Are you thinking about buying a car? Buying a car can be one of the largest purchases you’ll ever make, and you’ll probably do it more than once. It’s an important decision, but can be costly if you’re not careful. Before making any final decisions, there are some important things to consider that might wind up saving you a lot of money.
Do Your Research
In our busy, fast-paced lives it’s easy to overlook the research necessary for big purchases. But just like a contract you’re “too busy to read,” not spending enough time looking at the details of your purchase can cost you thosands of dollars.
Before you throw down a pile of cash for a car, you should be well-versed on topics such as fuel economy, safety ratings, consumer reports, recalls, and number of models sold in the past 12 months as compared to other, similar models. Any information you can gather will not only help you pick the right car, but will also give you an advantage when it’s time to negotiate a deal.
Buy Gently Used Cars
With new cars losing 25%-40% of their value in the first two years, most financial experts advise that you let someone else take that hit. Look to buy something 2-5 years old, but make sure the vehicle has documentation and evidence of good treatment. There’s a stigma attached to buying used cars because you might wind up with a “lemon.” But if you do your own research and practice a little patience, you’ll find the car you’re looking for in the right condition, for the right price.
Harness the Power of Cash
The power of cash lies in the power of negotiation. By paying for the car with cash, you might be able to negotiate a deep discount. If a seller is asking for $10,000, but you can give him $8,500 on the spot in cold hard cash, you might have found yourself a deal.
When negotiating there are some key things you should keep in mind: never become emotionally attached to the vehicle in question (and if you do, don’t show it), always maintain your power to walk away, and don’t be afraid to ask for a discount.
Avoid Financing and Save on Interest
As someone adamantly against debt, I am even more against the financing of a depreciating asset, a.k.a. a car. Dealerships heavily rely on you financing your next vehicle, as it’s how they make most of their money.
One of the best ways for you to save money when purchasing a car is to avoid financing. This means you’ll need to plan and save for a while before purchasing day, but the benefits – no interest; no payment book or minimum payments – will be well worth it.
As Dave Ramsey often says, “It’s the most expensive way to drive a car.” In the end, you turn in a car with lots of miles and no real value. The value is not a loss for the dealer; instead, it’s paid for by you, and the dealer makes quite a bit of money off this final exchange. Along with paying for this lost profit value, you’ll also have to pay fees and provisions for extra mileage and any wear-and-tear the vehicle underwent.
Use Edmunds “True Cost to Own” Feature
When buying a car, one of the best ways to get the most bang for your buck is to know the true cost of the vehicle in question. Most people make the mistake of making this designation based on the monthly payment. Just like with other big purchases, your car will end up costing you more than you think.
To find the true cost of your car, try Edmunds.com. Their “True Cost to Own” feature factors in depreciation, insurance, financing, tax and fees, fuel efficiency, maintenance, and repairs. Some cars depreciate quicker than others; some are more expensive to insure. It’s good to know everything that will cost you, even after the paperwork is complete.
Are you a car owner? Are you considering buying a car? What are some things you’ve done (or are doing) to guarantee you’re getting the best possible deal? Start a thread in our comments section below.
Brad Chaffee is a PerkStreet Customer Columnist who also authors Enemy of Debt, a place where he passionately but candidly tackles the psychological issues related to our own habits and behaviors regarding money. Brad and his family crawled out from under $26,000 of debt and some major bad habits to become debt-free in 20 months, and he believes that if they can do it, you can too! Aside from his blog, you can connect with him on Twitter and Facebook.