Personal Finance Advice: Buying a Car

We all know – or should know – that buying a car involves a lot more than finding a make and model that suits your personal tastes. While it’s true that you don’t want to buy a car that you personally find to be hideous, there is so much more to buying the right car than choosing one that makes you look good and matches your favorite nail polish. The more overall finance and less fashion you can consider while buying a car, the better.

The most important thing to remember when buying a car is this: Be Prepared. Buying a car should not be an impulse buy.

Wrong: “Look at that cute car! Maybe I should go buy it.”

Right: “Look, there is that car that I spent a lot of time researching and have secured financing for. I’m ready to buy it now.”

If you wander onto a car lot without having taken the time to research your various financing choices and car options the salespeople are going to eat you alive. They know exactly how to maneuver a casual conversation with a potential customer into test drive which evolves into a credit check and a sale. Before you know what happened you’re driving off the lot with a new car. You can avoid this situation by doing a few things:

Don’t visit the lot until you’re ready to buy. You can get all the pricing information you need online or with a quick phone call to the dealership. If you do walk onto a lot without doing any research, don’t take your wallet with you. You can’t buy a car if you don’t have your identification with you.

Look beyond car lots. There is no rule that says you have to buy a car from a dealership. You can get a great deal buying from another individual, but be sure you have the car inspected by a mechanic before you agree to the purchase.

Get financing ahead of time. Secure financing through a bank or credit union before you buy the car. This gives you negotiating power while also ensuring you get the best interest rate possible. You should spend some time researching the best rate available to you. If the dealership can offer you a better rate then you can cancel the loan with the other financial institution.

Know how much the car is worth. The price a car is being sold for is not necessarily the amount of money the car is actually worth. Find out the actual value of a car before you spend your hard earned money on it.

Negotiate. You have the upper hand when you go to buy a car. You can tell the salesperson how much money you are willing to part with and demand all sorts of extras. If you get everything you want at the price you want to pay, then it’s a testament to your great negotiation skills.

Remember that you also have to take the time to research the various cars available within your price range. Find out which cars have the options you want and the safety features you need. Don’t forget to find a car with great gas mileage so you can continue to save money long after you’ve bought the car.

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  1. sunshinestyles says

    I used last month to buy a new Toyota, which I hope to keep at least 10 years.  It was perfect because I didn’t have to negotiate or sit at the dealership all day, they did it all for me, even arranged the financing.  All I had to do was go to the dealer and pick it up, it took only 15 minutes at the dealership, and that’s way better than the 9 hours it took last time I bought one the traditional way.

  2. abk_8011 says

    Having just spent 3 grueling weeks researching and finally buying a car (last week!), I agree with all the advice posted. I just wanted to add a few things I learned along the way:

    I can’t stress enough the importance of securing financing BEFORE you go to a dealership. This is crucial because you can try to get a better deal with the dealership financing (dealerships work with many many banks). AND, when negotiating the car’s cost, salespeople like to use monthly payments rather than the full cost of the car. One of the first questions you are asked is how much you want to pay per month. So after finding a car you like, the salespeople will say, ‘if we can get this to XXX per month, will you buy the car’. This does not take into account interest rates or length of the financing term, so it’s not an efficient way of getting the cost down. If you come in with financing in hand, you can divert all that nonsense and talk bottom line price.
    Secondly, never buy cars on the weekend. Banks are closed on weekends, so if a dealer says they can get you a better interest rate with one of their banks, they are just guessing and won’t have an absolute approval until the next business day. It happens sometimes that they let you drive off in a car and find out days later that the bank did NOT approve a loan at the specified rate and you are back to square one.
    Thirdly, money experts advise against financing for longer than 48 months. However, if you feel hesitant about the higher payments and need to do a longer term, any money you pay over the monthly amount goes directly to principle. A good majority of your first bunch of payments go to pay the interest, so paying above and beyond in the beginning pays off in the end.

    Expect to spend a LOT of time in dealerships. Again, if you have secured financing in advance (credit unions have the best rates) you can circumvent a lot of the nonsense that salespeople put you through.

    Lastly, check your credit report before you do anything. Make sure everything is correct, try to have credit cards at only 5% utilization to maximize your score and be aware that some dealers use what is called an ‘auto enhanced score’ that calculates things differently.

  3. mubba says

    Definitely try to get a car that will hold it’s resale value. A car is probably the worst invesment you will ever make, the value goes down as soon as you leave the lot. But some keep more value than others. I’m also a firm believer in NOT getting a brand new car every few years, although some insist that it’s a good idea because your trade=in value stays high.

  4. mountaingirl says

    Using an auto broker can save thousands. When I needed a car, I asked a broker to find me a late model (1 – 2 years old) Subaru Forester. It took a few months but he found one that was 6 months old and had 7,000 miles – nearly new and still under warranty. In most cases the savings you gain are far more than the broker’s commission but be sure to ask.

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