PerkStreet Financial

This is Pete Anderson’s second guest post for PerkStreet. He believes that everyone can live a life free of debt and financial strain, they just need to have a plan. We wholeheartedly agree.

Buying a new car is one of the most expensive purchases that most people make beyond buying a new home, but unfortunately the decision is often made based more on emotion than on cold hard facts. People buy cars because they feel right, or because it helps them to envision a lifestyle they aspire to. The problem is, they end up paying a price that is more than they can afford. Today I want to look at some ways that you can ensure that you’re getting a good deal and saving money on your next automobile purchase.

Ways To Save When Buying A New (To You) Car

There are a lot of things that you can do to make sure that you’re getting the best value on your next car purchase. Here are a few of them.

• Do your research: Make sure that you give yourself enough time to research what type of vehicle you want to buy, how much it should cost, reliability of certain models, fuel efficiency and what you can get for your old car either as a trade or as a private party sale. Use sites like CarSoup.com, Autotrader.com, Edmunds.com and ConsumerReports.org to figure out what your vehicle is worth, and find out what you should be paying for your car. Don’t wait until your old car dies to do your homework.
• Buy a pre-owned vehicle: We often get wrapped up in having the newest the best and the brightest. If we step back, however, we’ll often see that if we just buy a car that’s 2-3 years old instead of the brand new model, we’ll get a car that is still quite nice, but costs thousands of dollars less. A new car can lose up to 60% or more of its value in the first 4 years! My current car was 2 years old when I bought it and had 29,000 miles on the odometer. Brand new the car would have cost around $19,000. Since I bought the car used it had already gone through the initial depreciation, and I was able to get it for closer to $10,000.
• Buy from a private party: Buying a car from a private party is usually going to be cheaper than buying from a dealership. Just make sure to do your due diligence in getting a vehicle history report and having the car inspected to avoid any problems.
• Save up and pay cash: Consider paying yourself a car payment every month, saving for your next car in a high yield savings account (like the one PerkStreet hopes to add to it’s great rewards checking!!). Doing this instead of getting a loan from your bank or from the car dealership’s finance company can save you a ton of money in interest, and you might even earn a bit while you save!
• Consider buying a rental car: One thing that will often save you thousands of dollars is to purchase a car that has been used as a rental car. My last car was a rental car in Hawaii, and was as good as new, but $2-3000 dollars less than comparable non-rental cars. Rental cars are usually pretty well maintained, and most aren’t driven much harder than privately owned cars. If you’re comfortable with this, you can find a great deal! (My old rental car lasted me until i traded it in at 130,000 miles – with no major issues!)
• Forget the extras: If you’re willing to have less than the top of the line, you can save thousands of dollars. Leave off the leather seats, sunroof and in-dash GPS and a $15,000 car can quickly become a $10-11,000 car.
• Be willing to negotiate: Sometimes whether you’re comfortable with it or not, the best way to get a deal is to be willing to negotiate. If you’re not comfortable in negotiating, bring a friend or relative that enjoys doing this sort of thing. Even offer them a cash bonus if they can get you a car at a lower price than you could have on your own.
• Make sure to get an inspection and a vehicle history report: When buying a used car make sure to get a vehicle history report in order to make sure the car hasn’t been in any accidents or had flood damage. Neglecting to do this can cost you a lot of money down the road.
• Don’t buy an extended warranty: Extended warranties are often a huge profit center for dealerships because most of the time people don’t need or use them. If you want to get a warranty anyway, consider buying from an outside company for less than you can get a policy at the dealership.

Things To Remember When Negotiating With A Dealer

There are things you need to do when you’re buying a new or used car from a dealer. here are a few:

• Set a firm price you’re willing to pay: Before you even go into a negotiation, you should know the price you’re not willing to go over based on research you’ve done prior to that day. Be firm on that price – and don’t start from that price in the negotiation.
• Try shopping at the end of the month: If you can, try shopping for your car at the end of the month. Quite often salesman and dealerships are trying to meet a monthly sales goals and are more willing to make a deal.
• Don’t be a monthly payment buyer: When you’re talking with the salesman about buying the car, be aware that they’ll try to distract you with monthly payments, financing offers, and other incentives. Don’t give them the control by allowing them to price your car by the monthly payment or by a good finance rate. Take control of the negotiation and tell them you’d only like to discuss total price first, and then talk about how you’ll pay later on.
• Maintain walk-away power: In order to get a good deal you need to stress with the dealer that if the price is right you could sign today, but you’re certainly in no hurry to buy. Keep open your option of walking away if the deal doesn’t fit your needs. If you appear desperate or that you NEED to buy a car that day, the dealer will take advantage of that. (Which usually means a higher price)
• Don’t talk yourself out of a deal: Sometimes the most powerful thing you can do is make your offer, and then be silent. Don’t get uncomfortable if the dealer doesn’t say something or make a counter offer right away. Just wait. Wait for them to make a counter offer. If you raise your offer, never go over your firm price.
• Don’t negotiate down from MSRP or sticker price, work up from dealer cost: Quite often the dealer will try to get you to negotiate the price down from the sticker price, which nobody pays. Instead, work your way up from the dealer’s actual cost of the vehicle. On a 5% profit a dealer can still meet operating costs and come out ahead.
• When you’ve reached your limit – stop: Be firm but polite and when you’ve reached your price limit, don’t go any higher. At this point they’ll either accept your offer, or not. If not, be ready to walk out the door.
• Try calling the next day: If they didn’t accept your offer, try calling your salesman or the manager back the next day with a last chance offer. Often they’ll take the deal just to move inventory.
• Get everything in writing: Make sure everything you agreed to is in the sales contract, and make sure to read the fine print to make sure there aren’t any added fees or charges.

There are a lot of things to take into account when shopping for a car. Most importantly, do your research, be ready to negotiate, and understand how the process works. If you do, you’ll end up paying a lot less money.

Some further car shopping resources:

• Beat The Car Salesman
• Car Negotiation Coach
• Car Buying Tips
• Edmunds.com

What other tips have you used in order to save money on your vehicle purchase? Tell us your car buying tricks in the comments!

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