Outside of purchasing a house, cars are the largest item most Americans purchase. In today’s world, they are a necessity for many people. A car is needed to work, to get to the grocery store, and to get to the doctor. If you have kids, you often need a car to get them to daycare, to school, or to the soccer field.

In today’s world of high rents and mortgages, childcare costs, and gas guzzling commutes, most car buyers find themselves on a tight budget. In addition to the car payment, they have to factor in insurance, maintenance, repairs or extended warranties, and—as is often the case for those trading in a car they still owe money on—negative equity.

With all these expenses, few can simply buy whatever vehicle suits their fancy. They need to walk into a dealership with a budget and stick to it, or they will end up struggling to pay for a car they cannot afford.

How do you make car shopping easier when you are on a budget? Here are three crucial tips:

  1. Get pre-approved financing

Before you even set foot on a car lot, get your financing settled. This allows you to know what price range to look at in advance. At most dealerships, the salespeople are trained to ask you your price range. Since you know your maximum financing amount already, you can tell them under that amount.

This keeps the conversation focused on the overall price of the car, which is where you want it to stay. Salespeople are trained to get you focused on monthly payment. This allows them to sell you a car that meets your payment goal by extending the financing term, which makes them more money and stretches your budget because you will be stuck with a much longer loan.

Pre-approved auto loans are available from many sources, according to Edmunds. If you belong to a credit union, it is the best place to start. Credit unions often provide loans several points lower than banks. Big banking outfits like Bank of America, Chase, or Wells Fargo offer solid rates if credit union financing is not an option. If you have bad credit, don’t think you are stuck with the financing the dealership offers. Subprime auto lenders, such as myAutoloan and SpringboardAuto offer pre-approvals as well.

The preapproval gives you your max loan amount and interest rate, not your payment. Before you go to the dealership, use an auto loan calculator to determine the overall price and loan term that meets your budget.

  1. Consider used vehicles

One of the best ways to get more car for your dollar is to choose a used car that is in good condition and has relatively low mileage. Don’t be intimidated by sticker price. Car dealers markup used cars much more than new cars. While a new car may only have a few hundred dollars negotiating room, used cars have thousands of dollars in negotiating room. Be sure to check the blue book values of any used cars that interest you and insist the dealer beat them by a substantial margin.

To get the best value, also check used vehicle ratings by U.S. News and World Reports. You can find the best values with the most reliability.

  1. Brush up on your negotiation skills

Remember, car salespeople practice negotiation every day. Be prepared. Car buying websites like Edmunds offer valuable tips on negotiating with auto dealerships. Remember, if you’ve done your homework and have pre-approved financing, you have the leverage. Follow the principles recommended by Edmunds and remain firm. If they don’t offer a good deal, walk away. Nine times out of ten, they will follow with a lower offer.

Car purchases are often made on emotion. While it is okay to be excited about a new car, make sure you only let yourself get excited about the cars that fit your budget. The excitement of a new car fades fast, but the payments last for years.


by: Sia Hasan