Four ways to get the car you want despite the chip shortage
What is the impact of the chip shortage on the car buying market? originally appeared on Quora: the place to acquire and share knowledge, allowing people to learn from others and better understand the world.
Answer by Gurpreet Singh, managing director of auto loans at Credit Karma, the Quora:
It’s no secret that the global shortage of semiconductor chips has made things even more complicated for people in the automotive market. These chips are essential components of today’s car electronics and are now delaying the arrival of new vehicles on the market.
With supply chain disruptions, the auto industry is still struggling to supply enough vehicles to meet demand. We’re seeing consumer demand starting to cool off a bit, with car prices down slightly for three straight months, but the price of a used car is still around 40% higher than it was a year ago. Consumers who can’t put off buying a car should consider taking these steps in order to get a car they want, at a decent price, at least by today’s standards.
Trade in your car. If you are a car owner in the market for a new car, definitely consider trading in your vehicle to help offset the higher price you may end up paying for your new car purchase. Higher used car prices mean that current car owners have likely seen the value of their cars appreciate. In fact, last summer when we analyzed Credit Karma members who had synced their vehicles with our platform, out of 25 million cars, we saw the median retail value increase by about $1,750, and that , in just a few months. If you decide to trade in your vehicle for cash or another car, shop around and get offers from a few different places.
Broaden your search net. In today’s market, your favorite dealer may not have the car you want, so be prepared to look beyond your usual parameters. Also consider buying a car through digital dealerships like Carvana. Not only do services like these typically give you a warranty that allows you to return the car you purchased within a certain number of days if you decide it’s not right for you, but they also act as a one-stop-shop for the financing and buying a car. For example, Credit Karma’s partnership with Carvana allows us to match our members with a car loan they are already pre-approved for so they have transparency on how much car they can afford.
Beware of dealer financing. If you choose to finance your car through the dealership, you could end up paying a higher interest rate. Still, avoiding dealer financing in this market is probably easier said than done, as there have been reports of buyers being pressured by dealers to obtain financing through them, or they might completely miss the purchase of the car. If you find yourself in a similar situation, listen to their options and terms, as it might save you enough money off the purchase price to make it worthwhile. Check to see if there’s a penalty for prepaying the loan, and if there isn’t, consider financing and pay it off as soon as the loan allows. If you believe the dealership you are interacting with is violating the law, you can file a complaint with the FTC and your state attorney general.
Save for a larger down payment. If you plan to finance your vehicle with an auto loan, consider saving for a larger down payment to offset rising rates. Due to high car prices, you may find yourself considering a longer term car loan, and while this may make your monthly payments more manageable, you will end up paying more interest over the life of your loan.
That question originally appeared on Quora – the place to acquire and share knowledge, allowing people to learn from others and better understand the world.