Memorial Day is purported to be one of the busiest car-buying days of the year. Expects lots of strong deals as interest rates stay low, as new car sales are expected to break a 15-year auto sales record.
It sounds like hype, but it’s not. There is an abundant supply of product on the market and the money to pay for it is cheaper than it has been in three years for new car loans and one year for used car financing.
Here are five things you should know if you’re going to buy a new car this Memorial Day weekend. With a little bit of foresight you can afford to plop filet mignons on the grill instead of hot dogs made with mystery fillers.
Shop for Your Loan
According to the financial website WalletHub, interest rates for new cars are at their lowest point in the past three years. The site also points out in its quarterly auto financing report that now is the time for people with excellent credit to buy used cars. The average interest rate for such buyers has fallen nearly 20 percent since Q2 2014.
That makes it a competitive market for financial institutions. Do you have strong credit? Then it’s a borrower’s market for you.
Shop around online to see what financing might be available to you. Then, take the lowest interest rate you find and see if your local car dealer can match it. You might be surprised. They deal with numerous financial institutions and it’s in their best interest (i.e. additional revenue) to arrange financing for you.
Manufacturer Financing Still the Best
It’s a good idea to shop for your loan if your credit is good or has a blemish or two. However, if you possess very good credit, you want to start with the manufacturers.
WalletHub says manufacturer financing is averaging 38 percent below average with an average rate of 1.93 percent for the first quarter of 2016. Plenty offer 0 percent financing, while Dodge is the highest at 3.9 percent. (Plus there might be other incentives tied into dealer financing.)
Your next best bet is going to be credit unions, which average 29 percent below average. Regional banks are the most expensive source, with average rates 30 percent above average.
Why You Should Buy Now
As explained above, interest rates are at a great point right now. One expert told WalletHub, though, that these rates aren’t expected to stick around. Dorothy C. Kelly, a lecturer in personal finance at the University of Virginia, said consumers will pay higher interest rates in the coming months. That’s going to make borrowing more expensive. Not a lot, but you’re still going to pay more.
Why You Might Want to Wait
Remember up top when it was mentioned that this was one of the busiest shopping weekends of the year? Dealers may feel less pressure to negotiate if they have showrooms packed with potential customers. Winter is usually the best time to buy.
Obviously that ship has sailed unless you can put off buying a new car until December. Then you can take advantage of year-end deals when both manufacturers and dealers want to close their books with as many sales as possible.
Tread Lightly on Leasing
Leasing has become almost 30 percent of all new car sales overall (and it’s higher in certain segments). People find it attractive because they can get more car for less money and often little down.
However, WalletHub points to problems with transparency in leasing new cars. Its report says leasing offers are the most difficult type of car-purchasing arrangement for consumers to understand, as they lack the equivalent of an APR [annual percentage rate] that can be used for comparison purposes.
WalletHub has created a rating system that tracks the transparency of manufacturers about leasing because it is integral to a consumer’s ability to make informed decisions. The average score is 4.8 out of 10.
Who has the best leasing programs? WalletHub ranks the top 5 as:
All have a score of 6 out of 10. WalletHub doesn’t explain how seemingly tied scores are ranked.
Wallet Hub ranks the bottom 5 (from lowest to highest) when it comes to leasing transparency:
As always, spend some time researching your car purchase here at BestRide.com before heading to the dealership. Preparation beforehand is going to make you less stressed at the dealership and get you to that Memorial Day picnic more quickly.