Here are some  tips to help you successfully navigate this difficult market:

Be flexible. Start by resetting your expectations. There’s a very good chance you won’t find the exact model with the features you’re seeking at the price point you’re anticipating. You may imagine yourself in a large SUV or pickup truck, but those vehicles have seen the largest price increases. Be open to a variety of brands, models, and options. While it’s always a good idea to shop multiple dealerships, in today’s market, be prepared to cast a much wider net.

Do your homework. Whether you’re buying new or used, do your research. Edmunds and Consumer Reports are great places to start. If you’re purchasing a used car, consider a certified pre-owned car from a reputable dealer with a comprehensive inspection program. If you don’t buy from a dealer, at the very least, obtain a Carfax report and invest in an independent inspection since not all vehicle incidents will appear on vehicle history reports.

Set a budget and pre-arrange your financing.  At today’s prices, it may be tempting to get a more expensive car than you can comfortably afford. Before you start shopping, establish a budget based on the affordability of both your down payment and your monthly installments. Be sure to plan for additional expenses like car insurance.

Set up financing through your bank or an online lender before you start shopping. Pre-arranged financing will give you a baseline to compare the terms of dealer financing. It will also allow you to act quickly and to negotiate from an informed perspective.

Most importantly, don’t borrow too much. The combination of inflated prices and rapid depreciation could leave you underwater on your car loan, which could be financially devastating if your vehicle is stolen or totaled in an accident.

Consider leasing. If you can’t find the car you want today, consider leasing until the market settles down. Lease costs are typically less per month than car loan payments. Because you’ll need to return the vehicle after the two- or three-year lease period, look for a vehicle with a high residual value or an attractive lease special so you don’t overpay on your lease. Also consider the mileage limit since it can be advantageous to add miles at the beginning of your lease.

Work with what you have.  With many cars simply out of reach, investing in your existing vehicle could make the most financial sense. Repairs, even if expensive, might be worth it if they allow you to escape today’s wild market.

If you decide to buy a new car, use your trade-in to take advantage of elevated used car market prices. Your trade-in has never been more valuable and can help to offset higher prices on your next vehicle.

If you’re coming off a lease, you may find that your end-of-lease purchase price is well below your vehicle’s market value today, especially if it was set before the pandemic inventory shortages. Be aware that many automakers have moved to restrict lease-end options, but the opportunity to purchase your leased car is still widely available. If you decide to extend your lease past the original term, you may be able to extend your original payment on a month-to-month basis.

Whether you’ve found the best deal and are ready to buy, or you decide to wait awhile for that new car, take the time to shop your auto insurance. If you can afford it, pay your annual premium up front instead of making monthly payments, which saves you money and also provides peace of mind.

¹US Bureau of Labor Statistics, February 2022 and CarandDriver.com January 2022.
²Edmunds.com, February 2022.