New Cars Are Expensive, Here’s What You Can Do About It

by Steve Georgoulakis, CFP® on Tuesday July 02, 2024
Posted in Category: Purchasing a Vehicle
Tagged with : ,

Toy car on coins

Stop me if you’ve heard this one already, but new cars are expensive, and it’s a terrible time to buy one, so don’t do it!

That’s probably prudent guidance given the high interest rates, even higher prices, and massive depreciation on certain new cars right now. But what if you truly need to purchase a new automobile? After all, military life happens, and a growing family, a total loss claim, a PCS, or even a deployment can put you in a position where buying a vehicle is necessary.

If that’s you, here are a few tips to help you navigate your next vehicle purchase without driving yourself into financial gridlock.

  1. Broaden your vehicle search. New car inventories are growing, and manufacturer incentives are back. Still, you may need to travel to make the best deal. Start your search with local dealerships to get a baseline and compare your results with options outside your geographic area. As you search, remember that if a new — or used — car has been sitting on the lot for more than 60 days, you may be able to negotiate even more off the price. Also, be willing to walk away if you are not getting the deal you want.
  2. Buy used. Over the past couple of years, the used car market has been significantly inflated, but that trend is changing rapidly. As of June 2024, the average transaction price for a new car is still over $47,000, while the average used car price is almost half that amount at approximately $25,000. Think outside the box when considering a used vehicle. Look online, follow car classifieds accounts on social media, and reach out to your network of friends and family. You never know if your neighbor down the road just received PCS orders and is considering selling their car.
  3. Avoid stretching out your next auto loan. This tip deserves some serious attention. Higher interest rates and sales prices have led to longer loan terms. Some lenders offer 84- and 96-month auto loans to “help” lower the monthly payment, but don’t be fooled.

Stretching an auto loan for six, seven or even eight years to lower the monthly payment can lead to expensive finance charges and a greater potential for negative equity. Negative equity occurs when you owe more on the loan than the vehicle is worth. Given what’s been happening with vehicle prices, it’s an expensive problem many recent buyers are dealing with in a big way.

The simple tip here is to budget for an amount you can reasonably afford to pay per month over four to five years and use that number to determine your target loan amount. A good rule is to limit your total vehicle expenses — payment, fuel, insurance and maintenance —to 15%-20% of gross income, and the lower, the better. Our calculator can help you crunch the numbers.

To learn more about buying a new or used vehicle, check out our award-winning video series, Car Buying Basics.

New vs. Pre-owned

5 Steps to Vehicle Financing  

What Do You Want Your Payment to Be?

Dealer Add-ons

Let Me Talk to My Sales Manager

Trade-ins and Negative Equity


The USAA Educational Foundation is a nonprofit, tax-exempt IRS 501(c)(3) and cannot endorse or promote any commercial supplier, product, or service. The content of this blog is intended for information purposes only and does not constitute legal, tax, or financial advice.