Pana-qaru ‘uru ‘apagharu “Money Talks” – Car buying

Photo Credit: McKayla Lee | SU Drum


Summer seems to be when we all think about getting a new car. With that in mind, I thought this would be an opportune time to remind you of some do’s and don’ts when it comes to car buying. US News & World Report and NerdWallet offer the following suggestions to help make your car buying experience as pain free as can be:

1) Know Your Budget

Before you decide on your next car, it’s important to think about your monthly budget, and how owning a car will fit into it. You’ll want to total all your current monthly expenses, including utilities, insurance, food, clothing, credit card payments, rent or mortgage payments, and other monthly obligations. Then add the monthly costs of having a car, including auto insurance, fuel, parking, and maintenance.

Only when you have a clear picture of your monthly finances can you think about how much car, truck, or SUV you can afford. Though car buying based on a monthly payment alone can cost you in the long run (as we’ll talk about in a moment), it is important not to overextend your monthly budget.

2) Find the Right Vehicle

Once you have an idea of your budget, you can look for vehicles that fit your needs and lifestyle. Consider how many people you must carry, plus how much room you need for everyone’s stuff. Think about where you drive, the road conditions, and how much you travel. If you spend a lot of time on long road trips, you might favor a roomy vehicle with excellent gas mileage over a subcompact that’s easy to park in the city. SUVs and crossovers are hot right now, but they come with higher price tags than cars and are typically more expensive to fuel, maintain, and insure.

Don’t just look at where you are today – think about your car needs a few years in the future. Are kids on the way, will you need something that can carry aging parents, or is that two-seat sports car roomy enough? If you’re not sure what the future might bring, a short-term lease might be a better idea than buying a car.

Consider what you like and don’t like about your current car. If you want more power, for example, you can trade fuel economy for a higher horsepower rating. The level of high-tech safety features has changed dramatically in the last few years, so you’ll want to learn what’s available before you choose your next car.

3) Learn the Language

It’s easy to get lost in the language of car buying and auto loans. The auto industry comes with a vocabulary of its own, and its quickly changing as new technologies come to the forefront. Making it even more challenging are automakers who use different names to talk about the same systems.

4) Know the Car-Buying Process

Car-buying is one of the last arenas of free-wheeling price negotiation. While that can be intimidating to many buyers, you can level the playing field by learning about how to buy a car, how cars are priced, and how to negotiate a great deal. Online tools have given buyers more information than ever before. That knowledge can be turned into confidence when you’re discussing a car deal.

Understanding the car-buying process will also help you identify any tricks or tactics a salesperson is trying to use to get you into the deal they want you to agree to. You’ll know when to push back and when to walk away.

5) Buy a Car Before You Need a Car

A common question is “When should I buy a car?” The simplest answer is that you should buy a car before you need to buy a car. If you drive your current vehicle until something fails or it leaves you stranded, not only will you have a vehicle with limited trade-in value, but you’ll also have to buy a car without the time to properly research your purchase and financing.

Exploring user forums for the model of vehicle you drive can show you when others are facing major component failures. If you’re nearing one of those mileage milestones and are considering getting a new car, you’ll probably want to buy sooner than later.

6) Don’t Buy Too Soon

You can also buy a new car too soon. Unless you have paid off your current car’s financing or can pay off your remaining balance with cash on hand, you should not buy a new car. While many dealers will offer to pay off your current loan, what’s really happening is your existing loan balance is just added to the financing on your new car.

You’ll be paying for two cars at the same time, though you’ll only own one of them. You will also immediately be upside-down on your new loan, putting you in financial jeopardy if something were to happen to your new car.

A better idea is to wait to buy until your current loan is paid off and you save enough to put a substantial down payment on your next new or used car.

7) Know Your Credit Score

Before you start applying for financing, it’s a good tip to learn your credit score. There are a few advantages to doing so. First, it will give you time to correct any incorrect information on the credit reports behind the score. Second, it will allow you to shop for loans with a better idea of the rates you qualify for.

There are many online sources of free credit scores. Many credit cards offer to tell you your scores as a perk of having the card, while other sites will provide a score in exchange for some personal information. Be cautious of sites that require you to sign up for credit monitoring services or other products before you get to see your score.

8) Get a Preapproved Loan

One of the most important tips we can offer is to get a pre-approved auto loan before you get anywhere near an auto dealership. By applying to at least one local bank, credit union, online bank, or online lender, you can get an offer that a dealer will have to meet or beat to get your business. Without an offer in hand, the seller will have no incentive to cut you a deal.

Today’s dealerships make a significant amount of their profit by acting as intermediaries between lenders and buyers. They mark up financing costs from outside lenders and offer it to buyers as part of an overall car-buying deal. In many states, they are not required to disclose the rate that the lender offered before their markup.

9) Avoid Long Loans

As cars, trucks, and SUVs have become more expensive, the length of auto loans has grown longer. It’s easy to find lenders who will give buyers loans lasting six or more years, but it’s not a good idea to have one lasting that long. You’ll typically pay a higher interest rate and a significantly higher amount of total interest over the life of the loan. The longer the loan, the more likely you will owe more on the car than it is worth. You’ll also have a greater chance of having costly out-of-warranty repairs while you are still making monthly car payments.

If you are getting your financing at the dealership, it is important to remember their primary focus is selling you the car. Using tricks like getting you into car loans that are way too long is just a way to sell more cars.

10) Shop at the Right Time

Visiting a dealer at certain times can be better than others. Ignore the advice some will give you about going right before closing time – it just doesn’t work. Instead, you want to shop just before the end of a month, quarter, or at year-end. Dealers and salespeople have goals and are likely to give you a better deal if they need just a few more sales to hit their next bonus.

Shopping on the weekend is fine if you’re just browsing or have a lot of time to purchase a car. Dealerships are usually at their busiest, and if you don’t look like a serious buyer they’ll probably leave you alone. If you do decide to buy, be prepared to wait a long time to negotiate a price, get a test drive, have your trade-in appraised, and get through the finance office.

Weekdays and evenings are much quieter at dealerships, so you may be able to get in and out in less time.

11) It Is Business, Not Personal

Buying a new car can be an emotional roller-coaster. Remembering that car-buying is a business transaction is critical to getting a good deal and not getting stressed out. Your sole job is to get the car you want at a good price. The salesperson’s job is to maximize the amount of profit they can get from the deal. Both approaches are OK if everyone involved acts professionally, ethically, and legally.

You’ll probably come into the showroom with an amount you want to pay. The professional salesperson is trained to move you incrementally from the amount you want to pay to the price they want to get out of the transaction. The deal you’ll likely end up with will be somewhere in the middle, which is how price negotiations are supposed to work. Don’t be disappointed when you must pay a bit more than you expected to pay, but don’t feel you have to give in to everything the dealer asks for.

12) Don’t Become Emotionally Attached

It’s easy to fall in love with a car, but if you want to get a great deal it is essential to set your feelings aside and focus on the numbers. That’s more easily said than done, however. Just remember, unless the vehicle is in extreme demand, it is merely a commodity that can be purchased at any dealer, or, in the case of a used car, from a dealer or private-party seller.

In other words, the Honda CR-V you see at on one side of town is the same Honda CR-V you’ll find at a dealership on the other side of town. The way dealers trade stock between each other, you can get prices from more than one on the same exact car.

Many private sellers will think that their vehicles are more valuable than they are because they have emotional attachments to their vehicle. If they won’t consider a reasonable offer, leave your name and number. After a few more prospective buyers walk away due to the high price, your proposal may become more appealing to them.

13) Look for Deals

When a car is nearing the end of its product cycle or isn’t selling well, automakers offer special incentives to encourage sales. These offers usually include cash back, interest rates that are lower than you’ll find at outside lenders, or a combination of both. Taking advantage of a car deal can save buyers thousands of dollars off MSRP up front or thousands of dollars off interest payments during the term of their car loan.

14) Look for Previous Model Years

It is common for automakers to make very few changes between major model redesigns. If you are looking at a vehicle that’s seen few changes since the last model year, you can potentially save considerable money by purchasing the previous year’s model. Automakers frequently offer great car deals on those last few cars on dealer lots, so be sure to explore our car deals page before you head for the dealership.

15) Consider Certified Pre-Owned Cars

New vehicles can be expensive, but used cars come with unknown histories and often no warranty coverage. There’s a third option, however, called a Certified Pre-Owned (CPO) car. They’re relatively new, low-mileage vehicles that have been inspected and certified by dealers representing the automaker who built them. They come with warranty coverage and other extras you wouldn’t get if you bought a non-certified used car. They typically cost more than other used cars, but far less than a new model. If you’re willing to give up the latest and greatest features, buying a CPO vehicle can save you a tremendous amount of money.

16) Do Your Due Diligence on a Used Car

Buyers who opt for a used car that is not certified have a couple of extra steps to take before they make an offer. First, you’ll want to get a vehicle history report from a site such as Carfax or AutoCheck. It will tell you about a vehicle’s accident history, title status, repair records, and more. If you see red flags on the vehicle history report, it should either put the brakes on buying that car or point out issues that require further investigation by a mechanic before you think about buying the car.

You will also want to get a thorough pre-purchase inspection by an independent mechanic. They should do a general examination, look for issues that are common to the vehicle, and explore areas that are identified in the vehicle history report, such as the repair of crash damage. If the seller will not make the vehicle available for a pre-purchase inspection by a mechanic of your choosing, you should not buy the car.

17) Test Drive the Right Way

A test drive is an essential part of any new or used car purchase, though you’ll want to do it right to get the most benefit. A good test drive starts long before you leave the dealer’s lot. The first thing you want to do is make sure you can get comfortable in the vehicle and can see everything you need to see. If the car isn’t comfortable on the dealer’s lot, it probably won’t be any more comfortable three months after you buy it.

While most dealers have pre-planned test-drive routes, you’ll want to find opportunities to drive the types of roads you travel daily. It is a good idea to drive the specific car you’re looking to buy, so you can identify quality issues, strange noises, or drivability problems. Not every new car comes out of the factory in perfect condition. Problems with used vehicles should be noted so your mechanic can investigate them during the pre-purchase inspection.

It is important to bring your kid’s car seats to ensure that they will fit where you need them to and are easy to install. If you’re planning on carrying large items regularly, bring them along to make sure they fit. Examples include dog crates, musical instruments, and sports equipment.

We have now gotten you to the point where you are ready to start negotiating for your new car. Next time, we will explore common mistakes and some tricks to help you get the car you want at the right price for you.

As always, please let me know if you have any questions or suggestions for future columns.


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