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My husband and I will be going to look at cars this weekend and I was wondering what are some useful tips for people new to buying a car?
I have bought a car at a dealership before when I was in my late teens but I feel like I didn't really do a great job during that experience. I went alone and was young and impatient so I ended up paying way more than I should have. I do NOT want that to happen again...
Without getting into too much personal detail... We are rebuilding our credit currently and have already been approved for a car loan at a "high APR" (I'm still waiting on them to get back to me on that, I told them I'm not going to their dealership until I know what a "high APR" is exactly) and a $1500 down payment for a 72 month term. We plan to shop around to get the best deal though and it's our intention at this point to purchase the most car we can get within our monthly budget and pay it off within 2 years (so earlier than the loan term).
My husband and I will be going to look at cars this weekend and I was wondering what are some useful tips for people new to buying a car?
I have bought a car at a dealership before when I was in my late teens but I feel like I didn't really do a great job during that experience. I went alone and was young and impatient so I ended up paying way more than I should have. I do NOT want that to happen again...
Without getting into too much personal detail... We are rebuilding our credit currently and have already been approved for a car loan at a "high APR" (I'm still waiting on them to get back to me on that, I told them I'm not going to their dealership until I know what a "high APR" is exactly) and a $1500 down payment for a 72 month term. We plan to shop around to get the best deal though and it's our intention at this point to purchase the most car we can get within our monthly budget and pay it off within 2 years (so earlier than the loan term).
First step would be to go online to bankrate.com or another online site (google or Bing it) and apply to see what your rate would be from them.
If it comes back lower than the dealer's high APR then tell them to match it, or you're going with the online loan app.
We could write books about this process, but my top tips:
1 - YOU control the money. If you don't like, don't agree, or don't understand what is happening, get up and walk out. Unless you are buying something very rare, that car or one like it will be available tomorrow at the same or different dealer. Don't get pressured into anything and don't give a license, credit car, or anything else that prevents you from getting up and walking out.
2 - Do not pay for any dealer extras. Rust proofing, paint coating, window etching, pin stripping, mud guards, whatever junk they want to sell. If it is already on the car, give them a choice of giving them to you for free, or removing them, but don't pay.
3 - As noted, research before you go, understand the interest rates available to you, and what a fair price for the car is.
Be careful. Dealers will try to take advantage of you. Do not buy any add ons or extras. Look up the price online as suggested before going to the dealer and do not let them give you a lot of malarkey about why their price is higher. You are generally better off financing outside the dealership. They make a big profit on financing. Do not worry about walking away. If they say they will only offer you a special price if you buy it right now - they are scamming you. Leave. Whatever they are offering you either they or some other dealer will offer it tomorrow.
In fact, it is a good practice to NEVER buy on the same day you first visit the dealership and look at the vehicle.
Research not only the price, but options and everything else you can learn about the vehicles you are considering. Be sure to test drive the vehicle and run it at highway speeds. Many people buy vechiles with CVT transmissions, double clutch automatics, tiny efficient engines, and then decide they hate them. It is too late.
Read the invoice carefully. Make certain you understand and agree with everything that is on there. Research to find out what are valid added charges (tax, license and destination fees) and what are malarkey. Even if you are excited about driving home in a new car, get up and wlak out if they add on things you did not agree to.
Also check with your local credit unions to see if you can get a better rate. I've found they are much more competitive on their rates. Years ago, when our credit was not so great, we got about 11% from a dealer's financing department. We refinanced it a few months later with a credit union for about 6%. Then you can hopefully bypass all the dealer financing shenanigans.
And do research your car online once you pick out what you want. If buying used, look up the values on KBB, Edmunds, NADA guides, etc. and see what they are running. I would shoot for a sales price around the private party value. If the cars are listed online, often that price is close to their lowest price they want to take, but there is always some room. If looking new, I've used either my credit union to get a pre-negotiated price, or used TrueCar to get a baseline price. Our last new car I got for about 9% off sticker price which was a few hundred less than the best price on TrueCar, on a new design vehicle that is in high demand. Many dealers were not really negotiating on them up front.
Always go over and recalculate the numbers yourself. Know about your local laws on sales tax and licensing/inspection/ documentation fees and know how much should be charged for each. In TX for example, if you trade in a car, you only pay sales tax on the difference in values, not the new car sales price. We traded in a $12K vehicle on a $30K one and paid tax on $18K. The dealer first calculated tax on the full $30K until I raised my voice and called them on it. Makes me wonder what they would have done if I had not noticed it.
Another thing I just looked up based on your location in Columbus, if you don't mind driving to Cleveland or Pittsburg, you can experience a totally hassle free deal from http://www.carprousa.com/ This is a radio show where they answer new car questions, do car reviews, and have certified dealer members that are held to the highest ethical standards. Their prices are preset and at a "supplier" or "credit union member" rate which is less than MSRP to begin with. I've never used them, but just about everyone that calls in has a very good experience. Might be worth the drive to save the hassle. Often they have the deal totally wrapped up and people are out of the dealer in an hour or so, or go above and beyond to get a deal done. Just something else to look at.
The two previous were SPOT ON!
Also, Know that the "Invoice Price" has become just as a factory construct as "Sticker", because the dealers and factory build up the cost above Invoice with obvious and covert extras you may or may not actually have to pay.
It really is worth it to spend 15-20 man hours doing the research:
Which brand, then which model, then which major options, then the Sticker (publicly distributed "retail price"), then the Invoice (much harder to find "wholesale price"), factory and the Dealer Incentives (aka "Trunk money", or factory rebates that go to the dealer unless you discover them and insist they be applied to your bottom line), and finally after all the above, then you
Research what the above car is selling for in YOUR MARKET.
FINALLY, take the selling prices above, subtract out the Invoice Price for the car and Invoice price for your options, and subtract the dealer extra charges that are proper, such as tax & tag, (aka "documentation"), delivery, and such, while NOT subtracting dealer non-proper, rip-off charges like "prep", floor mats, gas fill up, and such.
The number you are left with is the actual profit the dealer would get. (A few years ago, for my hot, sporty car, I found anywhere from $200-800 profit seemed to be common and I felt, fair, but I saw people paying over $4,000 profit for my car).
From that, you can determine if it's a fair profit, based on the availability and local selling conditions.
Also remember. There are no laws precluding dealers from lying to your face. It's all about what's on paper. READ the fine print, do the math.
I did all the above, and I spent about 40 man hours over a week doing research and such before I got a car, options, price, and found a dealer who would find that car to sell me, with all the math visible.
And I saved $1,400 from what was commonly sold. That's $35/hour savings, to get a great deal on the exact specific car I wanted. Well Worth the work.
However, if you just can't spend that kind of time, here's one more tip.
Join a Credit Union, and use their financing. Since they are - by definition - non-profit, user-owned, they will give the best financing you can find. And some have car pricing services.
Just know that there are more than 1 dealer and don't put a time limit as it could take weeks to get the best deal. Once you have selected the model/make/trim of the car, look up all the dealers for that make within 50 mile radius. Go to the nearest one for a test drive to make sure that is the car you want. Get initial figures while you are there and have them put it on paper for an OUT THE DOOR price and have them list out any options/accessories. Once you have this price, email a few of the other dealers you have researched and have them beat it. With the lowest price you have, now email the rest and have them beat it. If none of them comes up with a figure you like, expand your radius to 75miles and email those dealers and so forth. You can even go back to the first dealer and ask if they can beat the lowest price you have.
Don't even bother discussing finance rates with the dealer. Go to your credit union or your bank so that you know exactly where you stand as far as credit is concerned and have the dealer beat it.
Thank you for the advice, everyone. We have very poor credit so we are having trouble finding people who will give us a chance. We have bought and paid in full two cars from a buy here pay here back when our credit was so bad we couldn't even get an apartment (let alone a car) so we can definitely afford it but we have to find a bank who agrees.
We will look into credit unions, the car I financed in my teens was through one and I got a much better APR through them.
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