Money To Live

August 19, 2008

Car shopping

Filed under: negotiation — by moneytolive @ 5:00 am
Tags: , ,

Time for a new car?

Your current car is dead or nearly dead.

Your current car is “more car than you need.”

I am moving to a congested area. When we visited with my SUV, I dreaded parking in narrow spaces. Also, I do not need to haul much, and I hardly use the capacity of an SUV.

You’ve been a one car family, and with a job change or a move, you need two cars.

New baby? or all the kids have left home?

Selecting a car

Strictly by the numbers, used is the way to go. I have had one new car and one family hand-me-down. I am buying my next car new. Not all decisions are based solely on the numbers.

Minimum Requirements List. What do you absolutely need? What would be nice to have? If you are buying the car with a partner, what is on his/her list?

My list: small and easy to park, has an MP3 connection, 4 doors, decent gas mileage

Safety. Will children be riding in the car? Check government crash tests.

Compare costs. Figure out what you can afford and what you can expect to pay or negotiate. This information is available at a number of websites, such as Consumer Reports and KBB.

Gas. Before trading in your car to get a Prius or another car with better gas mileage, figure out if it will really save you money and consider that everyone else is thinking the same thing.

Insurance premiums. That red convertible is going to cost more to insure than a Toyota Corolla.

Financing

Lease or Buy. To buy a car, you can pay the total amount in cash, or make a down payment and take out a car loan with a fixed amount each month for up to 5 years. To lease a car, you may or may not need a down payment and have a monthly payment typically lower than the payment on a car loan. The catch is that the leased car must be returned after a set time, typically 3 years. To keep the car, a balloon payment is due, which could be half the price of the car. Strictly by the numbers, it is better to buy.

For a small minority, it makes sense to lease. If you know you will only be in the country for a few years and want a new car, it might make sense to lease. Going back in time three years, for some people it would have made more sense to lease rather than buy a large SUV. Car dealerships are writing down huge losses of SUVs coming off leases because they are being sold at much lower prices than was anticipated.

Down payment. When buying a car, you can get the best financing deals by making a large down payment. This could be pain in cash or by trading in your old vehicle.

Loans. To help you buy a car, a dealership will be ready to offer you a loan. Since some dealers offer loans at high interest rates, research current rates before you go (www.bankrate.com lists current interest rates). Banks and credit unions also offer car loans, for which you can be pre-approved before even picking out the exact car you want.

At the dealership

Shop around — pit dealerships against each other. This is easier with the internet because many dealers will give quotes through email.

Be prepared to walk away. This is not possible if you need the car yesterday, but if your current car runs fine, you can take your time negotiating.

If you are a woman, bring a man along. Sexist? Yes. Does it kill the feminist in me to say that? Yes. You do not need a husband or boyfriend (or even a father, though that is who I am taking) — any man will do.

My Car Shopping Experience

I am looking for a Honda Fit — it has four doors and is 1.5 feet shorter than most sedans (= easy to park). Most of the ’08 models are sold, and dealers that have some in stock are charging over MSRP. Since there is little room to negotiate on these few remaining ’08 models, I am waiting until the ’09 models come out because I expect to get a better deal on an ’09.

The vehicle I want to trade in (a low mileage 2006 Hybrid Ford Escape) is worth more than the vehicle I want to buy (2008/9 Honda Fit Sport). This is a funny situation because I expect the dealer to cut me a check. When shopping for an ’08 model, a salesman offered me $500 in cash for the trade. But going by KBB, I could get $2,000 back (before state taxes).

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3 Comments »

  1. Thanks for posting the article, was certainly a great read!

    Comment by Josh Maxwell — August 19, 2008 @ 5:31 am |Reply

  2. Don’t wear a Princeton Univeristy T-shirt or any other clothing that may signal how much money you make. Instead, wear your cheapest Wal-mart clothing and no jewelry.

    Comment by Amie — August 19, 2008 @ 10:10 am |Reply

  3. We went to the dealer with a reasonable pre-approved financing offer from our bank and walked away with a great rate from the dealership because they really wanted our financing business; while the convenience of using our own bank would have been nice we will up saving hundreds of dollars over the duration of the loan.

    Comment by denise — August 20, 2008 @ 9:34 am |Reply


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