Where to find new cars at lower prices
The cheapest new cars come from dealerships during specific times of the year, and from specific models that manufacturers are trying to move off the lot. You are not looking for a used car or a discount code — you are looking for new vehicles that cost less to begin with, either because the model is unpopular, because the year is ending, or because the dealer has overstock.
End-of-month and end-of-quarter sales are real: dealerships have quotas, and a salesperson who has not hit their numbers will negotiate harder on price. The same is true at the end of the model year, usually August through October, when new model years arrive and dealers need to clear inventory. Manufacturers also offer rebates during these windows — sometimes $2,000 to $5,000 off certain models — but these vary by region and change monthly.
The cheapest new cars by category are usually compact sedans, hatchbacks, and small trucks from mainstream brands. A Honda Civic, Toyota Corolla, Hyundai Elantra, or Kia Forte will cost less than a midsize sedan or SUV, and they hold their value reasonably well. If you need cargo space, a compact truck like the Toyota Tacoma or Hyundai Santa Cruz costs less than a full-size truck and uses less fuel.
Key Takeaways
- New cars cost less at the end of the month, end of the quarter, and end of the model year, because dealerships have sales targets and need to clear inventory.
- Compact sedans and hatchbacks from mainstream brands (Honda, Toyota, Hyundai, Kia) are the cheapest new cars, and you can often find them with manufacturer rebates of $2,000 to $5,000.
- Checking the manufacturer's website and calling multiple dealerships in your area tells you which models have rebates this month and which dealers have the most stock to negotiate with.
- Getting pre-approved for a loan from a bank or credit union before you visit a dealership gives you a real price to negotiate against and prevents the dealer from marking up the interest rate.
- The total cost of ownership includes insurance, fuel, and maintenance, so a cheap car that gets poor fuel economy or costs more to insure may not save you money over time.
How to research prices and rebates before you go to the dealership
Start by visiting the manufacturer's website directly — Honda, Toyota, Hyundai, Kia, Ford, Chevrolet, and others all list current rebates and incentives by region. These pages update monthly and show you which models have cash rebates, low-interest financing, or lease deals. Write down the rebate amount and the model name, because this is your negotiating anchor.
Next, check Edmunds, Kelley Blue Book, or TrueCar to see what other people in your area paid for the same car in the last 30 days. These sites show the average transaction price, not the sticker price — the sticker price is what the dealer wants, but the transaction price is what people actually paid. If you see that buyers in your city paid $18,500 for a Honda Civic, you now know that $20,000 is too high.
Call or visit at least three dealerships and ask what they have in stock in the model and color you want. Tell them you are comparing prices and ask for their out-the-door price — that is the total you pay, including all fees, taxes, and documentation. Do not negotiate yet; you are just gathering information. Write down the price, the mileage, and the dealer's name.
What to do when you visit the dealership
Bring a pre-approval letter from your bank or credit union. This letter says a lender will give you a loan for a specific amount at a specific interest rate. When you have this letter, the dealer cannot mark up the interest rate, and you have a real number to negotiate against. If the dealer offers you financing, you can compare it to your pre-approval and choose the better deal.
Tell the salesperson you have already researched the price and you know what others paid. Show them the Edmunds or Kelley Blue Book printout. Ask for their best out-the-door price, and tell them you are visiting other dealerships. Salespeople expect this — it is normal. If they will not negotiate, leave and call the next dealership on your list.
Do not let the salesperson separate you from the sales manager. The salesperson will say "let me talk to my manager" and disappear for 20 minutes. This is normal, but it is also a tactic to make you feel like you have already invested time and should just accept the offer. You have not. If the price is too high, say no and walk out. There are other dealerships and other cars.
Understanding the fees and add-ons dealers will try to sell you
The out-the-door price includes the car, taxes, registration, and documentation fees. It should not include extended warranties, paint protection, fabric protection, or gap insurance — these are add-ons that the dealer makes money on, and you do not need most of them.
An extended warranty covers repairs after the manufacturer's warranty ends. Most new cars come with a 3-year or 36,000-mile warranty. An extended warranty might cover years 4 through 7 or up to 100,000 miles. Whether this is worth buying depends on how long you plan to keep the car and how reliable the model is. A Honda Civic is reliable; an extended warranty is probably not necessary. A less reliable brand might justify the cost, but you can also buy a warranty later if you decide you want one.
Gap insurance covers the difference between what you owe on a loan and what the car is worth if it is totaled. If you put down at least 20 percent and you are financing the rest, gap insurance is not necessary. If you are putting down less than 20 percent, it may be worth the cost — ask your insurance company first, because some policies include it already.
Paint protection and fabric protection are coatings the dealer applies. They cost $500 to $2,000 and are not necessary. A regular car wash and interior cleaning will protect your paint and fabric just as well.
Financing options and how to keep the interest rate low
You have three ways to pay: cash, a loan from a bank or credit union, or a loan from the dealership's finance company. Paying cash is the cheapest if you have the money, because you pay no interest. A loan from a bank or credit union is usually cheaper than a dealership loan, because banks compete on interest rates and dealerships do not. A dealership loan is the most expensive, but it is convenient because you do everything in one place.
To get the lowest interest rate, check with your bank, your credit union, and online lenders like LightStream or Upstart. Tell them the car model, the price, and how much you want to borrow. They will give you a rate based on your credit score. If your credit score is above 700, you should see rates between 4 and 7 percent. If your score is below 650, rates will be higher, but you can still shop around — different lenders have different standards.
Once you have a pre-approval letter, bring it to the dealership. The dealership's finance company may offer you a lower rate to earn your business, or they may not. Either way, you have a choice. Do not let the dealership tell you that you have to use their financing — you do not.
Total cost of ownership: fuel, insurance, and maintenance
The cheapest car to buy is not always the cheapest car to own. A compact sedan might cost $18,000 but get 30 miles per gallon. A larger sedan might cost $22,000 but get 25 miles per gallon. If you drive 12,000 miles per year, the difference in fuel cost is about $200 per year. Over five years, that is $1,000 — not nothing, but not huge.
Insurance costs vary by model, age, and your driving record. A Honda Civic is cheaper to insure than a sports car, but a Hyundai Elantra might be cheaper than a Honda Civic because it is less likely to be stolen. Call your insurance company and ask for quotes on the specific models you are considering. This takes 10 minutes and can save you hundreds of dollars per year.
Maintenance costs are lowest for mainstream brands like Honda, Toyota, Hyundai, and Kia, because parts are cheap and widely available. Luxury brands and unusual brands cost more to maintain. If you are buying a cheap car, stick with a brand that has a lot of dealers and a lot of used parts in circulation.
When to buy used instead of new
A new car loses 20 to 30 percent of its value in the first year. A used car that is one or two years old has already taken that hit, so you pay less and lose less value. If you find a used car with low mileage and a clean history, it may be a better deal than a new car, even if the new car has a warranty.
The trade-off is that a used car may have hidden problems, and you have less recourse if something breaks. A new car comes with a warranty that covers defects for three years or 36,000 miles. A used car may have a shorter warranty or no warranty at all. If you are not comfortable taking that risk, buy new. If you are willing to have a mechanic inspect the used car before you buy it, a used car can save you money.
Frequently Asked Questions
What is the cheapest new car I can buy right now?
The cheapest new cars are compact sedans like the Honda Civic, Toyota Corolla, Hyundai Elantra, and Kia Forte, which start around $18,000 to $22,000 before rebates and taxes. The exact price depends on the model year, the trim level, and current manufacturer rebates in your region. Check the manufacturer's website for this month's rebates and call local dealerships to see what they have in stock.
Should I buy at the end of the month to get a better price?
Yes, dealerships have monthly and quarterly sales quotas, and salespeople will negotiate harder on price at the end of these periods. The end of the month, the end of the quarter (March, June, September, December), and the end of the model year (August through October) are the best times to negotiate. You will not always get a huge discount, but you have more leverage.
Can I negotiate the interest rate on a dealership loan?
You cannot negotiate the interest rate itself, but you can choose not to use the dealership's financing. Get pre-approved for a loan from a bank or credit union before you visit the dealership, and bring the pre-approval letter with you. The dealership's finance company may match or beat that rate to earn your business, but you are not obligated to use them.
Do I need gap insurance on a new car?
Gap insurance is worth considering if you are putting down less than 20 percent on the car. It covers the difference between what you owe and what the car is worth if it is totaled. If you are putting down 20 percent or more, or if you are paying cash, you do not need it. Ask your insurance company first — some policies include gap coverage already.
Is a new car cheaper than a used car?
A new car costs more upfront but comes with a warranty and no hidden problems. A used car that is one or two years old has already lost 20 to 30 percent of its value, so it costs less, but you take on the risk of hidden problems. If you have a mechanic inspect a used car before you buy it, it may be a better deal than new. If you want the peace of mind of a warranty, buy new.