June 9, 2018

Three Ways to Lower Your Car Payment

In the fight about affordable housing, which seems to rage everywhere, it is often forgotten that it's not only the price of the house that needs to be considered, but also everything else that comes with home ownership, like the real estate tax rate, and the heating costs. One large expense post that tends to get overlooked is whether or not you need a car to get to and from your house.

This spring, the average price of a car in the United States reached $34,000, up from about $30,000 only six years ago. And because interest rates are up, the average monthly car payment is now $535. That's before the insurance and the fuel. Who can afford that? Not, in turns out, the typical family.

Those who live where the public transport is good, don't need a car. But if you must have a car (like, to get to the job that pays for the loan of the car that you need to get to the job), there are a few tricks to make it hurt less.

1. Get the smallest car you fit in for everyday use
Be honest with yourself about what you really need: if you're a couple with a toddler, you don't need the minivan or the SUV. For the occasional grandparents' visit, rent a minivan: unless they visit every week, that will be less expensive than owning one (and even cheaper if the grandparents rent one!).

2. Get the smallest engine you can buy for your chosen car
Dealers like to tout the "benefits" of a large engine. Take their sales pitch as just that: a sales pitch. The real benefits are to their bottom line. You don't need 220HP to get yourself around town; that sort of horsepower only feeds into racing car fantasies. A smaller engine costs less at purchase, and less to feed.

3. Good things come to those who wait.
In this case, cheap things. US car dealers like to sell you from the stock they have on their lot. They have already paid for this stock and they want to move it as quickly as possible. This means that you buy whatever they think "most people" will buy. But if you have time to wait, you can really make out.

Here's what you do: You order your car from scratch: the bare car. Then you add only the features you like or need, and no more. Buying a car this way is cheaper because it doesn't come pre-loaded with features like most dealer-lot cars. All those features may be "standard" - but they are not free! You may have to persuade your dealer that they will do this for you. And you do have to wait a few months (depending on how far away your car is manufactured) but then you get the car to your exact specifications: If you want leather seats but not air conditioning, you can have that. This is how most cars are still ordered in Europe.

My current car was delivered with larger wheels. I didn't want larger wheels, which lower the fuel efficiency. I negotiated that they would replace them with regular wheels. They look like donuts. That's fine by me: they're saving me gas money and emissions at every mile. The dealer cut me a check for $1200, the difference in price of the wheels.

Oh, and keep an eye on those electric cars: manufacturers are rolling out new models, and they're getting more affordable.



You may also like:
1. Can you trust MPG specs?
2. How to buy a gas sipper for less
3. How much horsepower do you need?