Buying a car is an expensive purchase for the American family, second only to buying a home. It makes up 13% of the average American’s yearly spending, according to the United States Department of Labor. With so much money on the line, buying a car can be a stressful experience. Here’s how to buy a car so you get the right price without all the fuss:
Don’t Just Walk into the Dealership
Buying a car is a big deal. That’s why it’s important to never just walk into a dealership as the first step in buying a car. Some car salespeople are highly trained (and somewhat obnoxious) individuals who are depending on you to buy a car today so they can make a commission. I once had a boss that was a Financial Planner and usually very responsible with his money, and he went to the dealership for an oil change and came back with a brand new car. If he can be persuaded, you probably could be too.
Instead, do your research to create a short list of cars. Then, try a place like CarMax first to try a few different makes and models to see what you like. They are usually much friendlier and way less salesy than a traditional dealership. You can also try to get in touch with the Internet Manager to specifically drive a few cars. Internet managers are a lot less dependent on people walking through the door and are less likely to press for a decision.
Consider New vs. Used
The first step in creating your short list of cars to drive is to decide whether or not you’d like to look at new or used cars.
If you buy a new car, you have a lot of information about the car. You’ll know the condition of the car, the car’s price, and what other people are paying for it.. When you buy a used car (which can definitely be a money saver), you can still get some information about the fair price, but you may not completely know the condition of the car.
If you buy a used pre-certified car or from a used car dealership like CarMax, the car might have an included warranty. This can be a great way to save a little in the depreciation of the car while still getting something that’s in good shape.
As a whole, Americans only own their cars for about 5 years, so most of the cost of the car is the depreciation of the car rather than the on-going maintenance costs. Buying a used car that’s a few years old means that you save the first few years of depreciation, where it goes down in value the most, but you still know a lot about the condition of the car. But If slightly used cars are practically the same price as new cars, this might not be worth it.
When you buy a used car from an individual, you won’t have any kind of protection once you transfer the title. You can get really awesome deals by buying a used car directly from someone, but just make sure that you have a mechanic on call that can give it a very thorough inspection to determine the condition before you buy it.
A mechanic can usually tell you if the car has been in an accident as well. You can get a CarFax to see a report if the car has been in any accidents claimed on insurance. But if the owner backed into a wall and fixed it themselves, the accident won’t appear on a CarFax. It’s always good to have the mechanic give the car a second look for accident damage while they are looking for other problems in the car.
Do Your Research to Get the Right Car
The easiest way to make sure you stress less and spend less money on a car is to make sure you discuss costs and buy the right car for your family’s needs. Look online through places like Consumer Reports to find a short list of cars that offer the features you need. You can then check reliability and safety rating to make sure that you can get a long lasting car that fits all your needs. If you buy a car with known maintenance issues, you’ll pay a lot more in repairs and spend a lot more time keeping the car in good shape. Buying a more reliable car for about the same price will save you a lot of time, hassle, and money.
Do Your Price Research
Once you’ve narrowed down your list of potential cars, it’s time to research the price so you know what to pay for the car. You can determine the price range on sites like Edmunds, Kelly Blue Book, and NADA Guides. Look to see if the car is sold at several dealerships. If you like all the cars, this can be a great leg up when negotiating for a good price.
Print off a cheat sheet of cars you are interested in with their blue book value, invoice price, and MSRP price. You can go into the dealership knowing you’re prepared to pay the right price once you find the right car.
If you want to pay a good price on a car, you’ll need to brush up on your negotiating skills. If you know you aren’t good at this, take a friend who is! One conversation can save you hundreds or thousands of dollars, so it’s worth the trouble.
If you decide to buy a used car from the owner directly, the negotiation process is easier. If you stay firm on a price (or give very little ground), they’ll probably cave in,
Negotiating with the dealer can be a bit more difficult. They do this all day, every day, and you don’t. A good first try is to email several dealerships to get a price from the internet manager. If you can pit one dealer against another, you can get a good price without every having to set foot in the store.
The dealer might refuse to negotiate by email, so you might have to go in. But if you are armed with your cheat sheet, you can come in prepared. At first, name a price below what you’d like to pay. Then slowly edge up your price at a slower rate than the rate they are lowering the price at.
Stay firm and give little ground! They’ll probably “check with their manager” and make you wait in order to make you uncomfortable so you’ll to stop negotiating and just buy the car. They might even have someone get angry!
Be prepared to walk away. Many times a salesperson will call later to accept your price. But if they meet you at what you’d like to pay, you can accept and buy the car.
Remember, don’t let the dealership suck you into the game of “How much can you pay monthly?” You want to be able to tell someone what car you are interested in, and what you are willing to pay without the fluff!
Also, don’t let the salesperson discuss the value of your trade-in at the same time they are discussing the car price. Negotiate that separately.
Time It Right
If you can wait to buy the car, you can score a great deal. At the end of the sales month, prices are often slashed to great prices to make quotas for the individual salespeople as well as the dealership as a whole. Even better deals can be had if it’s at the end of their sales year.
Use a site like Autolist.com to get price alerts on the car that you want. When you see a car price well below market value, you can jump on it.
It’s Worth the Effort
Buying a car can be a bit of a process. But by doing your research, you can buy the right car at the right price. You’ll save a ton of money with both the purchase price and in maintenance costs, all while getting to drive the car you want.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.