Need a car ASAP? 3 ways to save when car prices and loan interest rates rise

If you want to buy a car now, well, don’t if you can help it. Not only are car prices significantly higher, but a series of interest rate hikes by the Federal Reserve have made borrowing more expensive overall.

Now, when the time comes, the Federal Reserve is expected to begin cutting interest rates. When that happens, borrowing should become cheaper overall.

But the Fed may not start cutting interest rates until 2024. Rate cuts may not begin until mid-year. Therefore, these savings may not be available for some time.

Therefore, it is best to postpone buying a car. But what if you can’t?

If you rely on your car to get to work and have an older vehicle that only performs simple functions and needs expensive repairs, it may not make sense to waste your money. In this case, purchasing a replacement vehicle may be a smarter financial move. And the good news is that there are steps you can take to save money on a car, even during a time when prices and loan rates are rising.

1. Buy a used car instead of a new car

The average new car buyer in the U.S. paid $47,936 in October, according to Kelley Blue Book (KBB). Meanwhile, the average list price for a used car in the U.S. was $26,533 in October, KBB reported.

Buying a new car has certain advantages, including having a warranty and effectively protecting you from major repairs during the first few years of driving the car. However, considering the cost difference between a new and used car, the latter may save you money.

2. Don’t pay for extra features you don’t need

When you buy a new vehicle, expect to be sold extra for a variety of features, including a nice speaker system, a good navigation system, and heated and cooled seats. These features may be nice to have, but they can also significantly increase the cost of your vehicle. If you’re worried about being able to afford a new car loan, avoid the temptation to pay for add-ons.

Also, remember that the more features your car has, the more likely it is that something will break. If your heated seats stop heating, you could end up having to pay for repairs. If your seats don’t heat up to begin with, don’t worry.

3. Increase your credit score for better car loan rates

The higher your credit score when you apply for a car loan, the more favorable your interest rate is likely to be. This doesn’t mean that if your score is 805, you should try to get as close to a perfect 850 as possible. 805 is already a really good score.

But let’s say your credit score is 680. If you reach a score in the mid or upper 700s, your car loan may be cheaper.

One of the best ways to improve your credit score is to regularly pay your bills on time. However, if you need a new car ASAP, improving your credit score may not take more than a few months.

However, if you can, paying off your credit card debt can add up to your debt pretty quickly. Correcting errors on your credit report can also boost your score quite quickly.

Now is not the best time to buy a car. But if that’s the situation you’re in, do your best. Shop around for used cars before buying a new one. And if you decide to buy it new, don’t pay for all the extra features it comes with. Plus, no matter what your credit score is when you apply for an auto loan, you can compare interest rates from multiple lenders to get the best deal possible.

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