How To Buy A Car (Trust Me – I Used To Sell Them)
We Americans like to buy a car at the dealership in one afternoon, and the dealerships try very hard to make us think that is possible and even smart. But its not. Realize how big a purchase a car is. And it is complicated.
Buying a car is the second-largest purchase most people make after buying a home. When you buy a home, think about all the help you have: you have a broker to help you find the best home for you, and a mortgage broker to help you find the best financing. And an inspector to make sure the house is safe. Sometimes you also have an attorney to make sure the contract is fair, and a title company makes sure the title is clear before you pay for the home. But when you buy a car, there is not one person there to help you. And the dealers want you to THINK you can waltz in to the dealership and buy a car from start to finish in an afternoon and sure, you can, but you will pay much much more if you do it that way. Here are four tips to give you an advantage:
1. Make at least one trip to the dealership JUST to look around and drive the cars. Promise yourself you will not buy that first time, no matter what. Why? So that you can go home and look up information on the internet, including dealer cost, safety ratings, option prices, and any manufacturer to dealer incentives that the dealer has certainly not told you about!
2. Know what you can afford before you visit the dealership to buy! This means talk to your personal banker or credit union officer before going to the dealership. Why? Some dealerships might actually WANT you to sign on for a more expensive car than you can afford so that you will then default on your loan and they will repossess the car.
3. Whenever the finance manager calculates something, insist that he show you the calculation. Why? The easiest place for dealerships to take more money from you is in the monthly payment. It is VERY common for dealers to increase monthly payments by just a few dollars, even $20 per month, over about a five year period is like giving the dealership $500 extra on the spot.
E.G. If you tell the salesman you can afford a payment of $500 per month, he might find a deal for you in which the payment works out to $460 per month. But instead of telling you that, he might tell you that he has great news!! – - that your payment is down to $480. What happens to the $20 difference between the lender’ $460 per month and the $480 the dealer is charging you? It goes right into the dealers pocket, and you will never know it unless you Len how to run the calculation yourself, or at least run it by your banker. How much would a dealership make, taking in an extra $20 per month for five years, on a loan with an interest rate of 3.9%? About $500. It is next to impossible to figure this kind of thing out without a financial calculator, or a friend with a financial calculator. But its worth the trouble!
4. Write down everything you learn about the car, from the internet, magazines, and especially from the salesman. Why? Doing this keeps everybody honest, and literally on the same pageYOUR page! Your salesman will see that you are writing down everything he says, and he will be less inclined to lie, or to try to change information on you later on. This tip is all about staying in control.
Tags: Buy A Car, Buy Car, Buying A Car, Buying A Home, Buying Car, Car Dealership, Cars, Dealer Incentives, Easiest Place, Expensive Car, Finance Manager, How To Buy A Car, Money, Mortgage Broker, Option Prices, Personal Banker, Purchase A Car, Safety Ratings, Title Company, WaltzRelated posts
I had what I thought was an interesting question sent in to me the other day and that is the topic of this article. The question asked was essentially; out of all of the car buying tips, the car deal negotiating tips, and out of all the dos and dont dos when you are car shopping and ultimately buying, what is the single most important area to have under control as the buyer.
I had to preface my answer by saying that in order to get your best deal when buying a car, there are many pieces to the car buying puzzle. They are all individually important because when you put all the buying processes together they make up your deal. And all of these car buying puzzle pieces are what dealerships are all about. They each represent an opportunity to sell you something and therefore make a profit on that sale.
Having said that, this is a great question and you would probably get many different answers. But, since you asked and I have pondered Ill give you my thoughts.
I would have to say financing. You must take the time to do such things as:
Get and understand your credit report.
Shop around for your financing options and ultimately get yourself pre-approved so you will know the amount, the interest rate you qualify for, and the length of your loan.
If you dont get your financing questions answered and in order, you can literally cost yourself thousands of dollars. So, while all of the other aspects of buying a car are indeed important, such as the price of the new car, what you get for your trade, and all of the research that goes into these areas; you can literally give it all back and much more in the dealers finance department.
If I get all my financing lined up ahead of time, why would I even bother with the dealers finance department?
A Good question; and there are a couple of aspects to the answer. First, once you know what you qualify for (a bird in hand), you can then give the dealers finance manager the opportunity to do even better for you. Secondly, even if you have no intention of using the dealer financing option, youll still have to have a seat in the finance office just to sign all the paperwork. Which means the finance person will do their best to sell you their financing package. So being prepared is the best answer.
If you have your financing in hand and know all your numbers ahead of time, youll be able to fend off the monthly payment approach by the car dealers sales person. Buying a car based on monthly payments is good for the dealer; bad for you.
Also, your financing homework becomes even more important if your credit is less than grade A. Be mindful that just the difference in just a couple of percentage points on your interest rate can represent over a thousand dollars to you during the life of your loan. And if your credit score leaves a little to be desired by potential lenders, you will probably see a wider range of qualifying quotes that you get back. So it is even more important that you get your car financing house in order before you head out to the dealership.
Certainly, financing is but one piece of the car buying puzzle. But, its a big piece. And you can rest assured its a big piece (for potential profit) for the dealer. Many people dont realize that this is yet another area at the dealership that you can and should try to negotiate on the road to getting your best car deal.
If you have done your research and homework to give yourself the best possible chance on the front end of the car buying process (new car & trade-in), dont give it all back on the back end of the deal (financing & insurance F&I) by not knowing what your financing numbers and options are.
Tags: Bird In Hand, Buying A Car, Buying Car, Car Buying Tips, Car Deal, Car Shopping, Control, Credit Report, Dos, Finance Department, Finance Manager, Financing Options, Good Question, Interest Rate, Negotiating Tips, New Car, Opportunity, Preface, Puzzle Pieces, Thousands Of Dollars