The Budget Fashionista

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.

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.

I used carsdirect.com 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.

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.