It will take a lot to end our love of cars. They take us places, help us explore, provide adventures, and promise vacations. All manner of vehicles take families on picnics, children to soccer practice, and families camping.
They take us to work, school, and shopping. Our jobs depend on our getting to work on time, and many more of us use our vehicles for work. We carry our work with us and work from our cars.
Some need a multi-purpose vehicle while others want something exclusive and much-admired. People pick cars that are environmentally-friendly, and others need the one that meets their budget. But, the purchase is always exciting.
Perhaps because it is such a large investment, the shopping decision takes on a special thrill and importance. But, for many, it gets complicated and discouraging, especially without the support of resources like Car-Buying-Strategies.com.
Auto manufacturers and dealerships are largely good people. But, they are in a for-profit business that can pressure salespeople to push limits on their dealings with customers. They are trained well and often better prepared than you to discuss what you want and how to get there. They even know how to convince people to borrow money instead of paying cash. So, before you sign on a car loan application, give it some thought.
Consider these 7 things before you sign
- Think about how badly you need a car. It may be car buying season. It may look like a good deal. You may want to catch up with or outdo your neighbor. Maybe you want to upgrade your model. Or, you may just want that red car. As Consumer Report says, “Be smart: Determine what you’re willing to spend before setting your sights on your dream machine.”
Considering the big financial investment, you should make a more rational decision. If you need a car to drive to work, you need a dependable and fuel-efficient model. If you use the vehicle for work, you need something comfortable and rugged. If you have a growing family, you need the room and safety. And, if you just want to show off, you might opt for a luxury model. In any case, you should have a plan before you hit the car dealership.
- You may not need this loan. There are direct and indirect lenders. If you can get a loan from your bank or credit union, you could be better off. If you can secure a loan or approval in advance, chances are the interest rate it is lower.
The car dealer’s financing may be more convenient especially when you have purchased on impulse. But, they are likely to press you to add accessories, trims, and insurance coverages that increase the loan’s principal. It’s prudent to take your time to compare the dealer’s offer with the bank’s plan.
- A used-car could make sense. Reputable dealers now sell “certified pre-owned vehicles. This is not just another term for “used car.” It means the dealer has ordered this car refurbished in detail according to manufacturer standards. So, you are assured the pre-owned vehicle is in good shape. Many dealers will back the certified claim with extended warranties.
Many of these cars have been leased vehicles or car rentals taken off the road because the leasing and rental customers want something brand new. They have low mileage and clean looks and interiors. You can save a lot of money when you buy the pre-owned status.
You might also step down to a reasonably-priced used car if you just need to get on the road. Or, a used car can make a useful second car or a vehicle for your driving student. The price will be lower than the “certified pre-owned” vehicle, but it won’t have the same dealer guarantees.
- There’s a cost to “no money down.” No down payment deals will pull you in if you are desperate to have a ride. But, you must remember the larger your cost, the more you will pay in finance and interest costs. You must remember the car salespeople are interested to encourage lending because of the earnings expected, so “no money down” may not be a deal at all.
You would be much better off making as large a down payment as you can. Considering even a new car will lose value as soon as you drive it home, you could owe more than the car is worth if you make no down payment. If the car is stolen or totaled in a wreck, your insurance may not cover the amount of the loan because the car has already depreciated.
This is also true of “No payments for six months” promotions. You may not have to make payments, but the cost of the remaining payments will be adjusted to cover the six months plus the interest accumulated over those months.
- You must afford it. Once you buy the car, you may incur costs you didn’t have before. When you move up in car model, vehicle type, or interior and exterior trim, you also increase your insurance costs. If you buy hybrid vehicles or all-electric cars, you must refuel conveniently.
New vehicles may require more expensive repairs, maintenance, and tires. If these are not financial issues to you, then go for the care you want. But, you don’t want to exclude these expenses from the car’s cost.
- Take the loan apart. You should never sign any document you don’t understand. And, when you apply for a car loan, you will be expected to sign several forms. You should at least learn a little about the key elements of a loan.
First, you need to know the length of the loan. The longer the loan the lower the monthly payments, But, it’s also true the longer term means more interest accumulated. So, what looks like a bargain isn’t one. Second, you need to understand interest rates. Regardless of what the salesperson says, it’s the APR that you are interested in. That’s the Annual Percentage Rate you will pay on the principle, added costs, and finance charges, Third, you want to look for any early payment fees. Early payment fees are charges incurred if you pay off the loan early. That would penalize you if you wanted to trade in the car for another before the loan has been closed.
- Shop long and hard. Before you think about visiting car lots or dealership showrooms, you should shop online. You’ll find extensive information on car performance and current prices. You can compare cars in the same model, style, or price range.
Several online resources will help you complete a checklist of values important to your decision-making. You need to determine all the costs including the down payment, finance, and interest fees. And, you must decide if your budget has room for those costs. You will also pay taxes on your car purchase, and while the dealer will be happy to roll that cost into your loan, you will wind up paying interest on the taxes. You should also be wary of additional taxes on low fuel efficiency vehicles or higher registration fees for certain vehicles.
Advertisement and window information must include the fuel efficiency. But, you can find the MPG online and even shop for vehicles meeting your goal.
Thinking about buying a car
If you will finance the car, you must know what you need and how to negotiate, and how to haggle. The dealerships and lenders must comply with the lending regulations and fair lending practices. So, you can always protest and file a complaint.
The New York Times has noted, “Regulators are airing ‘significant concern’ about the millions of Americans who are falling behind on their car loans, even as auto lending continues to boom at a near record pace.” It suggests these defaults result from dealer deception and fraudulent practices.
But, if dealership management and salespeople are in compliance, the only one to blame for a bad deal is yourself. You have research to do, and you can quickly determine “the sticker price” (MSRP or Manufacturer’s Suggested Retail Price). However, if you are uncomfortable in the negotiation process, you will fold your cards and leave the table.
It’s your job to be prepared with facts and figures worked into a strategic approach to deal-making. If you have a strategic script in mind and stick to your plan, you will have more courage to push back on any pressure. You should always remember that, in most cases, you can always leave and go to another dealer.
You have no obligation to befriend the dealer. There’s no need for worrying about what they think of you. In the real world, this is not a personal transaction. You do mean more to them than you think. They need your purchase and your loyalty for future business. So, you should take comfort in your favorable bargaining position.
You have extensive resources readily available, so you should not be shopping naively or dealing out of fear. Shopping information, feature comparison, and cost analysis should be enough to put you in the driver’s seat!