Top five tips for snagging the car of your dreams in a sellers' market

There's a recession looming; the Fed has steadily been raising interest rates to temper inflation; the demand for hybrid vehicles is driven by the high fuel prices and supply chain issues. It is definitely NOT the ideal time to buy a new vehicle. My timing, therefore, is not the best. But because the car I've been driving, a 2007 Mercedes Benz C230, has started showing signs of ageing, my parents and I decided that we need to get a new vehicle. I wish I could have held on a bit longer and waited for vehicle prices to go down (as supply eased), but I couldn't handle the risk of driving a faulty vehicle with my son as my passenger. 

And so the search for a new vehicle began. Based on my experience, I'm writing down five tips to snag the car you've been dreaming about in a sellers' market.

#1 Determine your credit score.

This may not be universally applicable. For instance, I didn't have a "credit score" when I was buying my first car in the Philippines. However, the first agent I encountered in the car dealership checked my salary and credit history (newbie me got snubbed during that round). When I bought my first car in the USA, my salary information and credit history were also evaluated, with the latter taking the form of a metric called the credit score. I didn't have much of an issue because I had a good one. The only snag I had to get over was the inadequate amount of credit I had. Put it this way (though it still doesn't make sense to me): To increase my credit "reputation", I had to open multiple credit cards! Anyone who has a similar financial philosophy as me would think that this is a crazy concept because I prefer to keep my finances streamlined, particularly credit.

Anyway, if you have a high credit score, the chances that you will be able to get approval for a car loan are higher.

The alternative, of course, is to pay for the car using cash. Then no credit score, no problem. 

#2 Figure out how much you are willing to pay for your dream car.

Once I have seen my credit score, I had to start looking more deeply into my finances. I have to budget monthly payments for the car loan and for the car insurance. Then there's gas consumption and emergency expenses (e.g., flat tires). From there, I checked out what vehicles I could afford (the "dream car"). I was shooting for either a Toyota Sienna or a Chrysler Pacifica (both hybrid minivans) because of the rising fuel prices. My online searches showed that the Sienna was being sold at around $36,000 MSRP and the Pacifica at $50,000 MSRP. I balked at the $50,000 because I wasn't willing to shell out that much. So I zeroed in on the Sienna. 

#3 Canvass financial institutions for interest rates for your credit score.

Related with #1, actually. The interest rates for car loans can go as high as 4.33%! A far cry from when Anna bought her car: 0% interest. She didn't have to do a lot of due diligence because she was just paying the MSRP plus fees as her out-the-door price. But in my case, I had to get some research done so I can figure out where I can get the best rates. 

I checked out banks and credit unions to inquire. Thanks to my good credit score, I was able to get really good numbers, considering the situation.

Don't be afraid to approach multiple financial institutions. They all are interested in doing business with you so take your time to find the one that offers the best deal for your credit score or financial standing.

#4 Get quotes from car dealers and see which ones give the closest value to your willing-to-pay price.

Once I knew I could get approved for a car loan, I brought my family along to car dealerships to check out the cars. And this was where I was hit with the real situation: aside from the MSRP, I had to pay more fees than I anticipated; my $36,000 potential car loan could potentially reach $60,000 because of all the fees being added to the MSRP. 

I learned that in the USA, people who go into car dealerships (more likely than not) will leave with a brand-new car. I am one of the very few (maybe) who did not move my WTP, so I left dealerships empty-handed twice. And I think that this showed my discipline as a car buyer; I am not easily swayed by sales pitches because I have done my homework.

I went back to the drawing board, so to speak, to assess my options. My parents agreed: I decided NOT to pursue the hybrid minivan objective because the demand is high and the supply is low. Instead, I explored my options in fuel-powered SUVs (two- or three-row options). I reviewed vehicle recommendations and customer assessments for both Clek Foonf and Diono Radian 3QXT, my son's car seats. This led me to Hyundai models Palisade, Santa Fe, and Tucson; and Kia Sorento and Carnival. The Toyota Fortuner wasn't on my list because I drove it in Michigan and decided that the third-row seats didn't have enough legroom for adult passengers. The Honda Pilot is listed at about $40,000 MSRP (still too expensive for me). 

A base unit of the Palisade is within my budget, but it's difficult to find one; a dressed-up one is beyond my budget. The Carnival, also a beauty, is difficult to come across because of supply chain issues. My family checked out the Sorento, and we discovered that the third row was not spacious enough, just like the Fortuner. Based on the reviews I've read about car seat installation and space availability, the Santa Fe appeared to be better than the Tucson.

Make sure to do your own due diligence. Show up at the car dealership prepared to leave WITHOUT buying a car if the dealer's out-the-door numbers don't align with your budget. 

#5 Finalise the sale and bring home your dream car.

While canvassing, one tip I learned from online searches was to appear like a serious buyer. To me, that meant that if I said that I'd come back to finalise my purchase, I'd be true to my word. Since my son was about to have a tantrum, I wasn't in a good position to haggle (yes, I haggled until the last minute!), so I told the dealer that I would return in the afternoon (I just had to feed the wee one). I asked them to reserve the car for me because I would be back (someone might become interested).

Speaking of haggling: my budget called for the base unit MSRP plus a 4-ish% interest rate (I estimated based on the higher interest rate when calculating my potential costs). However, the unit available in the dealership was dressed up with accessories that enhanced the car's safety and comfort features, with a higher price point. The agent gave me a discount on the out-the-door price (a bit over 10%) just so I didn't have to go to another dealer anymore. Plus, the dealership threw in five years' worth of car maintenance AND free roadside assistance to further sweeten the deal. All too difficult to decline.

Haggle. Haggle. Haggle. Once the sales agent knows your willing-to-pay price range and how much wiggle room they have, they will aim to sell at your highest number. So play your cards well and make sure you haggle until the end.

The high vehicle prices these days are brought about by different compounding factors (among other things: supply chain issues brought about by COVID-19 and the military conflict in Ukraine, and inflation). If you can hold off buying a new vehicle until everything has settled to some form of normal, do that; but if you can't, I hope that these tips will help.