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If you have flipped through channels lately, you’ve seen ads for Memorial Day sales at car dealerships. And while Memorial Day weekend is known for steep vehicle discounts, this year’s sale will take some extra consideration.
The average new car price remained about the same in April as in March, hovering at $48,275, according to Kelley Blue Book. But vehicle prices remain higher than last year due to a combination of high inflation and limited discounts. This doesn’t mean that a deal is out of reach — just prepare ahead of time.
Memorial Day vehicle sales tend to start in the week leading up to the holiday. This year, that’ll be from May 22 until the holiday on May 29.
Financing a vehicle is more expensive this summer
Last Memorial Day, drivers were met with high price tags due to supply chain issues and fewer available vehicles. This year, drivers should prepare to spend more due to inflation.
Incentives like rebates remain low, even with more vehicles on the lot compared to this time last year. But even as manufacturer incentives sit at historically low levels, according to Kelley Blue Book, they are trending upwards.
Incentives hit their highest peak in a year in April, reaching 3.6 percent of the average transaction price (ATP). This is compared to a mere 2.8 percent in January. But while incentives are increasing and making the cost to buy more accessible, they are not back to normal levels. Back in February 2021, incentives averaged 8.3 percent of ATP.
Before going ahead with potential incentives, find the difference in cost with this calculator.
A more expensive monthly cost
As the Federal Reserve works to quell high rates of inflation, the cost of financing your vehicle will remain high. The Fed rate increased to 5 percent to 5.25 percent following the May meeting, which indirectly impacts the cost of financing your car.
According to Bankrate data, the average rate to finance a 48-month new car is 6.58 percent, while the cost for used is 7.23 percent. The higher your APR is, the more you will have to pay each month and over the loan’s term.
The end of 2022 found new vehicles costing a monthly average of $716 and $526 for used, according to Experian. So even as vehicle prices decreased slightly over the past few months, higher interest rates will make purchasing more expensive.
How to get the best deal this Memorial Day
If you are set on driving away with a new set of wheels following the upcoming Memorial Day weekend, there are a few tips you can follow to get the best deal.
Test drive before the weekend
One way to save time and ensure you’re in and out of the dealership before the competition is to test drive ahead of time. This way, you can walk in ready to buy rather than feel pressured to sign a deal on a car you aren’t completely sold on. To arrange for a test drive, research cars online, then contact your dealer to arrange an appointment in advance.
Shop outside your ZIP code
Although the pandemic led to vehicle supply challenges, it also hastened the shift toward online buying. Take advantage of this new opportunity to see if there are vehicles available outside of your area.
Buying a car online is a similar process to that of an in-person purchase, and you might save some extra cash along the way. And with some areas offering better prices, it might be worth your while to travel to a city with more affordable prices to find your next vehicle.
Be flexible with your vehicle choice
With fewer vehicles lining dealership lots, now could be a great time to expand your horizon when it comes to vehicle model, size and style. Most drivers tend to be narrowly focused on a particular make or model, so flexibility could mean getting a vehicle while others don’t. Consider checking out Bankrate’s 2023 winners for the most reliable vehicles when shopping.
Negotiate the best price
With higher costs expected, it is smart to brush up on your negotiating skills before heading to the dealership lot. Confidence is key to getting the best deal. Check out tools like the ones offered by Edmunds and Kelley Blue book that present fair market prices.
Using that info, you can come in prepared with the amount you are willing to spend and the price for other comparable vehicles.
Purchasing a vehicle is a major financial decision. Although there will be an increase in incentives this year compared to last, it still may not be enough to sweeten the deal with such high interest rates. If you do decide to brave the crowded lots, shop around at different dealerships to find the best possible deal and prepare to spend a bit more money.