Deciding whether to buy a new car, lease, or buy used has never been tougher
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- Absurdly high prices and scant inventories are complicating car buying.
- Shoppers should consider new factors when deciding between buying new, buying used, or leasing.
- Experts say being flexible is key in nearly every aspect of a car purchase.
- See more stories on Insider's business page.
Looking for a new set of wheels? It's time to unlearn everything you knew about car buying.
"Whether or not this is your second car or your 10th car, all that stuff has to go out the window because the dynamics have become so bizarre," Ivan Drury, senior manager of insights at Edmunds, told Insider. "If you go in with that same mindset, you're going to be severely disappointed."
What are those "dynamics" exactly? In a nutshell, the supply of used and new cars has plummeted to extreme lows, while prices have soared to ridiculous highs. The main culprit is a computer chip shortage that's constrained vehicle production for months, but other factors have contributed too.
It all means that navigating a car purchase has become much more of a headache than before. Faced with dwindling options and eye-watering price tags, shoppers' central decision of whether to buy new, lease a car, or buy used has gotten substantially more challenging.
If you're looking to buy new, prepare to pay sticker price - or higher - don't expect to have your pick of all the options, colors, and models you're used to at the dealership, Drury said. Dealer incentives are hard to come by and haggling for a big discount isn't going to work these days, since vehicles are flying off lots in record time.
"Expect to concede defeat in one way or another," Drury said.
But buying new is still your best bet for getting the latest technology and safety features.
To make the most of a new-car purchase, consider targeting less sought-after models, says Benjamin Preston, an automotive reporter at Consumer Reports. Pickups and all-wheel-drive SUVs are in high demand, but you may find better availability and prices if you search for sedans, hatchbacks, and small, front-wheel-drive SUVs, he said.
Leasing, as in the past, is good for people looking to manage monthly payments on a larger or more expensive new vehicle they can't afford to buy outright, Preston said. Lease payments are typically cheaper than loan payments. But the downside is you're paying to rent rather than working toward paying off a vehicle you'll eventually own.
Leasing has another appeal nowadays: as a stopgap measure to avoid the chaotic car market. Those reluctant to hunt frantically for a vehicle or who can't afford to pay today's absurd markups may be better off leasing temporarily until the market settles down, Drury said.
Shoppers traditionally found the most value on the secondhand market, but that's less clear as of late. Used-car values have shot up roughly 30% over the course of the pandemic, according to Edmunds, meaning that some lightly used vehicles cost as much or more as their new counterparts. Before deciding to stomach the inflated prices, Drury recommends that buyers do plenty of research and make sure they plan to keep their vehicle for an extended period.
Shoppers may be able to get a better deal if they look at older models, according to Preston. Fortunately, in 2021, even a seven- or nine-year-old vehicle has some advanced safety features and modern tech.
Coming out satisfied in this bizarre market boils down to how much you're willing to budge on factors like price, brand, options, and how you're obtaining a vehicle, Autotrader's executive editor, Brian Moody, told Insider.
"The person who's probably going to do the worst in terms of finding what they want is the person who's very rigid," he said. "The person who's going to do the best is the person who's going to be the most flexible on pretty much everything."
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