This is a guest post from Kalyn Brooke of Creative Savings
“No money down!”
“Zero credit needed!”
“We’ll even throw in a free laptop….and a cruise!”
As the slick car salesman shouts all sorts of promises on your big screen TV, you’re either annoyed, or intrigued. Maybe you really can afford a new car after all! But cars are definitely not (nor should they be), impulse purchases. Second to our homes, they are one of the most expensive items we can buy, not to mention a big money suck when it comes to repairs.
Even if you are only just starting to think of buying your next car, these seven questions will help you navigate the waters of high interest rates, unethical dealerships, and add-on features, as well as safety and monetary concerns:
1. Do you really need one?
While this first question might seem a little silly, it really depends where you live. Those closer to a metro area can take advantage of public transportation before committing to a new car. Others living in the heart of their local town can use walking or biking to their advantage.
Likewise, if you already have two cars, and want to replace that second vehicle, think about the possibility of becoming a one-car family. My husband and I downsized to one car over two years ago, and have never regretted that decision since. It takes some extra communication with our calendars, but saves so much more on insurance and extra car payments!
2. What can you afford?
While your budget may be small, understand that an older, less expensive car may require more maintenance in the long run. Set up a savings account now to stash away money for car emergencies so you’ll always be prepared to handle them, and read Ruth’s post on How to Save on Car Repairs for even more ideas.
Affordability will also depend on how much you plan to drive the car. If you commute only 10-15 minutes a day, a junker might be more reasonable, but if you live further from town, you will need a vehicle that is much more reliable and safe.
Don’t forget to check insurance quotes either. Extra safety features will make cars a bit pricier, but give you lower rates.
3. How will you pay for it?
Do you need to get a loan or will you pay everything upfront? Nothing beats paying for a car in cash, so if you’re not in the market for one just yet, I would encourage you to start a savings account for this very purpose.
If you decide a loan is the way you must go, first take a look at your budget to see what type of monthly payment you can afford, and call various banks in your area to compare interest rates. They can be vastly different than what the dealer offers you, so you’ll definitely want to check around for the absolute best price before committing to a new loan.
4. What kind of car should you buy?
With the vast information available on the Internet, it’s easy to find reviews and recommendations for every type of car, and KellyBlueBook.com is one of my favorite resources. Consumer Reports and Shop Smart Magazine also feature a car section in each issue that is very readable by those of us who don’t really understand the technical side of cars….like me!
Some items to think about are:
- Safety and reliability
- Gas mileage
- Resale value
- Invoice price vs retail price
You should always look up the invoice price of the car before you go shopping. This is what the dealer actually paid for the car before they mark it up to the consumer, and is a great starting point for negotiations.You can look up typical invoice prices online at Edmunds.com.
5. Will you buy new or used?
There seems to be a stigma with buying a completely new car, but I truly believe this only applies to certain types of cars. You really have to take the quality factor into consideration before deciding which one you will buy.
For instance, I have bought three cars in my lifetime, two of them were used — a Chevy Cavalier and a Honda Fit. During the first few years of both, we sunk more than $1,000 into each car with various repairs, upkeep, and maintenance. Three years ago, we bought a VW Golf, with only 200 miles on it and we’ve only spent $600 in maintenance to date. It’s still going strong, and has retained 60% of it’s resale value.
While used cars might be cheaper, you really don’t know the entire history of the vehicle, so sometimes it is safer to buy new. But like I said, it really depends on the type of car. Make sure it’s a super reliable and quality vehicle that is known for retaining it’s value, otherwise, you probably won’t save much money by splurging on a new purchase. Instead, a safer bet might be to purchase an almost-new, 2-3 year old vehicle, which still gives you most of the reliability of a newer vehicle without the instant depreciation of a new car.
6. Do you have a vehicle to trade-in?
Research typical trade-in values on KellyBlueBook.com for the car you have, and come to the dealership armed with your findings. Just don’t let the salesman know about it until you’ve settled on a price for your new car!
The reason being is this — they know that if you have a trade-in, they can easily convince you to pay more for the car you were planning to buy because you are essentially giving yourself a “discount.” However, you should really negotiate for the cars separately. This will ensure you’re truly getting the best price.
7. Will you pay for any extra features?
I absolutely hate it when I get to the dealership, finally decide to buy the car after hours of research and agreeing upon a price point, only for them to give me a list of add-on options for the car. These range from a wax job, keyless entry, fabric protectant, and rust proofing, to wrap-around and extended warranties, and can cost anywhere from an extra $200 to well over $1,000!
If you’re buying a completely new car, they may already come with most of these features, but if you buy an older car and live in a salty coastal area, or travel icy Northern roads, you may want to consider adding on one or two. However don’t assume that the dealer is offering the best price for the service. Call a couple reputable repair shops and find out how much these services cost elsewhere. You can definitely save a lot of money by knowing exactly what you need and how much it should cost before heading to the dealership.
Asking yourself these 7 questions will help you think, act, and buy smarter during the search for your next car, but remember…..you can always walk away if you don’t feel entirely comfortable about a deal. You may need to visit another lot, or do more research. You have the power to say yes or no, and you never have to commit to anything right away.
You should be confident your next car is exactly the right one for you, and planning ahead will put you in a much better position to buy one when the time comes. Think of this post as a mental checklist to complete before you go shopping!
Kalyn Brooke is a full-time writer and blogger at CreativeSavingsBlog.com. Where she gives a fresh perspective on frugal living, and the kick-in-the-pants you need to create a budget from scratch. She lives in beautiful Southwest Florida with her news-photographer husband and the most adorable bunny you’ve ever seen. She loves making to-do-lists, reading good books, eating chocolate peanut butter ice cream, and pursuing big big dreams… all carefully planned out, of course.
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Have you purchased a new or used vehicle lately? What did you learn in the process?