Every Friday I post about one of the lessons I’ve learned so far in life, both financial and about life in general. We’ve all learned valuable lessons along life’s journey, sometimes the easy way and sometimes the hard way. Hopefully someone will read what I learned and avoid having to learn the same thing the hard way. Check back every Friday for a new lesson learned.
My First Car Purchase
I wasn’t really involved too much in the purchase of my first car. This was back in 2002 during my senior year of high school. My dad and I had been looking for used cars, test drove a few, etc. One day after school I went to a car lot and was checking out the cars and saw one that fit the bill. It was a nice little car (a 1994 Geo Prizm), and the price was in the budget my parents set. The actual purchase was handled by my dad, which included coming to a deal with the sales person and all the back office “stuff”.
Two years later I was rear-ended, and my car was totaled. The insurance company gave me a roughly $2,000 check, and suddenly I needed another vehicle. So, I looked online at various car lots and visited a few of those lots. I found a pretty sharp looking 1997 Dodge Avenger. It was a real sporty car, a red, two-door coupe with a sticker price of $7,500. I came back again with my dad to complete the purchase and set up the financing. This was going to be my first real loan, so I needed my dad to co-sign on the loan. I was working part-time and would handle the payments. The thing I remember most is that we didn’t really negotiate with the car salesman. I remember my dad asked the guy how low he could go on it, and the guy said, “I can go down to $7,000 if you buy it tonight.” So, that’s what we did.
When I look back on this, it almost makes me laugh. I ask myself, “What were we thinking?” But the truth is that I had no clue how to go about buying a car, and that is a huge problem that people face. Since that car purchase, I’ve learned a lot about how to buy a car. My next two vehicle purchases were much better, and I felt much more in control of the whole situation. The reason for this is simple: I’ve read up on how to go about buying a car.
Tips for Buying a Used Car
- View Listings Online: Get online and browse what cars are out there, both at car lots and from individuals. This gives you the advantage of being able to go to a car lot and know the exact cars they have and a lot of times what the sticker price is.
- Research Vehicle Values: While you’re on the internet browsing through used car inventories, check the estimated value of the vehicle. Three good sources are Kelly Blue Book (www.kbb.com), Edmunds (www.edmunds.com), and NADA (www.nada.com). You’d be amazed at how high the sticker price is on most cars compared to the true value.
- Arrange Financing First: Before you go to a car lot to purchase a car, call your bank or credit union, and see what kind of financing is available to you. This gives you an idea of what your interest rate and loan payment will be. Additionally, you can use this as a bargaining chip. Most car dealers get a kickback when they arrange financing through the dealer. If you already have financing arranged, a lot of times the dealer will work to get you a lower rate if you finance through them. For example, we bought a vehicle a few months ago, and I knew the rate I could get at my bank. I told the dealer this, and they offered a slightly lower rate. I played the loyalty card and said the rate they offered wasn’t low enough to get me to use a financial institution other than my regular bank. The dealer then offered me an even lower rate, which I took.
- Be Willing to Walk: Don’t be afraid to walk off the car lot without buying the car. If the dealer won’t come down to the price you’re targeting, simply tell them that you’re not interested in the car at the price they’re asking. Give them your phone number and tell them to give you a call if they change their mind. If you’ve looked online and researched what the value of the car should be, more than likely the dealer will call you back within a few days and come down to your price.
- Act Like You’re in Charge: Whatever you do, do not just walk into a car lot and say, “What kind of cars do you have for $x,xxx?” This lets the dealer know exactly how much you’re going to spend, and they can steer you toward cars that have a sticker price around that amount. Despite what they may say, the car salesperson is not on your side. Hold your cards close to your chest.
What are some of your strategies for buying a used car?