There is a bitter-sweetness to buying a new vehicle. On one hand, you’re excited to find your next dream car. On the other side, you have to prepare for a round of haggling with dealerships. Recently, I purchased my fourth vehicle. During the process, I decided to take some notes and share. Below, are 10 Car Buying Tips to help you the next time you are in the market for your new joy ride.
*These tips are in no particular order and may apply when shopping for new or used cars.
Car Buying Tip #1.
A Pre-Approval Gives You Control
Most people can’t afford to pay cash for a car. I mean, I don’t have ten to fifteen thousand dollars laying around just to spend on a car. And, I’m sure I’m not a lone wolf in that category.
Since most of us can’t pay cash for a car up front, we finance, or in other words, we take out a loan.
Traditionally, people would take the loan out with the dealership and make payments to the dealership. Well, I said traditionally, but, people still do that a lot now, too.
A better option, however, would be to get a pre-approved loan from your bank or from another lender that isn’t the dealership.
By getting a pre-approved loan before going to the dealership, you are able to have your financing out of the way before choosing your vehicle. Not only will your options be more open, but you won’t have to haggle with the dealer on things like your monthly payments.
In many cases, the dealership may try and get you a better offer than your bank’s offer. However, if they can’t get you a better offer, you still have a secured payment plan with your bank.
You can have the confidence of knowing the money stuff is already sorted out and the dealer’s job at that point is to find you the vehicle you want.
Car Buying Tip #2.
Do Your Own Research
Have an idea of what you are looking to buy, before going to the dealership. Research the vehicle you are interested in and research it’s value.
Kelly Blue Book and Edmunds are two good sites to find pricing, reviews and features on any car, year, make and/or model. An auto-salesman should not be your main source for information on the vehicle you want.
Also, research the dealership you plan to visit. A quick google search will provide you with some very useful reviews.
Read through the reviews to get an idea of how that dealership does business.
Keep in mind though, most people only write reviews when they have something bad to say, so don’t take every review at face value.
Instead, look for patterns and common complaints. If more than one or two people are making the same complaint, its probably valid.
Car Buying Tip #3.
Do Not Stretch Your Payments Out As Far As Possible
When you take out an auto loan, you will be asked to choose how many months you want them to split the payments into.
The most common terms are 36 months (3 years), 48 months (4 years) and 60 months (5 years). Some dealers will even try to offer a 72 month pay back (6 years).
Anything over 60 months is doing too much, 36 months is preferable.
It should not take you more than five years to pay off a vehicle and if it does, you honestly can’t afford the vehicle, so you should choose a different one.
No matter what the lender tries to tell you, the longer it takes you to pay back the loan, the more money you will pay overall.
You will pay more money in interest and you will likely become upside down on the loan, meaning, you will eventually owe more on the car than what the car is worth.
Car Buying Tip #4.
Know Your Local Auto Advertising Laws
In some states, it is against the law to advertise a car price, then tack on additional fees once the buyer gets ready to buy.
A common fee that falls in this category are “Dealership Doc Fees.” Yes, these fees are legal and valid, however, some states, like Georgia, require dealerships to include such fees in the advertised price.
For example: Say a dealer wants to sell a car for $10,000. They want to charge a dealer doc fee of $500. When they list the car for sale, the advertised price should be $10,500. Listing the vehicle for $10,000 and having he buyer come in and be charged an additional $500, is illegal in some areas.
This does not apply for every state, you have to check your state consumer laws to figure out how this works in your area.
But, definitely know before going into the dealership, otherwise, you could end up paying extra money for no reason.
Car Buying Tip #5.
Know Your Trade In Value
FYI – the amount you still owe is not necessarily the same amount that the car is worth. You could owe more or less than the actual cash value of the car.
Be aware: Trade-in offers vary depending on how much the dealer is interested in your vehicle. If they already have plenty of cars like yours on their lot, they may not give you the best offer for your trade in because they don’t really need your car. However, if they are in need of a vehicle like yours, they may give you what your car is actually worth.
Get multiple appraisals of your vehicle, a lot of dealerships will appraise your car for free with no obligation to buy from them.
Car Buying Tip #6.
Test Drive The Car
Obviously you should take a car for a good spin before you buy it, but don’t be so quick to turn the music up and hit the highway.
When you’re ready to test drive a vehicle, be sure to inspect both the inside and the outside for damages.
When starting the ignition for the first time, take a moment to listen to the sound of the car. Any clanking or other weird noises are red flags of needed repairs.
Also, check the dashboard to see if any of the service lights come on. Again, signs of needed maintenance.
It is also important to know that you do not have to take the pre-planned route the dealer wants you to take. Don’t be afraid to route your own test drive, being sure to include roads where you can pick up good speed to see how the car really rides.
If you have any questions or concerns while driving, do not be afraid to speak up and if you want something repaired first, demand it be fixed before purchasing.
Car Buying Tip #7.
Do Not Allow the Dealership to Pull Your Credit Until After You Are Satisfied with the Deal
You may or may not know, but every time your credit report is pulled, it affects your credit score, negatively.
The more you make attempts to get a loan or apply for credit, the more your score will decrease. Only allow a dealership to pull your credit after you’re certain you want their car and it’s within your budget.
If a dealer tries to pull your credit up front, let them know that you’re only willing to authorize the pull after you have negotiated all the details and specifics.
FYI – you have to sign a form giving them permission to pull your credit. Don’t be pressured to sign the form before you get the deal you want.
Negotiate overall price and trade-in offer, first. Interest rates will be discussed once your credit has been pulled.
Pull your credit report and review it for any errors. Double check your credit score, it will determine the interest rate on the loan, or in other words, the amount of extra, unnecessary money you will pay back on top of the loan.
Car Buying Tip #8.
Do Not Get Distracted by Monthly Payments
Monthly payments are the bread and butter for auto salesmen. Scams creep up when talk of monthly payments begin.
Salesmen will ask what you’re looking for in terms of monthly payments, then play around with the numbers until they come up with a formula that matches the amount you want to pay.
Here’s the thing, your monthly payment isn’t really what matters.
The numbers you should be focusing on are the overall total of the loan (interest included) and the amount of months you agree to pay it back in. Then, be concerned with monthly payments.
Car Buying Tip #9.
Shop in October
October is considerably the best month of the year to shop for a car. Notice, I did not say income tax season. I said October. That’s way, way, after income tax season.
October is when the next years’ car models start rolling out. Dealerships are pressed to free up space on their lots, so prices drop on older models.
Incentives and rebates for the new models come out during this time too, urging people to go out and buy.
Take advantage of October deals, it can have you thousands of dollars.
Car Buying Tip #10.
Do Not Pay for Add-Ons
Do not work add-ons into your auto loan. Dealership extended warranties, paint defect protection or a year of interior cleaning are all examples of add-ons. Just say no. Especially for new vehicles. New vehicles come with a 3 year minimum factory warranty.
Now, I’m not saying you should completely disregard a warranty. Warranties should be considered for used vehicles.
If the dealership warranty seems good. Do some research and purchase it, if it checks out.
In the event you do decide to purchase additional add-ons, do so out of pocket. Don’t finance these expenses. You will end up paying interest on them. That is a complete waste of money.
So there you have it, folks! 10 new car buying tips that will have you haggling out the best deals in no time. Happy Shopping!