7 smart ways to cut car costs in 2021
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Just the thought of car-shopping is enough to put a bad taste in most people’s mouths. Stories abound of well-intentioned customers getting talked into a pricey new ride by smooth-talking salesmen. That’s particularly true when it comes to used-car shopping: No one wants to end up with a lemon, and first-time car buyers are often particularly nervous about buying a used vehicle in need of extensive work down the road—or in the next month or two.
Still, the lower prices that come with used cars make them undeniably appealing—especially if you’re working with a tight budget. As long as you do your homework and ask plenty of questions before signing on the dotted line, it’s absolutely possible to buy a quality used car that will serve you well for years to come.
To help consumers make a savvy car-buying decision, CoPilot compiled a list of 10 key things to consider when deciding to buy a used car from expert sources such as financial outlets, insurance companies, and government agencies. Think of these 10 steps as a framework you can use to approach the car-buying process, from the moment you start shopping to finally negotiating with the seller or dealer.
Before you head to the nearest dealership or even start browsing online listings, read through this list to ensure you know what you’re really looking for and how to evaluate whether a used car is a good deal or not. It’s not as simple as finding a cute model in a great color that’s the right price; you also need to discern how much wear and tear is on the vehicle. Keep reading to learn the difference between highway and city miles, find out why the VIN number is so important, and discover the few things you might want to do in person.
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Before you start shopping, it’s important to have a clear idea of what you want in a used car. Consider the car size, number of seats, gas mileage, amount of cargo room, transmission, engine size, driving style, and any other special features like built-in GPS or Bluetooth audio. Make a list of your needs and your wants, then do some research on models that could work for you.
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It’s imperative to set a firm budget before you start shopping in order to avoid getting reeled into a higher number. Consider the down payment, or the amount you can put down at the time of purchase, and the monthly payments. Plan to spend 10–15% of your total monthly budget on vehicle expenses, including loan payments and routine maintenance. Used cars usually don’t require as high of a down payment as new cars—often, a downpayment of 10% will work. However, choosing to pay more upfront can reduce your monthly payments, which could be a smart decision in the long run.
Let the seller name the price of a vehicle before you. If you open with what you want to spend, it’s tough to drop your own price. If you show interest in a specific model and know the going rate, you can negotiate once the seller has put the price on the proverbial table.
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Once you have a finalized budget, figure out how you will finance the purchase. If you’re not planning to purchase the car outright in cash, you’ll need to line up financing through a lender. You can secure financing through a bank, credit union, online lender, or even the car dealership. Request interest rates through multiple lenders and get preapproved before you start shopping for a car—emphasis on before. Getting preapproved ensures you’ll stick to your budget and helps simplify the negotiating process once you’re ready to buy.
Securing funding ahead of talking to a dealer will also allow you to comparison-shop: Many commercial sellers will tout the monthly payment rather than total cost, which is an easy way to rope potential buyers into a payment plan that stretches across years and loses sight of the total.
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As you begin looking at used cars, take careful note of the mileage. Though cars with lower mileage might have less wear and tear than cars with higher mileage, they’re not always the best option: The way the car has been driven also matters. For instance, sitting unused for months at a time can cause plastic and rubber parts to get brittle and break prematurely and reduce the longevity of the car battery. City roads also tend to be harder on a vehicle than smooth highway driving. Be sure to ask the seller for as much information as possible about the way the car was used—including, if available, documentation.
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Ensure you’re paying a fair price for a used car by comparing the asking price against the car’s book value and the price of similar models at other sellers. A car’s book value refers to the base retail value of the make and model but doesn’t account for the specifics of that particular car, like mileage and condition. Searching for similar models for sale in your area might give you a better idea of whether it’s priced fairly.
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If you’re buying a used car from a dealer, make sure to ask if the vehicle comes with any warranties. It might come as is with no dealer warranty, with an implied warranty, with a full warranty, with a partial warranty, or with a manufacturer’s warranty. If the car does come with a warranty, get a copy of the dealer’s warranty document as well. Be sure to also research extended warranty options—these can offer full coverage including but not limited to total engine repair.
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Whether you’re buying a used car from a dealership or a private seller, ask for the VIN number so you can run a vehicle history report. This report includes ownership history, title reports, accident records, and service points. The car’s VIN number can also reveal whether or not there are any safety recalls on the model.
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While you can do much of your shopping online, you should see the used car in person before officially purchasing it. Take the opportunity to do a visual inspection of the car’s exterior, checking for any scratches, scrapes, dents, and rust on the body. Look out for misaligned panels, large gaps, mismatched paint, cracked glass, overly worn tires, dripping fluids beneath the car, and doors that don’t shut well—all could be signs of past damage or larger issues.
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It’s also a smart idea to ask if you can send the car to a mechanic for a more thorough inspection before committing to buying it. The mechanic might catch some more complex issues with the transmission, engine, or internal parts that you wouldn’t see from the exterior, and potentially save you a lot of money in the long run. Don’t forget to ask the seller if they’ll cover the cost of the inspection, either: Private sellers may not be willing to, but dealerships might.
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Take the car for a test drive before you buy it. Drive it on city streets and the highway, if possible, to see how it handles at different speeds and in different situations. Pay attention to how well the brakes work, listen closely for any strange engine sounds, make sure all the lights work, and check any special features in the interior. When you’re satisfied that everything works the way it should, you can sign all the paperwork and feel confident about your used car purchase.
From monthly payments to repairs to insurance, a car can be one of your biggest expenses. But that also makes it one of your biggest opportunities to put money back in your pocket.
If you’re trying to make ends meet or want to simply save some money in 2021, here are seven easy ways to reduce your car costs in the coming year.
1. Refinance your car loan
If your credit score has gone up since you bought your car, or the dealership put you in a bad loan, you can easily find a new lender that can lower your interest rate and save you hundreds over the course of the loan.
For example, according to the most recent data from Experian, the average annual percentage rate for a used-car loan for a consumer whose credit scores fall in the subprime category (501 to 600) was 16.4%. For those in the next tier (601 to 660), the average APR was 10.13%.
On a 60-month car loan of $20,000, a borrower who refinanced from 16.4% to 10.13% would save $64 a month and more than $3,600 over the life of the loan.
Refinancing will also give you the chance to adjust your payment schedule. In an emergency, you can extend your loan term. Or, perhaps you can even pay the loan back sooner.
2. Review or change your insurance
Chances are, it’s been years since you reviewed your auto insurance policy. By changing your existing policy — reducing coverage, lowering mileage limits or finding a new insurance company — you can start saving immediately.
It’s a competitive market, and companies are hungry for your business. Chances are you’re driving less than you have in years past. You may qualify for a low-mileage discount — or now drive so little that a pay-per-mile policy makes sense.
3. Sell your second car
Come on now, how often do you drive that second car? And while it sits there, you still have to register, insure and maintain it. Why not turn it into cash? The best time to sell a used car is just around the corner: Sales peak from late February to mid-April.
Even old beaters might bring in enough money to help you make a few payments on your remaining car. There are also easier ways to sell used cars than ever before, such as taking it to CarMax for a no-haggle offer that is good for a week.
4. Downsize to a cheaper car
Maybe you overspent at the dealership and now you regret having to pay for the top-of-the-line model with all those options and features. The fastest way to make the switch is by trading in — and now there are new online retailers such as Carvana, Shift and Vroom to help you do that. But selling your car to a private party is apt to snag a few grand extra. Then, you can shop for a reliable three-year-old car that will save you money and serve your needs.
5. Save money on maintenance and repairs
The best way to save money on car repairs is to be vigilant about routine maintenance. Check your owner’s manual — many of which are now online — to find out exactly what has to be done and when. If repairs are needed, find a trusted mechanic and ask what has to be done immediately. Some repairs can be postponed to spread the cost out over time.
6. Boost your gas mileage
If you have a big truck or SUV, a fill-up can easily cost $75. Driving smarter and following a few simple tips will turn a weekly visit to a gas station into every two weeks or perhaps longer. Spoiler alert: The biggest gas wasters are rapid acceleration and high cruising speeds.
7. Cash in your extended warranty
You thought an extended warranty would bring you peace of mind. But if money is tight, you can get a prorated refund on the remaining balance of the contract.
While you might feel that this leaves you vulnerable to high-priced repairs, you’ll be comforted to know that Consumer Reports has seen in member surveys over time that a majority of purchasers never used the warranties after buying them. Those who did shelled out more for these plans than they got back in benefits.
Not sure where to start?
Here are a few quick ways to figure out where you could slash car expenses:
- Use a car cost calculator to list all your regular expenses such as car payment, insurance and fuel costs. Once you get a handle on where your money is going, you can see where the fat is and figure out how to take action.
- Estimate how much you will need in the year ahead for maintenance and repairs.
- Create a separate account for maintenance and repairs. Any time you have extra money, tuck it in the car account so repairs won’t break the bank.
- Check your driving record to see if past traffic tickets have dropped off, which could get you a better insurance rate.
- Review your insurance policy to make sure you have taken advantage of all discounts.
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