However, if you make it clear you understand the dealer needs to make money, you can speed up the process and get your sale finalized with minimal back and forth.

Manufacturer Financing Often Offers Savings

While you may get outside financing offers from banks or other lenders that sound like good deals on car loans, new car financing from the manufacturer’s credit division is almost always the best deal.

Any time you hear about 0% being offered, that’s the manufacturer’s credit offer. Not to mention, there are usually discounts available for those that use the manufacturer’s credit over another option. After all, they have the ability to sweeten the deal since you’re buying their vehicle. If it makes the difference in a sale, it’s worth it to most manufacturers to sacrifice money on the financing end.

Hopefully this guide brought you some insight into new car buying and will help you make smarter and more informed decisions the next time you’re ready for a new car!