It is time to buy a new car. Here are some tips to keep in mind.
1. Research, research, research. With all of the information you need available on the internet, you have to be well informed before setting foot in a dealership. Consumer Reports and Edmunds provide the most comprehensive and unbiased reviews of new cars. (If you don’t want to subscribe to Consumer Reports, simply check their print magazines at your local library.)
2. Consider a slightly used car. With depreciation, it often makes financial sense to buy a one to three year old version of the new car you have your eyes on. This often translates into thousands in savings. Given the longevity of contemporary cars, buying a car with 10,000 to 30,000 miles is nothing.
3. Mind the options. Manufacturers and dealers make money off of the mindless array of options available. You have to ask yourself if you need all of those options. A costly option is all wheel drive. Do you really need it? Oftentimes, a set of snow tires for winter driving is all you need for your front- or rear-drive car. Plus, these options just mean more items to maintain and potentially repair down the line.
4. Arrange your own financing beforehand. Oftentimes, your credit union will have far more attractive rates and terms than the dealer.
5. The test drive. Do everything you can. Accelerate on a highway on-ramp. Brake hard. Try to find a windy road. Sit in the back seat. Check the trunk. Open and close every storage compartment and push every button. This is a major purchase. Take your time to make sure you are willing to live with this thing for the next five to seven years.
6. Trade-ins. Generally, you will get more money for your current car by selling it privately, on your own. But if you absolutely have to trade in your car, make sure you agree on the purchase price of the new car first before discussing your trade-in option. This locks the dealer and diminishes its bargaining power.
7. Negotiate. Know that you can always walk away and buy the same car elsewhere. Start with a number that is moderately less than the most you are willing to pay. As the dealer gives you its number, you move up incrementally. Gauge how much the other side is coming down and respond accordingly. After a few rounds, you and the dealer will hopefully reach an agreement. Watch Pawn Stars and look at how both sides negotiate. Note how each side could have gotten a better deal. Also, be ready physically. Clear your calendar of appointments, have a balanced meal beforehand, and do not drink coffee. Dealers are known to hold prospective buyers “hostage” in a room until a deal that is favorable to them is made. Be ready.
8. Skip the “extended warranty”/service contract. This is a bad deal and another source of profit for the other side. Cars today are exponentially more reliable than even cars from a decade ago. And when manufacturing or design defects show up, they often occur before the original warranty has expired. For every anecdote of Joe Blow saving thousands when his extended warranty kicked in and paid for a new transmission, there are thousands of car owners who wasted thousands of dollars on extended warranties that they never needed or used. Far too often, unsuspecting car owners find out too late about the fine print in these contracts which exclude many types of repairs.
Image source: Maxichamp
