Jill On Money: Car buying tips 2026
I am not a car person, but my car turns 12 years old this year, so I am trying to prepare myself for the eventuality that a car purchase is on the horizon.
Since purchasing my used vehicle, prices have soared to around $50,000, up almost $18,000 from the average price that I paid when I last was in the market in 2014.
That 55 percent increase in price is due to a combination of inflation and the fact that Americans have been buying larger and more expensive vehicles, including electric ones.
The numbers are staggering for those of us driving old cars – and there are plenty of us: according to S&P Global, the average age of vehicles on the road is 12.8 years. Of course, when you need a car, you need a car. Once you get over the sticker shock, approaching the process requires research and discipline.
The first step is to determine how much you can afford. If you already have money set aside, great, but the vast majority of buyers are either leasing or borrowing money to finance a purchase. (If you do not track your spending, a car purchase will prompt you to do so.)
Like the purchase of a home, a car is not just about the transaction price but also includes the ongoing operating costs. According to the most recent analysis from AAA, the total cost of owning and operating a new vehicle is about $1,000 per month.
Once you determine how much you can afford, you will need to conduct research before you walk into a dealership. Figure out which models fit your needs. Even if you have been loyal to a particular brand or dealership, consider expanding your search to other options and a broader geographic area.
Most of this information can be found online, though I have always consulted the experts at Consumer Reports. (I have interviewed CR’s Mike Quincy many times over the years.)
Next, determine whether you should buy or lease. Folks like me, who drive cars into the ground, are best served by owning. The reason is that even if you borrow money to buy, once the loan is paid off, your annual cost of the car drops. But if you are drawn to shiny new vehicles with improved safety options and the latest technology, you may prefer a lease. A lease usually requires a smaller down payment and results in lower monthly payments.
To compare buying and leasing, research loans from at least three lenders—a bank, a credit union, and maybe an online lender. Depending on your credit score, rates can vary significantly. Currently, new car loans average over 7% for 60 months. While you can reduce your monthly payment by extending a loan to 72 or even 84 months, if you can’t afford the payment on a 60-month deal, you’re probably looking at too much car.
Another way to reduce the price of a vehicle is to consider used cars, which are less than three years old. Doing so helps avoid the steepest amount of depreciation, while still being under warranty. According to Kelly Blue Book (KBB), the average price of a used car was $26,043 as of December. But used car loans carry higher interest rates, around 11%, on average.
Finally, for some negotiation is a sport, but for others, it is right up there with a root canal. A couple of in-dealership negotiation tips include avoiding dealer markups on your final invoice and removing expensive add-ons that you don’t need. I have found that the willingness to walk away is your best negotiating tool.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.