I remember the first time I bought a car. It was daunting, it was scary, and every time I stepped on a car lot, I felt like a dead deer with vultures circling. Surely, all those myths I had heard about car salespeople were true—they will peel your skin like a potato, pop your eyes like grapes and eat cornflakes out of your skull. Close, but not quite.
Since that time, I started selling cars and then moved into finance—so I have worked in both worlds where they can try to rip you off. While the world of cars used to be (and still can be) highly unscrupulous, the industry becomes more and more regulated with every passing month. You, as the consumer, have the upper hand, particularly if you are buying a new car. If you are buying used, do not buy from a cute independent car delear. Buy from the used lot of a dealership. You will get better service and you have a much slimmer chance of watching your car dealer pack up and leave town.
Whether you are a highly educated consumer or have no earthly clue what you want, there are two particular areas to watch to ensure you get the best deal.
Trade-In: Go to KellyBlueBook.com. Enter your car and select “Trade-in Value”. (Beware: you have no idea how many people mistakenly enter “Private Party Sale”.) When the dealership evaluates your trade, don’t demand a certain amount, as they will get away with the bare minimum if they can. If they offer more, great! If not, pull out your Kelly Blue Book print out. However, be sure that you are realistic. Do you have a V-8 in the middle of a gas crisis? Chances are they might give you slightly less than market value. Trading in a convertible in the middle of winter? They will hold it against you, but don’t let them get away with too much. After all, summer is just a few months away. So be wise and assertive, but don’t be a hateful customer.
Financing: Don’t know your credit score? That’s ok, chances are, as soon as they got the slightest indication of interest from you, they ran the score. Understand that, unlike the myth that is highly perpetrated, it does not hurt your credit score to have it examined. The exception is if you have it run about thirty times in a week (which has happened). What actually hurts your score is if you have something submitted to several banks.
According to law, the dealership cannot mark your financing rate up more than three points. For instance, if the bank finances at 5.75, the dealership cannot finance you higher than 8.75. If you know your credit score, know what rates are acceptable. If you have access to a credit union, use it. It isn’t always wisest to finance through a private bank. Check the rate.
The biggest piece of advice I can give you, as a former car salesperson, is that you should not do anything in a rush. Does the salesman seem he is rushing you? It is probably for a reason. Yes, car salespeople also have feelings, quotas and children to feed. But if they are honest and scrupulous, they will be more than happy to explain or help you. If you are a reasonable, easy-going customer, they will like helping you even more. Just make sure you have reasonable demands and don’t try and buy a $25,000 car at $300 a month. It just doesn’t work.
When you are evaluating your deal, look at the total price, not the payment. Yes, the payment may work for you, but how much are you paying in finance fees and the like? Do the math. Take the numbers home if you have to. Shop the dealership. Used or new, any kind of dealership will try to beat their competitors. They will go to extreme lengths to gain your sale. However, make sure you purchase the car from people you won’t mind doing business with in the future. As much as we hate it, cars have problems and have to be serviced. Check out the service department. Is it comfortable? Clean? Are there interesting things to do? Are the people competent?
The smartest way to buy a car is to put a large sum of money down and finance it four years or less. A car is the most rapidly depreciating asset you will ever purchase. This is not an investment, it’s an asset—and there is a huge difference. Remember that in a few years you are going to have to purchase another one. No matter how well you take care of your car, at some point you will have to replace it.
The absolute best way to buy a car would be in cash from a dealership, used. But life isn’t perfect and you’ll likely have to mix and match and make it work. Be careful, do your research, and you will be able to make an informed decision.
