If you’re in the market for a new car, we’ve got good news: The pandemic-induced supply chain woes may be in the rearview mirror.  

New vehicle sales in May increased by 22.8% compared to 2022, with 1,374,910 cars sold in the United States alone. 

New car prices are also trending downward, slowly but surely. In March, the average price paid for a new car fell below the sticker price — for the first time in 20 months, according to Kelly Blue Book.  

While that’s a reason to celebrate, being an informed car-buying consumer in today’s climate is still essential. Before you head to the dealership, here’s what to consider.

What type of car do you really need?

In many ways, this choice comes down to the classic wants versus needs comparison. Are you "revenge spending" by buying something you think you deserve but that’s way out of your price range? Or are you searching for a more reliable and affordable way to get to your job and drop off the kids at the pool? As you evaluate new or used, make and model, answering these questions can help narrow your choices:

How do you drive? 

Need to shuttle a big family around town? A new or used crossover SUV with fewer miles and high-reliability ratings may make sense. On the other hand, if you use a car only for occasional trips and convenience driving, opting for a certified pre-owned sedan might be a better value.

How much do you drive? 

Should you splurge for that hybrid? Evaluate your commuting habits and consider the fuel efficiency of different types of vehicles. A fuel-efficient or hybrid/electric car may be a cost-effective choice if you drive long distances frequently.

What do you want from your new ride?

Modern cars are all about the frills. You can save money by deciding what you want (and what you can skip) ahead of time. Think about the type of transmission (manual or automatic), seating comfort, technology features (infotainment systems, navigation) and any specific requirements you may have.

The good news is that it’s easy to do some initial car research — without kicking the tires. Many automotive websites, such as consumer shopping site Edmunds and vehicle valuation firm Kelley Blue Book, let you browse and compare new and used models, get a sense of current market price points and read reviews. You should also check out the Insurance Institute for Highway Safety’s annual Top Safety Picks and the annual make and model rankings by J.D. Power.

When’s the best time to buy a car?

Naturally, the best time to buy is when dealers are most motivated to sell. From seasonal incentives to end-of-model-year deals, here are three times to target for the ideal buying opportunity:

• Holidays. You’ve no doubt seen more car ads during popular three-day holiday weekends. Memorial Day, Independence Day and Labor Day are often the top trio when both manufacturer- and dealer-sponsored incentives combine, adding up to attractive discounts.
• Late summer. When next year’s models start rolling in, dealers try to clear last year’s vehicles off the lots. Moreover, as new-car inventory ramps up, the number of used cars also tends to increase — and pricing gets more competitive.
• End of each month and year. Dealers aim to meet sales quotas at the end of the month. And car buyers may find maximum savings between Christmas and New Year’s Day as manufacturers sweeten deals in a final sales push.

How much can you afford?

While there’s no exact formula to determine affordability, a good starting point is making sure car ownership — and all the related costs that come with it — fits easily into the household budget. Here are a few things to know:

Consider some guidelines

General guidance is that a monthly car payment shouldn’t exceed 10% to 15% of monthly income. As a gauge, Edmunds notes the average down payment for a new vehicle today is $6,956, while the average amount financed is $40,468.

Estimate the total cost

Knowing the actual cost of owning a new car makes it easier to buy smart. Of course, the sticker price isn’t the only cost you’ll incur — you’ll also have to factor in insurance, maintenance and fuel. Check affordability by calculating all the costs of car ownership by make and model with Edmunds’ True Cost to Own tool.

Check the value of a trade-in

Check your car’s value at the National Automobile Dealers Association's (NADA) Guides, Edmunds and  Kelley Blue Book. Tip: Wait to discuss your trade-in until after negotiating the best sales price for the car you want (so that the dealer doesn’t adjust the cost to make up for a generous trade).

How does a car loan work?

If you’re financing, you have two options: direct lending (from a credit union, bank or other financial institution) or dealership financing (which typically uses an outside finance company to service a loan and collect payments). Here’s what to know:

Understand your loan

When you apply and get approved for a car loan, you get the funds in a lump sum, then pay it back over time with interest. What affects your monthly payment and the total amount you’ll pay on the loan?

• Amount of the loan. If you make a down payment or are trading in a car, you will borrow less.
• Annual percentage rate (APR). This is the interest rate you’re offered.
• Length of the loan. Car loan terms typically range from 24 to 72 months.

Understanding the connection between the loan term and the interest rate is important. A longer loan term may lower your monthly payment, but it also means you’ll pay more interest.

Why it pays to get pre-approved

Before heading to the dealership, it’s wise to get pre-approved for a car loan. Pre-approval does three valuable things:

• Tells you how much you can borrow and the interest rate you’ll be offered based on your finances.
• Locks in your financing ahead of time, boosting your negotiating power.
• Gives you an idea of the price range you can afford, so you can focus on getting the right car at the right price.

Ready to buy a new car? You can apply for an auto online with Spectrum Credit Union to unlock low rates and flexible terms — up to 84 months. And with our loan pre-approvals, your financing is secured before you head to the dealership so you can drive away happy, knowing you got the best deal possible.