22% of Americans Are Resolving to Buy a New Car. Here's How to Keep Financing Costs Down

It's common to set financial goals at the end of one year that you'll fulfill the next year. And in a 2023 survey by Edelman Financial Engines, 22% of respondents said they were aiming to buy a new car in 2024.

You may be in the market for a new car if your current car is giving out on you, or if you've moved to an area where public transportation isn't so reliable. Unfortunately, it's not the best time to be purchasing a new vehicle.

Kelley Blue Book reports that the average new car price in November 2023 was $48,247. And while that's a 1.5% decline from a year prior, it's hardly a small amount.

Compounding the problem is that borrowing rates are high right now following a string of interest rate hikes from the Federal Reserve. So whether it's an auto loan you're looking to sign, a personal loan, or a home equity loan, you're looking at paying a bundle of interest -- even if your credit is good.

However, if a car purchase isn't something you want to put off, there are a few steps you can take to save money on a new vehicle. Here's how.

1. Don't go for the fancy features

The price you'll see listed for most vehicles is usually the bare bones price -- meaning, the absolute minimum you can expect to pay for a given car. It's not unreasonable to want to upgrade your car with a few decent features. But that doesn't mean you need every single feature that's possible to add on, nor does it mean you need the highest-end features. 

Let's imagine you're offered the option of cooled seats. That may be a nice thing to have on a summer day. But if you've never had a vehicle with cooled seats before, and you've made it thus far just fine, then you don't need to pay for that feature if you're trying to shave money off the cost of your new vehicle.

2. Boost your credit score before applying for a car loan

Since borrowing rates are high right now, you may end up paying more for an auto loan than you want to. But still, a boost to your credit score could leave you with a more competitive interest rate, relatively speaking. For example, if your credit score is currently 720, raising it to 780 or 790 could result in a lower loan rate.

There are different steps you can take to raise your credit score. If you have a little time until you think you'll be buying your car, pay every single bill in a timely fashion and see if it helps your payment history. That's the single most important factor when calculating your credit score.

You can also try paying off some credit card debt to whittle down your total balance. Using less of your available credit can help increase your credit score. 

And finally, check your credit report for errors. If you spot a mistake that reflects poorly on your borrowing history, getting it corrected could lead to a nice jump in your score. You can access free copies of your credit reports at AnnualCreditReport.com.

3. Shop around with different lenders

Auto loan rates may be up right now. But that doesn't mean all lenders are charging the same rate.

It pays to shop around with a few different lenders before signing a car loan. Don't assume that the financing offer you get through your dealership is the best one out there, either. Spend a little time looking, since it's a loan you may be paying back for years. You might want to check with your current bank for auto loan options, as there may be a relationship deal available to you. 

While it's currently not the best time to buy a car, financially speaking, there are ways you can lower your costs to some degree. Be mindful of these tips when you do your vehicle and loan shopping so you're able to walk away with the best deal possible.