Buying a Car? These Tips Will Help You Be a Smart Shopper.

Summary

WSJ Your Money Briefing: “Buying a Car? These Tips Will Help You Be a Smart Shopper.”

Date: July 19, 2021
Host: J.R. Whalen
Guest: Allison Poley, Wall Street Journal reporter

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Episode Overview

This episode focuses on smart strategies for buying a car in a challenging market characterized by soaring demand, high prices, and limited inventory for both new and used vehicles. WSJ reporter Allison Poley shares practical insights, actionable tips, and resources for car shoppers who want to navigate today’s tough auto market without overspending or compromising too much.

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Key Discussion Points and Insights

1. The Current Car Buying Landscape

[01:28–03:05]

• Inventory & Prices: Chip shortages have led to fewer new cars being produced, driving more buyers to used cars and pushing prices up on both fronts.
  • “When people walk onto a car dealership, they'll see lower inventories and higher prices.” – Allison Poley [02:08]
  • Average new car price: $40,000 (up 14% from a year ago)
  • Average used car price: $28,000 (up 24% from June 2020)
• Market Shift: Traditional car-buying wisdom may not apply. “Everything you thought you knew about car buying from last year or whenever you last were in the market has changed.” – Allison Poley [02:04]
• Not a Buyer’s Market: There are far fewer deals, and shoppers shouldn’t expect bargains.

2. Real-World Examples from Car Shoppers

[03:05–04:34]

• Flexibility is Key: Two consumer stories illustrate different approaches:
  • Huntsville, Alabama shopper: Shopped seven dealerships, ended up ordering new ($<50K), since used trucks were selling for $80K with high mileage.
  • Orlando, Florida shopper: Very specific requirements (Honda Civic hatchback EX in white), found used prices comparable to new (with miles), dealers unwilling to negotiate. Turned to YouTube tutorials and hired an auto consultant.
• Quote: “Her problem is that she's called around to multiple dealers and has not yet been able to get anyone to negotiate on the price. And she said that is because it's the dealer's market at this point.” – Allison Poley [03:49]

3. Adjusting Your Expectations

[04:34–05:16]

• Be Open to Alternatives: Large vehicles are more expensive and in shorter supply. Consider a sedan for infrequent needs, as they have higher availability and lower prices.
  • “If you only need to use it once or twice a year, you might consider a sedan instead.” – Allison Poley [04:44]
• Older Used Cars: Going for older, higher-mileage vehicles can save money and involve less competition from buyers.

4. Finding & Maximizing Incentives

[05:16–06:08]

• Discounts: Even in a tough market, some discounts still exist:
  • Recent college grads & military
  • Friends and family discounts (by manufacturer)
  • Club memberships (e.g. Costco) [05:38]
• Shop Outside Your Area: Some states (Florida, Texas) have especially low inventory, but other regions (New York, Washington D.C.) may have better supply.

5. Research Tools & Resources

[06:08–06:40]

• Online Research: Use sites like Edmunds, Cargurus, and Kelley Blue Book to compare vehicles, check reviews, and estimate price ranges.
  • “These allow you to research makes and models as well as reviews and prices.” – Allison Poley [06:17]

6. Making the Most of Your Trade-In

[06:40–07:16]

• Trade-In Value Soaring: Do not discount even older vehicles; trade-in prices have surged.
  • Example: Dealerships paid $16,000+ for vehicles with 100,000–110,000 miles, a 31% gain year-over-year.
  • “So you might be getting more for that old car that you didn't think much, and you can use those earnings to offset the cost of your new purchase.” – Allison Poley [07:07]

7. Consider Leasing as a Stop-Gap

[07:16–07:56]

• Short-Term Flexibility: Leasing may make sense if you can’t find exactly what you want. “If you can't get what you really want, you might as well borrow what you kind of want.” – Allison Poley [07:29]
• Mileage Limits: Be aware of common 10,000 mile/year limits; confirm these fit your driving needs.

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Notable Quotes & Memorable Moments

• “Everything you thought you knew about car buying from last year...has changed.” – Allison Poley [02:04]
• “Her problem is that she's called around to multiple dealers and has not yet been able to get anyone to negotiate on the price.” – Allison Poley [03:49]
• “If you only need to use it once or twice a year, you might consider a sedan instead.” – Allison Poley [04:44]
• “So you might be getting more for that old car that you didn't think much, and you can use those earnings to offset the cost of your new purchase.” – Allison Poley [07:07]
• “If you can't get what you really want, you might as well borrow what you kind of want.” – Allison Poley, relaying expert advice on leasing [07:29]

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Important Timestamps

• [01:28] – Discussion on inventory and current market challenges
• [02:03] – Price increases & the impact of chip shortages
• [03:15] – First-person shopping experiences
• [04:40] – Adjusting vehicle preferences and targeting sedans
• [05:23] – Where to still find discounts
• [06:14] – Best research resources
• [06:44] – Trade-in car values surge
• [07:24] – Leasing as a practical alternative

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Summary Takeaways

The current car market is exceptionally tough for buyers, with high prices and limited supply. Successful shoppers must be flexible, conduct extensive research, and explore all possible discounts—including trade-in values and geographic options. Leasing can also serve as a useful interim strategy until conditions improve. Use online tools and keep your options open to maximize your advantage in this seller’s market.

Transcript

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[J.R. Whalen]

Here's your money briefing for Monday, July 19th. I'm J.R. whalen for the Wall Street Journal. This is not your father's car. Market demand is high and so are prices for both new and used vehicles.

[Allison Poley]

So in this current environment, you won't find the same types of deals that you might have found in the past.

[J.R. Whalen]

But you don't have to pay through the nose if you know how to shop wisely. Our reporter Allison Poley has been running the numbers and asking around. Coming up, she'll be here with the smartest strategies for buying a car right now. That's after the break.

[Deel Advertiser]

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[J.R. Whalen]

They say there's nothing quite like that new car smell. If you can find a new car with prices well above what's on the sticker and inventory stuck in neutral, this is definitely not a buyer's market. But a smart shopper can have an easier time maneuvering around those challenges and find something to drive home. Our reporter Allison Poley is here with some tips. She's gathered for prospective car buyers. Allison, thanks for coming on the show.

[Allison Poley]

Thanks so much for having me.

[J.R. Whalen]

So you know, Alison, buying a car can be a big moment for individuals or families. But for people going into the current market to make a purchase, how do they need to sort of set their expectations?

[Allison Poley]

I spoke to an expert who said everything you thought you knew about car buying from last year or whenever you last were in the market has changed. When people walk onto a car dealership, they'll see lower inventories and higher prices. They that's because some of the components for cars, most notably the chips, are in a shortage at the moment. That means manufacturers can't produce as many new cars, and that's driven consumers to the secondhand market where they're looking for used cars. Prices have increased for both new and used cars. Last month, for example, the average transaction price for a new car was about $40,000, which is an increase of 14% from a year ago. And that's According to the research firm J.D. now, for used cars, the average price was about $28,000, which is up 24% from June 2020. So in this current environment, you won't find the same types of deals that you might have found in the past.

[J.R. Whalen]

And for car shoppers, this means having to be flexible in doing some research, you know, more than just doing simple comparison shopping. Now, you spoke to some people in the market for a car. How are they going about it?

[Allison Poley]

I spoke to one consumer who lives in Huntsville, Alabama, and he was searching for a pickup truck. This is someone who never bought a new vehicle before. So he went out looking for used vehicles and found that his selection was pretty limited. A lot of the vehicles that were available were expensive and had many miles on them. So he called around to seven dealerships in his area and ended up ordering a truck directly from the dealer. And he was able to pay less than $50,000 for that purchase, whereas some of the used trucks that he was looking for cost $80,000. I also spoke to a consumer in Orlando, Florida, and she has her heart set on a very specific type of vehicle. She is looking for a Honda Civic hatchback Ex in white. And she has looked at used Civic models, but they're similar in price to the vehicle that she's looking for and also have thousands of miles on them. Her problem is that she's called around to multiple dealers and has not yet been able to get anyone to negotiate on the price. And she said that is because it's the dealer's market at this point. So she's been watching YouTube videos for tips and has also hired an auto consultant to help her as she looks at all of her options.

[J.R. Whalen]

So are buyers going to have to be flexible when it comes to what they're looking for, either in terms of the age of the car or the size of the vehicle?

[Allison Poley]

Yeah, a lot of people do want those larger cars, but if you only need to use it once or twice a year, you might consider a sedan instead. They tend to have higher availability in the dealerships and they can come in at a lower price point. Some consumers who can't find new models are looking at used models with lower mileage. So if you're willing to buy an older used car, you might be able to get a better deal because then you won't be competing with the buyers who are going to pay top dollar for those newer, low mileage cars.

[J.R. Whalen]

So car buyers definitely have their work cut out for them. So what about discounts? Are there some opportunities that people often overlook.

[Allison Poley]

So even though incentives for car shoppers are at their lowest in quite a while, there are still discounts that are often available. So there are discounts available for recent college graduates as well as members of the military. There are also friends and family discounts for certain manufacturers. Depending on your employer, you might also try looking at a club membership such as to Costco to find discounts there. And outside of that, you might also try searching for a vehicle outside of your geographic area. So experts told me that certain states, such as Florida and Texas currently have low inventory. But if you're willing to look elsewhere, such as in New York or Washington, D.C. you might find more availability.

[J.R. Whalen]

Okay, so it sounds like there's some homework needed on the part of car buyers. What kinds of resources are out there that people should be aware of?

[Allison Poley]

There are so many resources out there which can be really helpful to consumers. So there are websites such as Edmunds Cargurus and Kelley Blue Book, and these allow you to research makes and models as well as reviews and prices. So you can look at cars that are listed at dealerships, new and used, to see what types of deals are out there and get an idea of price before you head into the dealership.

[J.R. Whalen]

Now, how about trading in your existing car? What should car buyers know about that?

[Allison Poley]

Even if you have an old car, you should not assume that it isn't worth anything. So the average transaction price for vehicles sold at dealerships that had between 100,000 and about 110,000 miles was more than $16,000 in June of this year, which is a 31% increase compared to last year. So you might be getting more for that old car that you didn't think much, and you can use those earnings to offset the cost of your new purchase.

[J.R. Whalen]

And you know, Alison, maybe actually buying a car isn't the best move financially in this market. What have experts you've spoken to said about the idea of leasing?

[Allison Poley]

One expert I spoke to said if you find yourself compromising on the color or even the brand of car, you might consider leasing for a short amount of time until the market improves. And he said if you can't get what you really want, you might as well borrow what you kind of want. At the same time, you need to be cognizant of what type of lease you're signing. At this point, 10,000 mile per year leases are the most common, and those might not be sufficient for some people. So you need to make sure that the mileage will work for your lifestyle.

[J.R. Whalen]

All right, that's WSJ reporter Allison Poley. Allison, it's been great having you on the show.

[Allison Poley]

Thanks so much for having me.

[J.R. Whalen]

And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.

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