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Navigating the Challenging Car Market During the Pandemic: Tips and Strategies for Buyers

Car-buying savings tips from financial advisor Suze Orman

When it comes to buying a car, the financial impact of the decision can be significant. From monthly payments and insurance premiums to gas and maintenance expenses, the costs can add up quickly.

And if you’re not careful, you could end up spending more than you can afford. To help you make a smart car-buying decision, financial advisor Suze Orman offers several tips to keep you on the right track.

Boost Your Credit Score

Your credit score plays a critical role in determining the interest rate you receive on a car loan. And the higher your score, the lower your monthly payment.

To improve your credit score, pay your bills on time, keep your credit card balances low, and check your credit report for errors.

Buy on the Cheap

Cars are not an investment. They depreciate in value as soon as you drive them off the lot.

So, unless you plan to keep the car for a very long time, it’s best to buy a cheap car. The less you spend on the car, the less you lose when it comes time to sell or trade it in.

Target a Gently Used Vehicle

If you’re not buying a new car, consider a gently used one. A car that’s a few years old can be just as reliable as a new one, but it will cost you significantly less.

Plus, since it’s already been through the initial depreciation, you’ll lose less when you decide to sell or trade it in.

Get a Three-Year Loan

When financing a car, it’s best to opt for a short-term loan. While longer loan terms can make the monthly payments more affordable, they also mean you’ll pay more in interest over the life of the loan.

A three-year loan is a good compromise between affordability and minimizing the amount of interest you pay.

Shop Around for the Best Loan

Don’t just accept the first loan offer you receive. Shop around for the best loan terms available to you.

Check with your local credit union, consider a traditional car loan, or even a home equity line of credit (HELOC). Also, don’t forget to factor in any fees associated with the loan.

Get an EV Tax Break

If you’re in the market for a new car, consider an electric vehicle (EV). Not only are they better for the environment, but there are also tax credits available that can offset some of the cost.

Check with the manufacturer for details. Suze Orman’s thoughts on car as an investment

When it comes to investing your money, a car is one of the worst investments you can make.

Why? Because cars depreciate in value as soon as you drive them off the lot.

According to Suze Orman, “When you purchase a car, it instantly loses approximately 20 percent of its value.” And by the end of the first year, it can lose as much as 30 percent. By year three, it can be worth as little as half of what you paid for it.

So, if you’re looking for a good investment, a car is not it. Instead, focus on investments that appreciate in value over time, such as stocks or mutual funds.

Conclusion

Buying a car is a significant financial decision that requires careful consideration. By following Suze Orman’s tips, you can make a smart car-buying decision that won’t break the bank.

Remember to focus on improving your credit score, buying on the cheap, targeting a gently used vehicle, opting for a short-term loan, shopping around for the best loan terms, and considering an EV for tax credits. And most importantly, remember that a car is not an investment; it’s a depreciating asset that will only cost you more over time.

The COVID-19 pandemic has had a profound impact on the global economy, and the automotive industry has not been exempt. Consumer demand for new vehicles has fallen dramatically, with many buyers opting to hold off on purchasing a car until the economic outlook stabilizes.

In addition, the supply chain disruptions caused by the pandemic have led to production delays and reduced inventory levels, making it more challenging than ever to find the car you want at a price you can afford.

Difficulty in Buying a Vehicle

One of the most significant impacts of the pandemic on the car market is the difficulty in buying a vehicle. With reduced inventory levels and increased demand for certain types of vehicles, prices have soared, making it harder and more expensive to find the car you want.

According to a report by Edmunds, the average transaction price for a new car in the U.S. reached $41,000 in December 2020, the highest on record. And for used cars, prices have surged by nearly 10% in the past six months alone.

Part of the reason for the price increases is due to the supply chain disruptions caused by the pandemic. The closure of factories and the disruption of international trade have caused temporary shortages in raw materials, leading to production delays and reduced inventory levels.

And with fewer cars available, prices have been pushed up. Another factor contributing to the difficulty in buying a vehicle is the shift in consumer demand caused by the pandemic.

With more people working from home and spending less time commuting, demand for fuel-efficient vehicles has risen. And with the onset of winter weather in some areas, demand for all-wheel-drive vehicles has increased as well.

This shift in demand has led to increased prices for these types of vehicles, making them harder to find and more expensive to purchase. In addition to the supply chain disruptions and the shift in consumer demand, there are also logistical issues caused by the pandemic that have made it more challenging to buy a car.

Many dealerships have adjusted their operating hours or shifted to online sales models, limiting the opportunities for in-person shopping. And with the pandemic still raging in many parts of the world, there is also a shortage of available transportation options for shipping cars from overseas.

What can buyers do in this challenging car market? First and foremost, buyers need to be patient.

With supply chain disruptions and fluctuating consumer demand, prices are likely to remain high and inventory levels low for the foreseeable future. Buyers may need to adjust their expectations or consider alternative types of vehicles that are more readily available.

Secondly, buyers should shop around and be willing to negotiate on price. Just because prices are high doesn’t mean that there isn’t room for negotiation.

Research the average price for the car you’re interested in, and be willing to walk away if the price is too high. Finally, consider alternative financing options.

With interest rates at historic lows, buyers may be able to secure a low-interest loan that makes the purchase of a new or used car more affordable. Buyers can also consider leasing or financing a used car instead of purchasing a new one, which can help manage costs in the short term.

Overall, the current economic and pricing conditions of the car market make it a challenging time for buyers. But with patience, research, and flexibility, buyers can still find the car they need at a price they can afford.

In today’s car market, buyers are facing significant challenges due to the COVID-19 pandemic’s impact on the economy and supply chain disruptions. The reduced inventory levels and increased demand for select types of cars have led to soaring prices, making it more expensive and difficult to purchase a vehicle.

Buyers can navigate the current car market by being patient, shopping around, negotiating on price, and considering alternative financing options. The key takeaway is that car buyers must adapt to the new normal in the car market and be flexible to ensure they get the vehicle they need at the price they can afford.

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