Expert Tips for Getting the Best Price on New and Used Cars

As prices for new and used vehicles keep declining and there’s discussion about the Federal Reserve cutting interest rates, some buyers may be thinking about finally purchasing that new or preowned car they’ve postponed for some time. According to Edmunds.com figures, the average transaction price of $47,616 for June was down 0.7%, or roughly $330, from $47,946 in June 2023. And buyers are receiving a larger reduction from sticker prices. Edmunds’ numbers showed the average manufacturer’s suggested retail price rose 1.6% to $49,434 in June versus $48,651 a year earlier, effectively delivering car shoppers a $1,819 discount compared with a $704 discount a year ago. Used-vehicle prices are falling as well. The typical buyer paid $27,277 last month versus $29,573 a year prior, Edmunds data indicated.

But as the year moves on, automakers are not likely to roll out many incentives, said Cox Automotive executive analyst Erin Keating. “Even brands holding onto more days’ supply, like many Stellantis brands, are keeping incentive spend in check,” Keating said. “There appears to be a real effort to hold the line out there.”

So if you want to get the best price on a new or used vehicle, here are expert tips on how to shop.

Come prepared, but be open-minded

The secret to a fruitful car buy is understanding your choices before you step into a dealership. That means being aware of everything from the specifics of the new model itself, the worth of your trade-in (which you can determine online or with an expert), interest rates and what you qualify for, to what parts of the price are negotiable and which aren’t, said Ivan Drury, director of insights at Edmunds.com.

Let’s examine financing. Specialists recommend visiting several banks or credit unions to get preapproved so you’ll know which interest rates you’ll qualify for on both new and used cars. “Why both?” Drury asked. “Because shopping online versus being at the dealership are two completely different experiences. You might fall in love online with a listing, but one test drive later with a seating position that you find unbearable and you’re back to seeing what other fish are in the ocean, or, in this case, you might go from shopping new to seeing an excellent used option on the other side of the lot.”

Drury advised that even if you’re preapproved through your bank, let the dealership also try to find financing for you. Dealers work with multiple lenders and often have longstanding relationships from years of transactions. Drury noted if a dealer can shave even just a quarter point off your interest rate, it’s worthwhile. “There is one financial institute that franchise dealers have access to that you don’t: the automaker’s captive finance company,” Drury said. “This is where dreams of 0%, 1.9%, 2.9% … financing come true, if you’re lucky enough to be looking at a vehicle that has one of these low APR offers. So let the dealership run your numbers.”

But before accepting any captive offers, calculate whether the interest savings outweigh any cash incentives that might be available.

Negotiate on fees

Matt Smith, head of Consumer Insights for car-shopping site CarGurus, said besides arriving with preapproved financing, the most critical number to focus on is the total “out-the-door” price for the vehicle. That sum will include all fees and taxes because some charges may be negotiable. “Look for an itemized list of the fees,” Smith said. “They might not trim a dealer fee, but they could make adjustments elsewhere in the deal. If a dealer really wants to sell a car and move some metal at the end of the month, then I don’t think anything is off the table.”

Used cars might come with fees for rustproofing or undercoating that a buyer could haggle over, Smith said. But one charge on a new car is almost always nonnegotiable: the destination fee. That’s typically over $1,000, he added.

Car buyers have another possible leverage point, Smith said: finance and insurance products. “If the dealer isn’t going to budge on price, see if they’ll include tire-and-wheel coverage in the deal,” Smith advised.

Tire-and-wheel coverage often covers replacing tires and rims damaged by poor roads. It can be a worthwhile add-on depending on your locale and road conditions, Smith said. But steer clear of extended warranties, because those seldom pay off, he warned.

Get away from monthly payment mentality

A major error many shoppers make is focusing on the monthly payment. Experts understand why — consumers want to ensure it fits their budget — but that’s not the route to the best deal. “Because we see loan terms stretch out to 72 months or 94 months, it might feel good for your monthly payment, but with interest rates over that long, it ends up being more than what you’re actually paying for the car,” Smith said. “So figure out the out-the-door cost.”

Drury agreed, noting salespeople will often ask what you want to spend monthly or what your current payment is. None of that matters, he said. “What matters is how much you want to spend today, on this purchase,” Drury said. “Just because you’re currently doing something or have the ability to do more doesn’t mean you should. Know your numbers and if you want, flip the question to be about the present vehicle. But also know that wherever you start, it is not going down from there.”

Should you put money down on a lease or not?

If you opt to lease a new car, dealers often request a few thousand dollars down. That lowers your monthly payment compared with financing a purchase. But since you won’t have equity in a lease, is it smart to hand over $2,000 or more that you won’t get back? Drury suggests zero down or a modest down payment when the lease interest rate is low. “This would result in a higher monthly payment, but it does leave you with more cash on hand for other expenses, planned or otherwise,” Drury said. “I say this so that the buyer is borrowing more cheap money versus putting up a lot up front.”

However, if the lease rate is high, then a larger down payment should reduce the monthly payment and is recommended to limit how much you pay simply to borrow the car during your lease term.

What to look for in a test drive

Now let’s cover shopping and the test drive. Smith said always schedule an appointment with the dealership before you show up. “Otherwise, the car you wanted might be sold already,” Smith said. “And negotiate a price ahead of time. These people are professional negotiators, so get as much in writing ahead of time. Showing up and saying, ‘What have you got for under $20,000’ is not a successful negotiating strategy anymore.”

Don’t hesitate to ask detailed questions about the vehicle, Drury added, because even the same model can see significant changes from one model year to the next, some obvious and others less so. “You don’t want to buy a new vehicle in July only to find out that the next model year is being sold in September and has that one feature you really want,” Drury said. “This applies to used vehicles as well, saving money by purchasing an older version of the same model might not be worth it if you find out after the fact that you missed out on that one little option that could make your life so much easier.”

Drury recommends these shopping tips:

Do your research about the vehicle’s features online first but ask your salesperson specific questions and see the features in person.
Check the automaker’s media/news release site, but realize not all information about future products is available when you’re buying.
Find the right fit regarding trim levels and options because assuming you can live without something to save upfront could cost you later if you decide you want a different trim package after purchase. “One of the biggest mistakes that happens is trading in a vehicle within a month, a year or even two years. Unless you’re putting up a massive down payment or have a lot of positive equity, you’re going to be either in negative equity or having eaten a lot of depreciation,” Drury said.
Choose options that help every time you drive the car. For example, heated or ventilated seats are useful if your area’s weather varies widely. If you struggle with parking, cameras can help, Drury said, “but opting for a moonroof that you keep closed 95% of the year, probably not as worthwhile.”

Shop right for the weather

Another thing to keep in mind, Drury said, is that a bad-weather day is a car shopper’s advantage. “There will be fewer people at the dealership and you can test drive a vehicle during a time in which you really need to know what you’re getting into,” Drury said. “Bright, sunshiny days are great and all, but newer vehicles tend to have less glass for safety reasons and that could translate into more blind spots than you’re accustomed to.”

For used cars, the reverse holds. You want sufficiently bright conditions so you can inspect the vehicle for flaws. Still, Drury suggested driving it in the rain, too, before buying to check for leaky seals or fogged headlights or taillights. And even if it’s hot out, test the heater, heated seats and heated steering wheel. If it’s cold, try the AC or ventilated/cooled seats.

‘Silence is golden’ during a test drive

The test drive is as crucial as the negotiations, so here’s how to handle it: “Test the stereo, but only briefly,” Drury said. “During most of the test drive, silence is golden. You want to hear any noises or just in general how much road noise enters the cabin. Pair your phone, see if the infotainment system is up to your expectations, if it or any other features annoy you today, they’ll annoy you tomorrow and for the rest of your ownership experience.”

Smith offers this checklist for test driving a new or used car:

How does the car accelerate?
Are you sensing any strange vibrations?
Is it shifting oddly?
Roll down the windows and listen to the brakes. If brakes need replacement, you’ll hear a metal-on-metal sound, a squeal.
Touch all the buttons and confirm you’re comfortable with them.
Watch YouTube car reviews beforehand because they dig into the vehicle’s tech.
Sit in every seat. If you have a small child, bring the car seat to ensure it’s easy to install and a stroller fits in the trunk. Or ask if you can bring your dog to see if he or she fits in the vehicle.

Specifics to look for in a used car purchase

According to Google Trends data, searches for “what to check on used car” have jumped 350% in the past month. Luke Bishop, parts manager at GM Parts Direct, which is owned by Flow Automotive, offers the following when shopping for a used vehicle:

Pop the hood and inspect the engine closely for signs of leaks or burnt-oil odors. Fresh leaks will look wet and shiny, while older leaks may look dirty or dusty. Leaks could indicate serious trouble.
Check the oil level with the dipstick. The oil should be clean and at the recommended level shown on the dipstick. If it’s dirty or at the wrong level, Bishop said it could signal poor maintenance or potential engine issues.
Watch for any smoke from the exhaust. A healthy engine will emit little to no smoke.
Don’t even consider buying the car without a mechanic’s inspection if you notice exhaust smoke.
Pay attention to the brakes. Worn brake pads can create uneven braking and make the car pull to one side when braking. This could also point to problems with the suspension or steering system, Bishop said.
Inspect the tires carefully for wear and uneven tread.
Ask the seller for the vehicle’s history, and whether it has had recent repairs, performance modifications or mechanical problems.

To that end, Smith said he would never purchase a used car without paying for a prepurchase inspection by a trusted mechanic and obtaining a vehicle history report. A prepurchase inspection typically costs $130 to $200, according to www.repairpal.com.

Final piece of advice: ‘Know when to walk away’

Drury said he leaves everyone with one more tip: “Know when to walk away.” Go home, run the numbers or reassess your needs versus wants, he said. Buying a vehicle can be overwhelming, especially if you only visit a dealership every few years. “You might also be emotionally drained if you’re shopping because of a repair bill on your current vehicle mirroring a down payment and you’re debating on what to do or your current vehicle was just totaled,” Drury said. “Try not to let those emotions get the best of you; solving the problem immediately but not completely by purchasing the wrong vehicle will haunt you longer than just giving it a day or two to simmer.”

On the other hand, he noted, automaker incentives do expire. So if the salesperson says that you won’t get this deal tomorrow, they may be telling the truth.