Find out what the dealer pays for the car and visit two dealerships. Just doing those two things saves most people $230.
If you can do those two plus you enjoy bargaining and are willing to do research you can save $800.
Through surveying more than 1,400 car buyers, Silva-Risso and his co-authors, Fiona Scott Morton, of Yale University, and Florian Zettelmeyer, of Northwestern University, found buyers could save about $800 if they find out what a dealer pays for a car, visit two dealerships, like to bargain and like to do research and price comparisons before making a purchase.
The research also found that a consumer who doesn’t like to bargain or do a lot of research can save $230 by doing just two things: finding out what the dealer pays for the car and visiting two dealerships.
- Buyers who have learned the dealer’s invoice price save on average $121.
- A consumer saves $109, or about 7 percent of dealer gross margin, when a consumer shops at two dealerships instead of one and about $600 when a consumer shops at as many as seven dealerships.
- Consumers with the most willingness to do multiple rounds of bargaining save an average of $302.
- Consumers with lower search costs, or time and effort to find information on the car, pay on average $287 less than those with high search costs. Typically consumers without the resources to search for information have high search costs.
Want to save $31,000? Stop buying new cars and drive the one you have until the odometer hits 225,000 miles.
By keeping your car for 15 years, or 225,000 miles of driving, you could save nearly $31,000, according to Consumer Reports magazine. That’s compared to the cost of buying an identical model every five years, which is roughly the rate at which most car owners trade in their vehicles.
Calculating the costs involved in buying a new Honda Civic EX every five years for 15 years – including depreciation, taxes, fees and insurance – the magazine estimated it would cost $20,500 more than it would have cost to simply maintain one car for the same period.
Added to that, the magazine factored in $10,300 in interest that could have been earned on that money, assuming a five percent interest rate and a three percent inflation rate, over that time.
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