6 Ways to Save on Your Next Car
Buying a car — always a costly endeavor — has become even more expensive recently, thanks to a surge in vehicle prices since the pandemic and spiraling auto-loan rates.
The average balance for a new auto loan hit nearly $34,000 by the end of 2025, about $10,000 higher than in 2018, according to a recent report from The Century Foundation. Meanwhile, Experian data shows that the recent average interest rate of 6.39% on new-car loans is 57% higher than rates were in 2022.
Fueling the increases: New-vehicle prices now average close to $50,000, thanks to tariffs, lingering supply-chain challenges and higher manufacturing costs. Loftier new-car prices, in turn, have pushed up demand and prices for used cars as well, with the average price of a three-year-old used car recently at $31,500.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
“There’s a whole mix of factors that have been driving the price of cars higher, which makes it really hard for anyone who needs to buy a new car,” says NerdWallet personal finance expert Kimberly Palmer.
In the market for new wheels? These tactics can help keep costs on track.
1. Stay in your (budget) lane.
Save time and narrow your vehicle choices by setting your budget up front — and sticking to it. Aim to keep your car payments under 10% of your monthly income and your total car costs (including insurance, gas and maintenance) under 20%, says Matt Schulz, chief consumer finance analyst at LendingTree.
2. Shift your timing.
The end of the month (and often the end of the quarter or the year) may offer your best opportunity to snag a discount. That’s when dealers, closing in on their quotas, are most motivated to cut prices to make a sale. If you can wait until the end of the calendar year, you may see even better offers on 2026 vehicles as dealers look to make room for next year’s models.
3. Don’t let monthly payments steer your decision.
Auto expert Lauren Fix, founder of Car Coach Reports, recommends avoiding financing terms that exceed the terms of a car’s warranty — typically three to five years. Yet nearly seven in 10 new-car buyers now finance their vehicle for more than five years, Experian reports. While a longer term will lower your monthly payments, the extra interest you’ll pay over the life of the loan can dramatically increase the total cost of the car.
“If the number doesn’t work for you, don’t try to jam a square peg into a round hole,” Fix says. “Find another car. Look at a different trim level or a smaller vehicle.”
4. Map out alternate routes.
Although used cars still generally cost less than new models, the gap between them has narrowed. Prices for three-year-old used cars are at a near-record $31,500, and loans for used cars typically have higher interest rates. So run the numbers using an online auto-loan calculator. You can find one at sites such as Bankrate and Cars.com.
5. Cruise in with outside financing.
Compare loans from at least three banks and credit unions, and get preapproved before visiting the dealership. “If the dealer can beat your bank, great. Let them,” says Sean Tucker, a managing editor with Kelley Blue Book. “Just don’t put yourself in a position where you’re dependent on the dealer’s offer.”
Some dealers may run low-rate promotional financing, typically for borrowers with a high credit score. But these offers are less common than they were before the pandemic.
6. Drive a hard bargain.
Most dealers now have an internet sales department that will give you a price quote before you set foot on the lot. Collect at least three of these quotes, which you can use to push down the price during negotiations, Palmer says.
Map out your finances before buying a car
A car is a major purchase, and the right price and financing strategy will depend on how it fits into your broader budget and financial goals. A financial adviser can help you weigh the cost of a new vehicle against other priorities, from paying down debt to saving for retirement.
Use the tool below to connect with a financial professional who can help:
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
