It’s another edition of Molly’s Money! This is a series I have been writing on this blog for almost TWO years where I talk about all things personal finance. Check out my previous posts in the series here.
This week’s post is all about BUYING A CAR! Woop! I realize that there are A LOT of schools of thought on the car buying business… but, these are just my thoughts, my experiences, and what I’ve learned in the past with buying cars… So, take it for what it’s worth, but I hope this is helpful or insightful for some of you!
1. DON’T Be In A Hurry
When you’re in a hurry, a car salesman can sense that and is less likely to work with you because he / she knows you’re desperate. When you’re not in a rush to buy a car, the ball is in your court. It gives you more time to REALLY shop around, look at the best deals, and compare prices.
2. DO Pay Cash For a Car. Seriously. ONLY PAY CASH FOR A CAR.
I realize a lot of you may be thinking, “But I don’t have $16,000 to pay cash for a car!” Well, to that I say, “Then don’t buy a $16,000 car. Buy a $5,000 car and save up for a $16,000 car.” It’s just not worth it to have a car payment! I remember when I was shopping for my mom-mobile last year, there were so many 3-4 year old cars on the lot. The car salesman explained that it’s because so many people will come, finance a new car, pay it off in three years, and then come and trade it in and start the process all over again. It’s like it’s normal for them to have a car payment and they can’t handle NOT having a car payment… it’s like it’s a mentality thing.
I’m not knocking you if you have a car payment or have financed a car in the past… it’s just something that I really, really feel strongly about! Think about all the money you save if you don’t have a monthly car payment!
Think about it… if you put $300-$400 a month in savings (the average monthly payment of a new car)… you could EASILY be able to pay cash for a small car within 10-12 months!!! And think about if you saved even longer…
3. DON’T Lease a Car
I realize I just said DO pay cash for a car and that should include not leasing a car… but seriously. Leasing a car is a HUGE waste of money. You’re literally throwing money away each month. And in the end, what do you have to show for it? Nothing. That’s all I’m going to say about that.
4. DON’T Buy a Brand New Car
I will preface this by saying TWO of the five cars I have owned in my lifetime I bought BRAND new. And I regretted it BOTH times. For example… I bought a BRAND NEW Jeep Commander when I was in college. This was, admittedly, during my time of extremely poor financial decisions. Please do not judge me. I’ve talked at length about this… Nine months later I realized how poor of a decision it was and I decided to sell the Jeep to get something more reasonable. In NINE MONTHS the value of my Jeep was almost HALF of what I bought it for. It was a little more than half… but still. I lost a TON of money on that car. And it was no bueno. I was mad.
On AVERAGE, a brand new car loses 20% of it’s value within the first six months. SIX MONTHS. Within five years the value of a new car drops 65%. Do you realize how much money you’ve lost on that brand new car?
I realize that a lot of dealerships offer GREAT warranties and bells and whistles with new cars… but so do a lot of used car dealerships. Trust me… the money you will save in the long run by buying a used car TOTALLY outweighs the bells and whistles of a brand new car.
5. DO Your Research
Know exactly what you are looking for when you go car shopping. Do a TON of research online before you ever step foot on a lot. Price cars out via Kelley Blue Book. Read the Consumer Reports on it. Know what you want. Be knowledgable. It makes you much more credible to your sales person!
6. HAGGLE. But Do It Right.
ESPECIALLY if you are paying cash for a car, you have much more wiggle room for haggling the price of a car. Don’t totally low ball the salesman, but know what you are looking to spend ahead of time and see how much you can negotiate. Always take into account “Tax, Title, and Tags” – that can be a ton of extra fees at the end that can sneak up on you.
When we were shopping for a car last year, we knew we wanted to spend NO MORE than $16,000 FLAT. We wanted to walk off the lot with a car having spent less than that… including tax, title, and tags. So, when it came time to haggle… we said, “Here’s what we want to spend, we won’t go any higher than this. Period.”
The salesman kept trying to upsell us and we actually said we were walking away…
He said, “wait, wait, wait!” and… we walked away with what we wanted!
7. Be Willing to Walk Away
This goes with #1 and with #6. If the price just isn’t right, if something just doesn’t sit right with you, or if something is off… be willing to walk away. A lot of times the salesman will be willing to work with you if he / she thinks you’re serious. Other times it just gives you the freedom to better compare prices and experiences elsewhere.
8. Never Go Shopping Alone
Bring a spouse, significant other, friend, etc. with you when you go. Don’t go alone! Having someone else there to speak on your behalf or discuss the pros and cons with you will really go a long way!
What about you? What tips do YOU have for buying a car? Any you would add to the list?