Tips for Buying a Car Without Going Broke
Don’t shop for cars with your heart or head. Shop for cars with your budget in one hand and an interest rate calculator in another! Before you race to get a new ride, check out these five tips for buying a car without racing up your debt.
1. Consider Your Budget First.
Review your monthly income vs. expenses and find out how much you can afford to spend on either a used car that you can pay cash for or financing for a monthly car note. If you are financing, Bankrate.com and other websites provide online calculators to assist with affordable car buying and financing options. Keep in mind a difference of two percentage interest rate points can add up to $1,000 if you are borrowing $25,000 for a car. So, don’t get robbed and have most of the loan going toward your interest.
2. Forget About Leasing.
In a lease, you are simply renting the vehicle for a set period of time. Once that term expires, you must return the vehicle to the dealership with nothing to show for your years of payments. Additionally, other cost (sometimes hidden) can be found if you drive more than allotted miles, insurance rates for leased cars are sometime higher, and if the car has any minor scraps or scratches, that may cost extra, too.
3. Take it for a Test Drive First.
The first time you go to a dealership, you shouldn’t be looking to buy. Tell dealers that you’re just looking and don’t let them talk you into anything. Better yet, drop by on a day when the dealership is closed. You can roam around the lot and inspect the window stickers with no pressure whatsoever. Take notes on what you like, then return home and do some serious research.
4. Knowledge is Power.
After you know what you can afford and have picked out the car that you like, do research on your own and find out how much the dealer paid for it. One of the most important pieces of knowledge a car buyer needs is the invoice price (the dealer’s cost) of the car he wants to buy and you can use it as leverage to negotiate. Thank goodness the Internet makes getting this information easy. Kelley Blue Book provides a tool that will help you understand what a car will cost beyond its purchase price when out of cost expenses are considered such as insurance, fuel, and depreciation.
5. Hit Back.
Always negotiate the price of the car before you talk about trade-ins or financing. Once the dealer price is determined, compare it to the manufacturer’s retail price and negotiate a number that within those two. Once you are settled on a price that you can afford and are comfortable with, then discuss how it will be paid and/or prices about your trade-in.
About Dr. Karen Ratliff
Dr. Ratliff is a certified life coach and professional educator, assisting many people in accomplishing financial, career, and educational goals. She is also the author of “Tightening Your Bootstraps: 104 Tips to Kick Your Debt to the Curb Now.” Keep up with her budgetary advice via Twitter @drkarenratliff and her website at www.drkarenratliff.com