Buying a car can be an expensive process for many of us, and the cost of the car can go far beyond the amount you pay when you leave the dealership. Most of us buy a car either privately off someone we know or through a well-known online car marketplace, while others prefer to go directly to a new or used car dealership and negotiate. The problem lies that with both of these traditional methods we never really know if the price we ended paying for the car is the best one we could have gotten at the time and this has left many of us continuing to ask ourselves ‘What is the cheapest way to buy a car?’
One new method of car acquisition that has become increasingly popular of late, is using a car broker to buy or sell a car on your behalf. Why use a car broker? Car brokers act as an intermediary, they take the hassle and stress out of buying or selling a car, and best of all, they are independent of car dealers and banks, ensuring you always get the best price possible. If you would like to learn about how a car broker works please read our FAQ and our featured blog from last month ‘What is a car broker?’. But first, let’s delve a little deeper into the costs of buying a car; There are many factors to consider in regard to the actual price of a car which includes the actual purchase price, ongoing financing costs, yearly maintenance and the often-overlooked cost of depreciation. With these costs in mind, ‘What is the most economical way to buy a car’?
What is the Cheapest Way to Buy a Car?
Buy Within Your Budget
Start by identifying how much you can afford to spend and what kind of make and model you are after. Set a target for the initial cost of your car and consider the long-term costs of owning it as well. A car purchase can be expensive, and while you may have your heart set on that brand-new BMW, the long-term costs of ownership may end up putting it out of your budget. This is called the ‘Total Cost of Car Ownership Over Time’ and takes into account the total cash price, depreciation, insurance, financing, taxes and fees, fuel, maintenance, repairs, and any applicable government subsidies. Different makes and models will have a different total cost of ownership and not taking into account the hidden costs of car ownership can quickly put you into a position where you can no longer afford the maintenance or repayments of your car.
Cash is King
We’ve all heard the mantra ‘Cash is King’, and there is some truth to the saying when it comes to buying a car. Buying a car in cash is one of the many ways to ensure you are getting a cheaper overall price. This is simply because a car purchased in cash carries no additional financing costs. For the most part, this is a good rule of thumb to follow but this is not always the case; Let’s take a look at two different examples.
Example 1 – Buying a car with only cash you take out of your mutual fund earning 5.0% p.a. compounded over 5 years.
Car cost: $20,000
Mutual Fund Interest Lost: -$5,525
Actual Car Cost: $25,525
Example 2 – Buying a car with a special 0% interest financing option from a dealership
Car Cost: $20,000
Interest Cost over 5 years: $0.00
Actual Car Cost: $20,000
The above two examples are overly simplified and of course several variables have to be considered. It does serve to showcase that in certain situations financing a car purchase may be more beneficial than purchasing a car using your savings.
Consider Used over New
We often get asked the question ‘What is the cheapest way to buy a new car?’ and while there are some tips and tricks to save money buying a new car, the reality is buying a new car can be one of the most expensive ways to buy a car; This is due to the real cost of depreciation. Depreciation is the loss in value of your car over time and on average a new car will lose 20% of its value after one year, and 15% each year after that. While different makes and models depreciate differently, new cars will be worth approximately 50% of their initial purchase price after five years and only 10% of their initial purchase price after ten years. For most car buyers there is simply no way to avoid the cost of depreciation. For a business, however, this depreciation can often be ‘written off’ as a business expense effectively reducing the business’ tax liabilities.
Don’t Settle for a Low Trade-in Value
If you are trading in your current car, consider selling your car privately first. Selling your car privately will almost always get you a better price than trading it in at a dealership. Dealers will often try to give you the lowest price possible on your trade-in so that there is enough margin for them to make a profit on your old car as well as your new one! If you are short on time, or simply don’t have the expertise to sell your car privately consider engaging the services of a car broker. A car broker has the industry knowledge and negotiation skills to get you the best price. They can take care of everything for you from getting repairs at trade prices, professionally cleaning and photographing your car, listing your car and even lending you a car for a few days while your car is getting ready for sale. The process is simple, all you need to do is tell your car broker ‘sell my car’ and you’ll be sure to get more than just the ‘trade-in’ price.
Choose Car Finance that is Right for You
If you need to use car finance for your car purchase, make sure you are using the best financing options available to you. There are many ways to finance a car on credit from dealer finance, personal loans, credit card debt, a car lease, to even extending the mortgage on your home. The costs associated with each financing option will vary depending on your Equifax Score (VedaScore) commonly known as a credit rating and the range of lenders available to you. Using an auto broker can be a powerful way to secure better finance and, in some cases, a car broker can even help buyers with a bad credit score. Most car dealers will have access to a small range of finance partners that they use for financing on their cars. An auto broker on the other hand, being independent, utilises a large range of lenders and can quickly compare all the different financing options available to you. Using an auto broker to secure car finance Brisbane wide can be one of the best ways to get the cheapest finance on your next car purchase.
What is the Cheapest Way to Buy a New Car?
Hundreds of different makes and thousands of different models all offering countless customisable options are ‘sold’ to you when you enter that car dealership; New cars can be very expensive but what is the cheapest way to buy a new car?
Timing is Key
If you are in the market for a new car purchase, time your car purchase with the end of year sales and old dealer inventory. Often the answer to ‘what is the cheapest way to buy a new car?’ is simply waiting for the big end of financial year sale to buy ‘run-out’ stock. Buying a car just before or just after the new model for that year is about to arrive, is often the best way to save several thousand dollars on your new car purchase. If you don’t mind a couple of thousand kilometers on the speedometer, another way to save money is to buy a ‘demo car’. Demo models are the cars the dealers use for test drives and are often sold much cheaper than that of a new car.
Avoid the Upsell
What is the cheapest way to buy a car? Avoid the ‘options upsell’ at the dealership! Modern cars can be infinitely customised to your liking and many of these options are available when you purchase a new car from a dealer. Adding in all these extras onto your car purchase can really increase the initial cost of your car especially if you are using finance. The heated seats, tinted windows, drop-down DVD player might seem like reasonably priced options now, but with finance at 8.00% over 5 years they can quickly become more expensive than an after-market install. To make matters worse, luxury options rarely hold much value in a future trade-in or sale, and technology quickly becomes outdated.
Flexibility and Research is Key
Be flexible with your car make and model, nowadays many car manufacturers are conglomerates and cross-utilise parts across multiple vehicles. So, while you may have your heart set on one particular brand and model, chances are you can find almost the exact same model with a few minor tweaks at a different brand. Don’t be afraid to shop around until you find the best deal. Buying the first car offered to you is not the best answer to ‘what is the most economical way to buy a car’. Take the time to research your options or better yet engage a car broker to take care of everything for you!
Why use an Auto Broker?
Finding the right car, at the right price is an uphill battle; It is time-consuming and takes industry knowledge to ensure the car you buy is the best deal for you. Is a car broker worth it? A car broker takes the hassle out of buying or selling your car and will guide you through the entire process from start to finish.
- No more paying a premium on your car purchase.
- No more negotiations with dealers.
- No more driving lot to lot to find the best car.
- No more complicated financing options.
- No more hidden fees.
- No more low trade-in values.
- No more missing out on subsidies and deals.
- No more not understanding legal requirements.
If you are in the market to buy a new or used car or are looking for the best price when selling your car, Get in touch with us at eCarz. At eCarz we are full-service car brokers and we know how to get your money’s worth. No more asking yourself ‘What is the cheapest way to buy a car?’ or ‘What is the most economical way to buy a car?’. Call us today to find the perfect car at the best price for you.