Buying a new car can be stressful! For most people, their vehicles are their second most valuable possession after their homes. In order to make sure you buy the car that’s right for you and your family, you must consider many factors, but it is most important to find a vehicle you can realistically afford.
The Magic of Budgeting
The first step in knowing what you can afford, is making sure you have a good grasp on your monthly expenses. If you don’t already have a system down, now is the perfect time to put together a household budget. I am the official bill payer in my family, and I pay all of our bills through online banking. This makes it easy to get a snapshot of where our money is going because of all of our bill pay vendors are listed in one place. I can extract the data into a workable spreadsheet so that I can track expenses and make sure that we’re on track. This will help you get a birds-eye view of what your finances really look like and what kind of monthly payment you should be aiming for.
Factoring All Costs of Car Ownership
It’s not just the price of the car that matters - there are several other major factors that affect affordability. You will need to account for operating costs like gas, maintenance and tires. Ownership costs include full-coverage insurance, license, registration, taxes, depreciation and finance charge. It now costs an average of $8,876 to own and drive a typical sedan, or 2.7 percent less than the $9,122 it cost last year.
Narrowing the Playing Field
Before you begin researching makes and models; have a heart to heart with yourself (and your buying partner). Are you looking for something sporty to zip around town in or fuel efficient to cut down on costs? Check out this handy car buying decision guide to help you weigh your needs with all of the available types of cars that are out there. Narrow your list to cars that are 5% below your monthly budget to cover the ownership and operating costs.
New or Used
One would think that buying a gently used car would be a better deal than a brand new car. That logic would hold true in most economic climates, however the opposite holds true right now. Currently there are some really sweet deals out there that make buying a new car more attractive. Many times used/certified pre-owned cars are financed at a higher rate than new cars which makes a new car more attractive.
- Hand Pick Your Sales Rep. Before you go to the dealership, call them on the phone to vet out their sales staff. Not all salespeople are created equally, and you want to work with someone knowledgeable and whose personality will mesh well with yours. Many dealerships will list their staff on their website. Come up with a list of questions to test out, and once you decide who you want to work with, make an appointment with them.
- Timing is crucial. I bought a new car on New Year’s Eve Day last year because I heard it was best to wait until the end of the month to buy a car so I thought why not wait until the very end of the year. Dealers are extra hungry to make their margins at the end of the month, so strike while the bargaining iron is hot!
- Do your homework. It’s always good to do sufficient research before you head to the dealership. Find out if there are advertised rebates or dealer incentives for the car you are purchasing. If you plan to trade in your current vehicle, take the time to come up with what you believe is a fair price for your trade in. Carry printed data to the dealership with you to make sure you are well equipped when you start talking numbers. Showing the dealer that you are knowledgeable will give you a leg up from the beginning.
- Never go into a negotiation hungry! Eat before you go in or bring a snack if you have to, because you may be at it for a few hours and you will need your energy and you don’t want to rush the process and make a bad decision because your blood sugar is low!
- Bring a buddy. It helps to have a friend with you during the negotiation process to help prevent the sales staff from trying to intimidate you. Your partner in crime should use their most critical eye during the process. Also, have your friend be prepared to suggest that you go to another dealer or come back tomorrow if things get heated.
- Beware of eavesdropping! If you and your car shopping buddy are left in a room alone to discuss, be discreet in your discussion or step outside for privacy. The phone could be left on intercom mode and your conversation may be overheard.
In order to get the lowest interest rate when taking out a car loan; there are several factors that will determine your rate:
- Your lender. It never hurts to start with financial institutions you already work with, they know you and may be your best bet for getting the best rate.
- The car you're buying. New cars often have the best rates.
- Loan-term length. Some automakers offer zero-percent financing on five-year loans. In general, though, longer loans come with higher interest rates.
- Your credit rating. The better your credit score the lower your rate.
Car Buying Service
For those of us who would rather have dental work without Novocain than buy a car on our own, there’s an amazing service out there called a concierge buying service. Many organizations, such as AAA, warehouse clubs and credit unions, offer car-buying services to their members free of charge. The service generally provides members great savings and allows you to buy a car without having to go through the painful process of negotiation. Greater Nevada Credit Union has just partnered with many select dealers who will provide our members with special no-haggle pricing, superior rates, service, and flexible terms with an auto loan from Greater Nevada.
So, as the month draws to a close, and you are thinking of heading out to car shop, let us know if you come up with some car buying wisdom to share and leave a comment!