With widespread job losses causing a drop in demand, automakers and dealerships are rolling out tempting offers to entice buyers into new vehicles.
Many showrooms are promoting 0% financing or temporary payment pauses. Others are adding generous cash incentives to shave down prices.
Social distancing has also reshaped the purchasing experience. Consumers can now complete the entire car-buying process online and have their vehicle delivered, avoiding an in-person dealership visit altogether.
All these incentives might leave you wondering, “Is now a good time to buy a car?”
We consulted a few professionals, who echoed a similar point: don’t base your decision solely on industry deals—let your personal finances guide you.
“Low rates come and go,” said Pamela Capalad, a New York-based certified financial planner and founder of Brunch and Budget. “The key question to ask is, ‘Was this purchase already on my plan?’”
Purchasing a vehicle just because the price looks attractive, when it wasn’t part of your plan or doesn’t make financial sense, isn’t a wise move, she cautioned.
Before committing, carefully review your finances to ensure you could still manage monthly payments and other ownership costs if you were to lose your job or be unemployed for a few months.
“If your job security feels uncertain in any way, it may be better to wait,” Capalad advised.
Having a solid emergency stash is always prudent, and it’s especially crucial in unpredictable times. Make sure buying a car won’t deplete the funds you’ve set aside for emergencies.
“An emergency fund is incredibly important right now,” said Ann James, a Las Vegas-based accredited financial counselor and founder of Financial Freedom Battles Buddies.
While the usual guidance is to keep three to six months’ worth of living expenses in reserves, she noted your personal circumstances might call for a larger cushion.
Before you start browsing cars, be clear on exactly what you can afford, taking into account additional expenses like insurance, registration, upkeep, parking and more. You don’t want to fall for a vehicle that exceeds your budget, Capalad warned.
Another decision to make is whether to buy or lease the vehicle.
“If you prefer a new car every couple of years, leasing could be the better fit,” James said.
If you plan to purchase, having cash on hand to pay upfront might give you leverage in negotiations. Yet even buyers who need financing may have an advantage given current market conditions.
Capalad recommended negotiating a lower sale price rather than accepting dealer-added upgrades you don’t intend to use.
Requesting discounts is also smart. Dealers commonly offer military and student savings, and some are currently extending price reductions to healthcare workers in light of the pandemic.
And if you’re trading in your current car, remember to account for its trade-in value, James added.
If you’ll finance the purchase, check your credit score before visiting the dealer. Your score will determine the interest charges you’ll incur over the life of the loan.
“Don’t wait until you’re at the dealership for them to pull your credit,” James advised.
She also recommended exploring multiple financing options rather than relying only on dealer offers.
“I suggest getting preapproval from three different lenders so you have choices,” she said.
Ultimately, if your financial picture is stable and you can comfortably cover a car and its related expenses, it’s reasonable to take advantage of current promotions. Just avoid letting emotions drive the purchase decision, James warned.
“Feelings fade, but those car payments can stick around for three to seven years,” she said.
Also consider tips on responsible car buying to make a more informed choice.
Nina Alvarez is a senior writer at Savinly.
