BBB Tip: Buying a car in a seller’s market

Inflation and high interest rates have created a market where higher prices are the norm for car buyers. Experts say prices and interest rates look to remain high for now.

If you’re in the market for a new (or used) car, you may need to approach the process differently than in the past. These tips will help you get the best possible deal in a challenging market. 

Tips to find the car you want at a decent price

• Set a realistic budget. Determine how much you can afford, including the total purchase price, monthly payments, insurance, and maintenance costs. Stick to your budget to avoid financial strain.
  
  
• Think about financing before you start shopping. If you have savings, buying a car outright is always the cheapest option. However, most consumers choose to finance their purchase, paying less upfront but more in the long run since you’ll need to borrow money and pay interest on your car loan.  Decide how much you can afford to set aside for monthly car payments. Talk to your bank about getting preapproved for an auto loan. Not only will this give you some bargaining power when you are at the dealer, but you’ll also be able to compare dealer financing to find the lowest interest rate on your loan.
  
  
• Don’t get underwater. Many cars are still selling at prices over their sticker value. Consumers may be tempted to take out a bigger loan when it seems all vehicles sell for a premium. The problem is that cars are depreciating assets, and their value drops significantly when you drive them off the lot. Without a decent down payment, you could quickly end up upside-down (a.k.a. underwater) on a loan, owing more than your car is worth. If your car gets totaled in a wreck or stolen, you could be left owing money on a vehicle you no longer have. If you can’t afford a larger down payment, consider purchasing gap insurance, which would cover the difference in the event of a severe accident.
  
  
• Don’t count on discounts or even haggling. In the past, year-end deals and bartering to get a lower price on a car were part of the sales process. With limited inventory, getting a deep discount from a dealer trying to clear off excess inventory isn’t likely. On the bright side, your used car trade-in is likely worth a little more than it would have been pre-pandemic. Consider using that for a little extra leverage to strike a deal.
  
  
• Check for incentives and rebates. Even in a seller's market, manufacturers and dealerships may offer incentives and rebates. Look for special financing rates, cashback offers, or other promotions.
  
  
• Do your research and try to be flexible. Before you set foot on a dealership lot, know which cars will fill your needs and their current market value. Look at several different dealerships’ websites to view their inventory and check their prices. When you’ve settled on a particular model or two, decide which feature package you want before a salesperson convinces you to need the premium package. Keep in mind that flexibility is critical. If you have a few color options in mind or are willing to consider two different model cars, you’ll have a better chance of finding a vehicle you like.
  
  
• Consider a certified pre-owned vehicle. If new cars are too expensive, look into certified pre-owned (CPO) vehicles. These cars are typically inspected, refurbished, and have extended warranties, offering a good balance between cost and reliability. 
  
  
• You can order a car, but you’ll have to wait. Another option with fewer cars on dealers’ lots is to request a car customized to meet your needs. If you go this route, know that you’ll probably wait at least six weeks to get the car, or much longer if it’s a high-demand model.
  
  
• Look farther afield. If you’re having trouble finding a car locally, consider expanding your search geographically. Looking outside your city will give you more options, but remember, you may need to travel to see the car and take it for a test drive.
  
  
• Negotiate if you find a car you like. Even in a seller's market, there may be room for negotiation. Budgeting, getting preapproved for financing, and researching ahead of time are all critical. Turnover on dealership lots is fast, and you must be ready to act. Focus on negotiating the total price of the car rather than just the monthly payment. Use your preapproved financing as a bargaining tool. If you find a car you like and don’t buy it immediately, another shopper could swoop in before you decide.
  
  
• Consider a used vehicle. If a new car doesn’t fit your budget, consider buying a used car. Certified pre-owned cars might be a good option since they have warranty coverage and other “like new” perks. However, be willing to pay a little more for this option. Whether you buy from a dealer or a private seller, always do plenty of research and inspect the car carefully before you seal the deal.
  
  
• Consider leasing. If buying isn’t feasible due to high prices, consider leasing a vehicle. Leasing often has lower monthly payments and allows you to drive a new car every few years.
  
  
• Evaluate your trade-in value. Your current vehicle may be worth more in a seller's market. Use online tools to estimate your trade-in value, which you can use to offset the cost of your new car.
  
  
• Be patient. Yes, it’s a competitive market, and you should be ready to pounce if you find a decent deal. Don’t let a sense of urgency or desperation cause you to accept a bad deal or fall for a scam. You may need to compromise to a degree, but never overlook your primary goal of buying a vehicle that serves your needs and will get you around for future years.

For more information

Visit the BBB Auto HQ for more tips and advice on buying, selling, renting, and repairing your vehicle. Find a car dealer near you. Check out BBB's tips for buying a car online. 

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