You may have heard that there are very few new cars available on dealer lots and used car prices are up 42 percent. What should you do to get the best deal if you must buy a new ride, right now? It’s important to know that there is a global chip shortage that will not end until 2022. This means they’ll be a lack of computer chips for cars, phones, computers, games consoles, and more; but the effect on the auto industry is different. A new vehicle can have up to 100 of these semiconductor chips on board. I'll show you how to get a GREAT deal on a car, whether it's used or new. These tips will save you money.
Let's look at the status of the car market, it is such a tough environment right now due to the global chip shortage. We also have a rubber shortage, which a lot of people aren't aware of because everyone's talking about microchips. This means manufacturers can't produce a car and send it out 99 percent complete. This obviously means there's going to be a shortage of supply of new vehicles. If you are starting to looking at used cars, you are not alone. Used car prices are up almost 40 percent. Many vehicles including trucks, SUVs, and even sports cars have gotten crazy in price.
Here are some tips you need if you want to lease or you should buy. First, people are always confused, do I lease or do I buy? Most people are aware that their payments will be less per month, if you lease it but you do need to know one important thing; not how much it costs per month, but how many miles do you drive in a year. If you drive between 10,000 and 15,000 miles a year; that is the perfect sweet spot for leasing a car. If you drive under 10,000 or over 15,000 miles per year, you should always buy because you'll either leave money on the table or end up with a big bill at the end of your lease for over mileage. Over mileage can be very expensive, so you want to make sure to know how many miles you are driving. If it's under that 10,000, keep the car and you'll save more money that way.
If you choose to buy a vehicle, the monthly cost is higher than leasing. Given the fact that you have to put a lot more money down when you finance, you will own that vehicle. It’s important to note that there are very few finance deals going on right now.
If you do lease, there are three questions that need to ask:
What are the documentation fees? This shouldn't more than $50, some dealers don’t charge and other can charge as much as $1000. Doc fees are best described as taking the paperwork and moving it from one side of the desk to another, making sure the department of motor vehicles gets you your license plates, registration and filings. You might be able to negotiate that down but if you feel that you're not being treated right at a dealer, you can always walk away. Keep in your head, never be afraid to walk away, there's another car. As PT Barnum says, “there's a butt for every seat”, so you really look for another vehicle. Don’t think that there is only one like the one in front of you. There's multiple vehicle like this around the country.
Ask what is the residual value? That's the value of that vehicle three years down the road at the end fo the lease. The higher the residual value the lower your monthly payment, keep in mind, you're just renting the car when you lease.
If you are getting out of a lease, the original contract has a buy out fee and a return fee. These fees are not negotiable. Dealers are seeking used and lease return cars, you may be able to get more for your vehicle, but can you replace it with a new one. That is the current challenge.
If buying a car is your option, you must ask questions:
Is the price negotiable? I always tell people to never pay that number that's on the window sticker. Even in today's market if you see the price on the window and they're not negotiable, you should walk out of the dealership and find another dealer. There's always room to move on a deal. Remember a very important factor no one talks about, if you're sticking with the same brand whether it's a low priced or a real expensive brand there's something called a “loyalty discount” and that's between $500 and $2000; that if you don't ask for it, the dealer keeps it. If you're switching from one brand to another like a Mercedes to an Audi or vice-versa; there is that same dollar amount it's called a “conquest discount”. Any sales consultant that tells you, “oh we don't know what you're talking about, that doesn't exist”, is not being honest with you. Again don't ever be afraid to walk away.
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