COVID + Credit: Buying a Car During the COVID-19 Pandemic
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After a home, a car is generally the largest purchase most people will make in their lifetime. That makes it an especially important (and sometimes difficult) process. Not only do you have to choose from a huge range of brands and models, but you also have to decide if you’re going to buy a new or used car and whether you want to buy or lease.
This already challenging process may seem all the more daunting during the Coronavirus/Covid-19 pandemic, as many states have instituted strict social distancing and shelter-in-place procedures to keep residents safe. However, in many areas, car dealerships not only remain open but also offer consumers significantly lower-than-normal interest rates in an effort to encourage sales. If you were already shopping for a car before the pandemic hit, or if you just want to take advantage of the significant deals available, here are some things to know.
Buying a car during the Covid-19 pandemic
If you have been affected by a Covid-19-related job loss, furlough or income reduction, you should generally hold off on buying a car — or any large purchase — unless absolutely necessary.
However, if you need a car for essential transportation, or if you’ve simply been lucky enough to avoid an income loss, you may be able to take advantage of financing discounts. Many dealerships currently offer low (even zero percent) interest rates that can save you substantial money over the life of your loan.
While some dealerships remain open, many have moved to online purchasing and touchless delivery in an effort to maintain sales without sacrificing social distancing standards. Those that do remain open may be operating at a reduced capacity, on a by-appointment-only basis or with rules in place to limit the amount of contact between customer and salesperson. For example, masks may be required, and you might be unable to take your car of choice for a test drive. Do as much research as possible online from home, and call your dealership of choice to confirm their procedures so that you’re prepared to follow them.
Used vs. new cars
Buying a used car can be a smart move. While it might be an exaggeration to say a new car loses one-third of its value the moment you drive it off the dealer’s lot, it’s true that the steepest decline occurs during the first few years of ownership. If you buy a used car, at least you’re not paying for that big depreciation. A two-year-old car is typically still covered by the manufacturer's warranty. If you buy a car that was previously leased, you’ll probably find it’s in great shape. Drivers tend to take good care of their leased vehicles to minimize end-of-lease costs for excess wear and mileage.
Buying a used car does come with risks. Because the vehicle is older, it could have mechanical issues a new car doesn't. Even so, it’s possible to find a reliable used car for a great deal. When buying a used car during the Covid-19 pandemic, it’s generally a good idea to work with a dealership rather than an individual seller, as dealerships are more likely to have procedures in place to keep their vehicles sanitary and safe for customers to purchase. It’s also a good idea to schedule an independent inspection by a mechanic, who can often identify problems that you may have missed. In most states, mechanics have been deemed essential workers and will still be available to you, even if a stay-at-home order remains in place.
Negotiating your best deal
Regardless of whether you choose new or used, you’re going to want to get the best possible deal. Here’s how:
- Decide what kind of car you want. This means not only the make and model but also what features you need or want. Luckily, most of this process can be completed via online research that will not require you to come in contact with other people.
- Make sure you have a backup plan. If you fall in love with a car and decide there is only one model you want, you’ll be putting yourself at the mercy of the dealer. Therefore, it’s a good idea to consider a backup plan. For example, if you really want a Honda Accord, you’d probably also be happy with a similar car, such as the Toyota Camry. Having that second option in mind can make you a stronger negotiator.
- Shop around. Once you’ve decided on the exact car you want and the options you need, you can shop around for the best price online, in the newspapers or by calling dealerships in your area. This can also be helpful in identifying which dealerships are still open for business.
- Feel empowered to negotiate. Just because you’re buying during an unusual time doesn’t mean you’re at the mercy of the dealership. In fact, many dealerships may be more willing to negotiate than normal in an effort to combat declining sales. Remember to stick to the model and options you have in mind and resist the salesperson’s attempts to push unnecessary and costly extras onto your purchase.
- Be prepared to walk away. You might get a dealer to agree to something over the phone but find that no such deal exists when you get to the showroom. If you don’t get your terms in writing, you probably don’t have a deal. However, there could be several other dealers willing to sell you the same car at the price you want to pay. Knowing you have other acceptable options will give you the strength to walk out the door if you can't get the deal you want on a particular model.
Although Covid-19 may complicate the buying process, it won’t necessarily stop you from obtaining the car you need. Research the options ahead of time and be considerate of any safety guidelines outlined by your dealership of choice. With a little advance preparation, you may be able to make the most of a tough situation and save money on your new purchase.