Before the coronavirus pandemic made “social distancing” a household phrase, you could shop for a car at a dealership, haggle on the price, shake hands, and close the deal.
But in the era of extreme hygiene, 57% of Americans are nervous about purchasing a vehicle, according to Avis Car Sales data. If you’re in the market for one, follow these tips for buying a car and shopping for an auto loan during the pandemic.
1. Set your budget
Figuring out what you can afford helps narrow your choices so you’re only test-driving a few cars and limiting your exposure.
As a rule of thumb, your monthly car expenses should equal no more than 10%–20% of your monthly earnings, said Jeff Rose, a certified financial planner and spokesman for Avis Car Sales. So if you earn $4,000 a month, for instance, then you would spend around $400–$800 on the loan payment, maintenance, gasoline and insurance combined.
You’ll also need to figure out how much to put down.
“I’ve always recommended putting down at least 10%,” Rose said, but consider your budget.
2. Consider new vs. used
As the pandemic drags on, “vehicle demand has grown as people have become wary of getting on trains, buses, airplanes, and ride-share services,” said Jordan van Rijn, senior economist at the Credit Union National Association.
But with disrupted supply chains, he said, it will be more difficult for consumers to find good deals on new vehicles. If you decide to buy a used car, van Rijn suggested running a background check or getting an inspection.
3. Shop for a car and set up contactless test driving
You can use the internet to compare prices, vehicle features, sizes, and colors as “traditional car dealerships transition to an online presence,” Rose said.
After looking through your options, make a list of a few cars you’d like to take for a spin.
If you’re squeamish about walking into a dealership, call them instead and ask about at-home test drives. They’ll typically sanitize the car, drop it off at your home for a few days, and field any questions you have via email or phone call.
4. Pull your credit
Good credit “can be used as a bargaining tool for a lower interest rate,” Rose said.
And according to van Rijn, lenders generally give the best rates to buyers with a credit score around 700, "but many applicants may be approved for loans with credit scores in the mid- to upper-600s, albeit at higher interest rates.”
Van Rijn recommended checking your credit reports before applying for a loan and disputing any mistakes.
5. Shop for a loan online
Car buyers who don’t have the money to pay for a car upfront usually take out a car loan. This part can be done online — and as an added benefit, it makes negotiations easier. Here are some tips:
Start by getting rate quotes from multiple lenders: “Visit at least one credit union,” van Rijn suggested, “as evidence shows that credit unions charge lower auto loan rates relative to banks.”
Compare the interest rates, monthly payment, fees, and the down payment.
Take the best offer and ask another lender to beat the interest rate or offer some other incentive.
Try to communicate via email, so everything’s in writing.
6. Negotiate the car price
Once the lender’s on board and you’ve chosen a car, it’s time for you and the seller to agree on the car’s price. You can use the same negotiating strategy you used to shop for a car loan: Gather several offers, and use them to bargain down the price or ask for incentives.
“Simply mentioning to the dealership that you have visited another dealer or intend to will help keep car salesmen honest,” van Rijn said.
When you’ve signed paperwork for the car, the dealer may even drop it off for a socially distanced delivery.
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