Top Stories
Top Stories
Personal Finance

How to snag a good deal on a car if you're shopping during the July 4 sales push

Key Points
  • The average price of a new car is $36,902, compared with $32,113 in June 2014.
  • The average monthly payment is $562, compared with $476 five years ago.
  • Experts have tips for both keeping the cost of a new car down and for helping the buying process go smoothly.

Consumers looking for a new car might find themselves in the driver's seat when negotiating during the industry's annual July 4th sales push.

With prices continuing to climb and competition from millions of leased cars returning to the market this year, slowing demand for new autos has resulted in dealerships eager to unload inventory.

"Dealers have too many vehicles on their lots compared to how many they're selling," said Ivan Drury, senior manager of industry analysis at Edmunds.com.

Source: Patrick T. Fallon | Bloomberg | Getty Images

The average price of a new car is now $36,902, compared with $32,113 in June 2014, according to Edmunds data. The average monthly payment is $562, compared with $476 five years ago.

And, consumers are stretching out the length of auto loans to afford new-car purchases: As of June, the average loan length was closing in on 70 months — two months shy of six years.

About 35% of new cars are priced below $30,000, compared with 54% in 2012, according to a recent Cox Automotive report. Separate data from Edmunds show that the price of a 3-year-old used car — the age of most autos coming off leases — averages $13,535 less than a new car. In 2010, the difference was less than $9,000.

At the same time, however, consumers have shifted their preference to pricier SUVs and pickup trucks and away from lower-cost sedans and smaller cars. Improved technology and safety features add to the price, as well.

For shoppers, the used-car competition and slowing consumer demand means manufacturers are boosting incentives for their sales events surrounding Independence Day.

For example, the 2019 Hyundai Sante Fe, with a starting sticker price of $25,750, comes with a $2,500 cash back on certain styles or 0% financing for up to 60 months. The Volkswagen 2019 Jetta comes with a 1.9% interest rate for 60 months. Both deals, which expire July 8, require that you use the manufacturer's financing arm. Those types of deals typically are only available to consumers with very good or excellent credit.

VIDEO3:5503:55
Ford's second quarter US auto sales is down 4.1 percent

While interest rates on auto loans remain elevated compared with five years ago, the average rate has edged down over the last couple of months to 6% as the Federal Reserve has left alone a key rate that affects consumer debt and loans.

In June, more car shoppers were able to get interest rates ranging from 2% to 5% than in any month so far this year, according to Edmunds.

Consumers should not focus solely on the price of the car they're considering, Drury said.

"When you're looking at how much the car will cost, be sure to consider the financing," Drury said. "If a slightly higher selling price comes with a better interest rate, you might come out ahead over the life of the loan."

More from Personal Finance:
If you see this while shopping for a new home, run
Tying the knot? Some couples may face a 'marriage tax penalty'
Here's what super savers who plan to retire early do differently

It's also important to compare incentives at the dealership. On top of manufacturer discounts, an individual dealer might give you a better deal on a trade-in, or a lower interest rate, or even extras like free oil changes.

"It takes a little more legwork to compare deals among dealerships, but you're going to spend a ton of money so you might as well do the research," Drury said.

If you do end up looking at a car that comes with a manufacturer's incentive, negotiations with a dealership should be based on the reduced price, said Kelsey Mays, senior editor of Cars.com.

"That should be your starting point," Mays said. "That incentive is a factory-to-consumer discount when it's advertised by the manufacturer, so it's not costing the dealership anything."

Here are some other tips to help smooth the car-buying process.

Get preapproved financing

Unless paying with cash, you should get preapproved for a loan from a bank or credit union. While there's no obligation to use the preapproval, you'll at least be armed with a comparison when the dealership offers its loan terms.

Generally speaking, the better your credit score, the better terms you'll get.

Collect key documents

Make sure you're armed with all the documents you'll need to complete a sale: your driver's license, the title and registration for your existing car (if you're trading it in), and proof of insurance.

If you are making a down payment, call the dealership ahead of time to find out what forms of payment are accepted.

Beware the add-ons

Once you get to the nitty-gritty of a deal, you might be offered an optional feature or service contract, such as an extended warranty.

Make sure you do the math before you sign on the dotted line — not only to understand the extra monthly cost, but also to know what you would pay over the life of the loan for the add-on.

Subscribe to CNBC on YouTube.

(CNBC's John Schoen contributed to this report.)