Car Purchase

Purchasing a car, like any other large purchase, is something you should plan for before getting to the dealership. While there are a lot of emotional decisions, like what color and which style car you prefer, there are some financial decisions you should consider when purchasing a car also. Those include:

• Are you going to finance the car or pay for it in cash?
• If you are financing it, where are you going to get it financed?
• What are their interest rates?
• Should you pay a down payment?
• How much insurance will you need?

Here are some helpful tips when buying a car:

1) Do your Research

You should always do research when buying a car. Buying a car should not be an impulse purchase, but instead a well thought out decision. Know how much that car you are buying is worth. If it a new car you can find out the invoice price of the car, which is the price the dealer paid to the manufacturer, which can help with you negotiations. If you are buying a used car you can use websites like Autotrader.com or Kelley Blue Book to see what other similar cars are selling for.

2) Look into Pre-financing Options

Many people think of financing as an after thought after they have already made their mind up about a car and most are financed at the dealership. Many times dealers have incentives from manufacturers available to give very cheap financing, especially if you have good credit. Sometimes, however, the rates dealers quote are higher than those you can get at a bank or credit union. It is a good idea to shop around for different financing rates prior to purchasing a new car. This can allow you to figure out how much of a car payment you can afford before getting your heart set on a vehicle.

3) Shop Around

Always visit multiple dealerships and even try contacting others by phone or email to get quotes. Dealers are typically independently owned and will compete with each other, even if it is over the same brand vehicle.

4) Negotiate Terms

Always be willing to walk away. Buying a car is all about negotiation. Like buying a house, a car purchase is a very important purchase that you may be paying for the next 3 to 7 years. Make sure before you sign on the line that you are happy with the deal you got. If there is any doubt in your mind, walk away and give yourself time to get comfortable with the deal. Trust me, the dealer will be calling you soon to try to close the deal.

5) Look at both New and Used Cars

As soon as you drive a new car off the lot, it loses a considerable amount of its value, simply because of the fact it is no longer “new”. Buying a new car can come with some practical benefits like a warranty, new parts that are theoretically less likely to break, and of course the emotional aspect of owning something new that no one else has driven before. Used cars on the other hand that are lightly used and well maintained can often provide a similar benefit for a significant discount.

6) Buy Based on Purchase Price, Not Monthly Payments

Car dealers love to dangle low monthly payments out there as a way to entice the less financially savvy buyers into buying their cars. Don’t let the dealers fool you. Those low payments can be tied to a long commitment of payments that often leave you with a balance on your loan if you chose to sell your car before the payments end. Always be sure to negotiate based on the total, bottom line price, not what your monthly payments will be.

7) Utilize the Internet

The saying “The world is getting smaller every day” is not just a saying. With the internet so readily available, you can shop and compare prices on vehicles almost instantaneously at places that would have been otherwise impractical to visit in person. Make sure to use the internet to be informed about prices, reviews on vehicles, and incentives available at other dealers to use as part of your negotiating arsenal.

8) Don’t Mention your Trade In

If you have a vehicle you would like to trade in, make sure you don't mention it to the dealer until after you have negotiated the price of your new vehicle. Dealers love to pay the game of moving money from one hand to the other to make something appear more enticing. They may offer a great deal on your trade in but that money is only coming from the purchase price of your new car, or they may give you a great deal on the new car and then offer you an extremely undervalued price on your trade in, saying something like “Oh, but look at the money you will save on taxes”. Don’t let them fool you.

Also, if you have an old vehicle you are looking to get rid of, consider a private sale. Many times you can get much more for your old vehicle, which easily overcomes the tax benefit of trading it in.

9) Factor in Insurance Costs

Insurance varies greatly from vehicle to vehicle. With the use of the internet, it can be easy to get an immediate quote on the vehicles you are considering so you will have an idea of what your total costs will be.

10) Avoid Impulse Buying

Usually the best tactic when it comes to buying a car is to leave the dealership telling them you need to think more about the deal before signing. They will try to pressure you into signing then with things like “I can’t promise the car will still be here” or “This deal is only good for today”. The cars are not flying off the lot like the dealers like to make you think and the dealer wants to sell the car so they aren’t going to suddenly raise the price on you the next day. Take your time and make sure the vehicle is right for you and that you are getting a good deal.

11) Always Test Drive the Car

Get in the car and take it for a drive. Push the buttons and make sure everything works. If someone is hesitant to let you take a test drive that should be an immediate red flag and you should walk away. Make sure the car is comfortable to you. There are tons of different shapes and sizes of vehicles and some cars will not fit you.

Here are a few things beyond comfort you should look for:

• Idle and shifting: the car should be smooth and quiet at idle and should shift smoothly as you accelerate.
• View: Make sure you have a good field of view. Adjust the mirrors and make sure you do not have any large blind spots.
  
• Controls: Push all the buttons. Make sure they all work. Turn on the AC, turn on the radio, turn on the windshield wipers.
  
• Handling and Braking: Make sure the car responds appropriately when driving. Take the car to an area where you can accelerate, don’t just drive down a neighborhood road. Make sure the brakes work and are smooth.
  

12) Visit a Mechanic When Buying a Used Car

Unnoticed, needed repairs can cost you thousands of dollars. Luckily, if you are buying new, the car is required to come with a warranty. When buying a used car, however, once you sign on the dotted line, it is your problem. Have an experienced mechanic look over the car before you make the deal. If the person selling the car has a problem with that, walk away, because they know something they hoped you would overlook.

13) Buy a Car You Can Afford

If you don’t already have one, you should have a budget before buying a car. That way you know how much you can afford. Make sure to not only include the payments but also insurance, gas costs, maintenance, new tires, etc.. To get started setting up a budget, Townsend Financial Life Management offers an online budgeting tool that can also track and categorize your spending to help you make sure you stay on track.