Buying a new car right now sucks, there is no other way to appropriately describe it. Inventory is difficult to find, dealers are getting away with even more nonsense, and often the best “deal” is a car with no markup. If you must go shopping for a car, do these two things to maximize your dollar.
If you are shopping for a new car or looking to lease, and you are aiming for a popular model, it’s likely that the best “deal” you will find is MSRP. I’ve even seen “market adjustments” (price hikes above MSRP) on less popular body styles like sedans, so you know the market is rough right now. Assuming that you refuse to pay a markup, you will want to keep in mind resale value.
Remember that the market isn’t always going to be this inflated, and if you plan on selling or trading your car in a few years the depreciation curve is going to be a big factor in your cost of ownership over that time. For example, I was recently helping a client with a hybrid sedan, and he was targeting the Hyundai Sonata Hybrid, which has an MSRP of around $35,000. I mentioned that, given the tight inventory, he may want to be open to an alternative like a Toyota Camry XLE Hybrid, which also has a sticker price of around $35,000 depending on equipment.
The key point I was making to this client is that, while the Sonata is a sharp car, if he is likely to spend $35,000 in either case, the Camry is going to hold value better, and when he goes to trade in he will likely get an offer several thousand dollars higher for Toyota. In a different market, the discounts and rebates on the Hyundai may have resulted in a cheaper initial cost, which could outweigh the steeper depreciation curve. But right now, the key things to look at are MSRP and depreciation.
Looking at cars with higher resale also applies to leases, since the bulk of your payment is calculated based on the difference between the sale price and the residual value. Using the Toyota versus Hyundai example again, if the $35,000 Toyota is predicted to be worth $20,000 at the end of the lease term, and the $35,000 Hyundai is predicted to be worth $17,000 at the conclusion of the lease, the Toyota will offer lower payments. The reason being is that, on the Camry, we have a $15,000 difference in value being divided over 36 months which gives us a base payment of $416 per month. The Hyundai’s depreciation $18,000 over the same term, so this works out to a base payment of $500 per month. Of course, there are other variables that go into a lease calculator like money factor (interest rate), rebates, local taxes, and fees, but if two cars are starting at the same sale price, chances are the car with the higher residual will make for the more competitive lease.
Some folks don’t buy or lease cars for short-term ownership, but rather hold onto them for a long time. Buying a car and driving it for years beyond the point at which the loan is paid off is the best way to get maximum financial value out of your purchase. Long-term owners may not care much about resale, so if you fall into this camp and are looking at current market prices that won’t go below MSRP, a different perspective is to look at getting the most features for your dollar (and of course, if you have any insight into maintenance costs, that’s helpful, too).
Let’s say you were in the market for a three-row crossover and you wanted features like leather seats and advanced safety features. A common pick would be the Honda Pilot EX-L which has a starting price of $40,285 for a 2WD model. If you investigate various automakers’ configurators you will find that the Mazda CX-9 Touring will offer a similar feature set as the Honda but with a starting price of $37,125. The Kia Telluride LX offers synthetic leather seating and a slew of standard safety tech for an MSRP of only $34,015. While you may not get a discount on any of these cars, just by opening up your options within the same segment you could potentially save $3,000 - $6,000 for the same set of features that you’re looking for. Of course the caveat on the Kia is that it is incredibly challenging, though not impossible, to score one of those without a massive markup.
When shopping for a “deal” on a car, just know that that term is relative and relies upon the state of the car market. These days, it’s not about finding rebates; you should focus on maximizing resale over your ownership period so as to minimize your total cost of ownership, and you should pay attention to how you can score the most features for the lowest MSRP — because that’s pretty much the least people are paying right now.