How to Save Money on a New Car Purchase

Recent new car sales numbers have shown the auto industry is in a rebound. Even with the recession still hitting many people hard it seems some people still need to buy new cars.  The rise in consumer confidence may have triggered this growth in new car sales, which is good sign for the economy.

It is important to remember that when purchasing a car one’s own financial situation remain the most important consideration. Even if you are able to buy a brand new vehicle, it is important to be frugal and strive to strike the best possible deal whatever your financial situation.

Saving Money on your New Car Purchase: 3 Tips for Success

With this in mind, what practical steps can you take to shop frugally and make an affordable new car purchase? Consider the following: –

  1. Choose your Buying Resources Wisely: If you are motivated by finding an affordable new car, then dealerships should not be your source of information. Instead, you should visit online resources such as Exchange and Mart or Consumer Reports to access a wide range of vehicle information across a range of brands.  In addition to this, it is also easy for you to offer your existing car as a trade-in on the new model, which can drastically reduce the cost on your new car purchase.  Keep in mind dealerships make my money on used cars than new cars so be careful how they structural the deals. 
  2. Pay Attention to Financing Plans and Agreements: When buying a brand new car, the majority of consumers are forced to pay with a fixed financing agreement which may not be their best financial choice. While this spreads the cost of the car over an agreed period of time, you need to be able to commit to making regular payments. Failure to do this will trigger late payment fees and headaches. You should find a good car loan rate through a local bank or credit union. In addition to this, be sure to read the financing terms in full and review these carefully to make sure there are no hidden catches that will come back to bite you later.
  3. Choose a Medium or Low Trim model for you New Car: There are numerous Trim levels on certain car models, which cater towards a range of budgets and expectations. While each Trim is going to offer different features, there won’t be that much difference in the overall car. Buying a car with all the “bell and whistles” won’t necessarily keep the value if the car or automaker doesn’t have a good reliability rating and depreciation outlook. It’s best to choose a lower Trim model and pay a little more fore certain features you want without going over you budget on a car that is not that different.

Financing a Used Car

alfa-romeo-giulietta-spider

There are many considerations someone thinks about when purchasing a used car. One of the largest being how to pay for it. A majority of used vehicles are financed since this is an expensive purchase for most car shoppers A large factor when buying used vs a new car is the loan rate the credit union or bank gives you and the amount of money you are approved for.

Insurance

Although finance is the focus here, it nevertheless has a large impact on insurance. If a bank issues an auto loan it will require certain levels of insurance on the vehicle that is collateral on that loan. Although auto loan rates are typically lower than personal loan rates, if the insurance is $100/month cheaper because you are a high risk category then going with a personal loan at a higher interest rate may make sense over an auto loan, since it could save your money. This does not change the fact you have less insurance on the vehicle and if something happens to it you may lose out overall but assuming all goes smoothly you might be fine.

Dealership Financing

You may already do your banking with one or two banks or credit unions. A dealership often does business with lots of banks and credit unions and the financing arm of the auto brands they sell. Working with a dealership has the advantage of convenience and speed. Large full service dealerships like The CarShopcan assist you arranging insurance and financing a car.

However be aware that with convenience that probably means you won’t be getting as good a deal vs going through a local bank or credit union. There can be a lot of “gotchas” through dealership financing you may not be aware of and you should read terms carefully.

It is always smart to compare all your financing options and I recommend taking your time to consider who you will finance any car with. Searching for financing before starting the search for a car is a good idea. Personally I recommend using a local credit union over a bank or dealership. Many actually use the lower rates they get through a credit union and pressure a dealership to give better loan rates and terms.

Cash Alternative

Maybe you have saved up for a used vehicle and intend to pay cash for it. That’s great as most dealerships tell salespeople that, “A sale today is better than a sale tomorrow.” This usually means you can pressure the car salesman to give you better deal on the spot with all that beautiful cash, but that may not always be the case. Since dealerships make more on the financing of cars most of the time they might be hard negotiating a better price. If that is the case then you should move onto another dealership and not waste your time.

 

Have you ever Considered buying a Fleet Vehicle?

fleet vehicles

There are plenty of places and people you can buy a used car from, each with its own advantages and disadvantages. This includes dealerships, private parties, and friends or family. However buying used fleet vehicles is one place many people neglect to look, even though they can save thousands by considering it.

Fleet vehicles and cars can include those from police forces, car rental companies, government agencies, large corporations and even used taxi fleets, such as Cab Direct, which sell off large numbers of fleet vehicles and cars they don’t need every year. The vast majority of these fleet vehicles are sent to auto auctions where they are sold to dealerships and then usually resold to the public.

Even though the main customers for these fleet vehicles are dealerships, there is nothing stopping average joe’s from buying them. So Why not considering buying them directly from the fleet owners?
When you do the math, the vehicles that get sent through standard auction channels are then sold at a dealership cost a lot more. This is for a variety of reasons. The dealerships selling fleet vehicles have to pay for a large number of outlays. For example, they need to pay for shipping them to the auction, followed by auction fees, then transportation to a dealership, reconditioning, and subsequently an additional add on for profit at the dealership. This is often $2000 or more than the amount the fleet company was hoping to get for the vehicle sale.

Essentially, what this means is that if a commercial fleet owner only wanted $8000 for a vehicle when they sell it, you won’t be able to purchase it for less than $10,000 – and that’s on the very low end of the estimate. This could typically amount to around a 25% markup from what you could buy the vehicle for directly, if you went down the route of working with fleet owner yourself.

Though many people are concerned about the roadworthiness and nature of used fleet vehicles,since they have been used by a lot of people, I would still recommend considering them. Most of the time these vehicles have a specific maintenance schedule that is maintained often by dealership garages or private independent repair shops. Fleet vehicles all need to be in great running condition and service which routinely involves traveling a great number of miles and dealing with mixed conditions. Those responsible for their maintenance don’t tend to let an oil change slide for a month or use a cheaper quality auto parts that might cost more in the long run. Private party “one owner” vehicles often make these claims of maintaining cars but seldom can it be verified.

Negotiating the best deal for a fleet vehicle is a simple matter. You’ll need to contact the fleet companies or fleet sales specialists directly. They have a price in mind and know what they would get at the auctions since they sell a lot of these cars. If they can get the same price from you and save the costs of shipping it to the auction, it is definitely a win-win for everyone. This allows you to enjoy the same used car as you would get from a dealership at savings around the 25% mark.

Next time you are buying used, why not consider a fleet vehicle?

A Vehicle History Report Won’t Tell You Everything

Alfa Romeo Spider
Alfa Romeo Spider

I have gotten a few emails about this so I thought I would talk about what a Vehicle History Report will and won’t tell you.

I am sure most people have seen information and advertisements for a Vehicle History Report, such as Carfax and Autocheck, but are they worth it and can you trust what they say? Well … the answer is bit mixed.

In my opinion you should it is always good to try to get all the information about a used car before you buy it. These Vehicle History Reports hardly give you the whole story of a used car most of the time though.

Let’s say you are looking at a used car, such as a Honda Accord.  This Honda Accord looks fine and good to you and you can’t see anything wrong with it.  Hell mechanically the car seems to be running fine and the Carfax or Autocheck report come out clean.  So should you buy it?  My answer to this question, “Hell NO!”  You should ALWAYS get a used car checked out by an independent mechanic before you hand over any cash, check, credit card, money order, wire transfer, etc.  Even if that report comes out clean.

The reason?  What you may not realize is that a vehicle history report takes data mostly from insurance companies and dealerships.  That means only cars that have been fixed via an insurance company claim will show up on a Vehicle History Report.  Sooo, it can tell you data that is useful but you must realize something.  Body shops are not required to report to any state agencies or databases the work they perform.  That means it is easy for a body shop to repair a car and sell it to you even if you check a vehicle history report.  Dealerships and body shops do it all the time actually.

I have a friend and his dad used to paint cars in NASCAR back in the day.  If I took a car that I had to him that needed some bodywork or had been in an accident, he could make my car look like new.  It would be hard to tell if the car had been painted and it wouldn’t be reported to anywhere and therefore wouldn’t show up on a Carfax or Autocheck report.  

Besides most vehicle history report systems can never keep up with the amount of cars getting into accidents.  (That sounds unfortunate but true!)  Bottom line, cars should be checked out by a professional mechanic before you bu no matter what.  

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5 Tips for Buying a Used Car

Alfa Romeo Spider
Alfa Romeo Spider

Car buying is on a new upswing.  Reuters recently reported that overall car buying (new and used) has risen drastically in the past 4 years.  Car sales rose 13 percent to 1,188,865 cars and light trucks sold during the month of September at U.S. auto dealerships.  That was the best month since March 2008, just after the start of the recession and this shows promise for the auto industry.

The upswing is mainly due to rising consumer confidence, making people feel safer to open their wallets on car purchases.  However, many Americans are still feeling the tight with their money in this economy as it is still moving at a snail’s pace.  That’s why more people are considering used cars over new cars these days.  If you are one of these people here are “5 Tips for Buying a Used Car.”

Preparation is Key

Preparation is crucial in a used car buying search. Spending time researching different models and trims can help you get a better price and know what car fits your needs. The internet offers a wealth of information about used cars – learn about the different models, options, reliability, prices, etc.  The more you know the better, the better prepared you are to find the car you want and get a good deal.

Check Your Credit

If you’re a used car buyer with potential credit issues who might find it difficult in getting approved for a loan, again turn to the internet to better educate yourself. Better yet, you should probably know your credit rating in advance, so the entire discussion about financing and credit isn’t a surprise to you.

I recommend you look for a reputable credit union that will offer great financing for pre-owned and used vehicles at reasonable rates.  Credit unions offer much better financing than what you will find at a bank all with personalized service.  Credit unions actually offer the same loan rates on new cars as used cars, making them straightforward and easy to understand.  They can also help you improve your credit and some even offer classes on financial literary.

Do the Numbers

When seeking a used car, know what your budget is and where it will be a year from now. Don’t shop for a cool luxury convertible car if you’re living on a shoestring budget, try to find a reasonable and sensible small car that will be easy and not expensive to maintain and insure.

Most used car buyers try to manage a down payment of about 20 percent, while financing the rest. But don’t let that get away from you either.  I don’t recommending financing a car for more than four years (48 months), and it is a good idea to keep your monthly payment lower than 10 percent of your total income.

You can find great tools online to figure out what a reasonable monthly car payment is for you.  It’s best to pay for the car as much upfront as you can but most will need to borrow a little money.

Get the Car Checked

You NEED to get any used car you are considering buying checked and inspected by a reputable independent mechanic BEFORE you buy it.  Unless you are a gearhead, like me, and know what to look for in used cars it’s not a good idea to just take a dealership or individuals word on the history of a car.

Did you know that there is no law requiring body shops to report work they have done on vehicles they work on?  A friend’s dad is master painter and bodyman and he can make any vehicle that has been in a serious accident look new again.  Meaning Carfax reports can be completely clean, but not tell the whole story about the car.

Eyes that know what to look for will be able to see if a car has been in an accident or if it needs any mechanical fixed to be road-worthy.  Having a used car checked out before you buy it is very important.

Watch for Trade Ins

Most used car dealers will ask if you’re trading in a car for the new/used car you’ve got your eye on.  You want to be careful about talking with the dealership about this.  Trade-in talk shouldn’t enter into the negotiation process in my opinion.  Smart used car buyers consider trade-in cars as a separate transaction, and as such don’t mention a trade-in factor into the conversation until the end.  Also you will likely get more for your used car if you sold it online via Craigslist or other local ad listing service or website.  Did you know that dealerships typically make a killing on used car trade-ins and not much on selling new cars?  One of dealerships dirty little secrets!  To be sure you are getting a good deal utilize sites like ClearBook.com which assess the value of your used car for the approximate trade-in value.  You will find you typically won’t get a good deal.

So don’t fret if you are a first-time used car buyer or don’t have the best credit rating in the world.  There are plenty of great tools to help you and you should always be looking for opportunities to buy if you are in the market for a new car.  Ask friends, family, and neighbors if they know of any good used cars for sale.  If you have any questions about buying a used car please leave a comment below.