Photo courtesy Edmunds.com, Taken by Scott Jacobs
Purchasing a Car
Car dealerships are a business. And, like any other business, they need to make money. Therefore it's pretty reasonable to assume that car dealers are out to sell you a car and make the most money possible on the deal. As a consumer, you want to get the best product for the best price. To attain that goal, you must avoid the common and costly pitfalls of car buying. Here are some points to ponder before you purchase:
- There are two times of the year in which you will get the best price on a car: the last two weeks of December and July to October.
- Competition gets you the best price. Know what other dealers are charging for the car and then the deal will be on your terms, not the dealer's.
- Know your credit history and remember that it is illegal for anyone to run a credit check on you without your permission. Some car dealers actually ignore this rule.
- Don't give the dealer your license or social security number.
- Cars that need to be ordered from the factory should NOT cost more than the cars on the lot. Don't be fooled.
- Be wary of letting a car dealer locate the car you want from another dealership. They often charge you unnecessary fees.
- It is illegal for a car to have a missing MSRP or price invoice sticker.
- Don't fall for advertising. Do your own independent research.
The thing that makes most car buyers nervous is that they know they are going to have to negotiate. Don't be afraid of negotiating. If you go into the dealership with a very good idea of what you want and what you want to pay, the negotiating is up to them, not you. You've done your work and now the dealer has to work to get closest to the price you want to pay.
One common dealer scam happens after you have decided to buy the car. At this point, the car salesman may start asking you to pay a variety of extra charges. This can mean hundreds or even a thousand or so dollars. Don't fall for these tactics. You agreed on a price and you should stick to it. Don't be afraid to walk out of a dealership if you feel that you are being treated unfairly. The bottom line is it's your money and you don't want to lose it because you didn't speak up.
One more thing to keep in mind is that, according to Car Buying Tips.com, trade-in buyers are among the world's most gullible people. Car dealers can make tons of money by giving you below market value for your trade-in. On top of that, they're probably reaping a large profit on your new purchase. In addition to a profit on your new car purchase, they will also sell your trade-in for far more than they paid you. If you are armed with a realistic idea of what your trade-in is worth, you'll know if the dealer is trying to take advantage. If you have a down-payment in addition to a trade-in and your trade-in is in good condition, you could consider trying to sell the car on your own. You might get a better price for it.
Okay, so you've found the perfect car. Before you even think about purchasing it, you need to know how you're going to pay for it. If, by some miracle in today's economy, you have saved enough to pay for the entire car, you will not need financing. But most car buyers today make their purchase by paying a down payment and then financing the balance -- making monthly car payments until the remainder of the loan is paid in full. Remember, that financing is a loan and as with all loans, you have to pay interest. Unless you don't mind paying thousands of dollars in interest, you'll want to make your down payment as high as you can afford. The low Annual Percentage Rates (APR) that dealerships and car companies advertise on television are the interest rates the dealer charges for financing. Often, those low rates are only for people with perfect credit or they are an introductory rate, meaning they will go up after a certain period of time.
If you know you have to finance the car, you need to shop around for the best interest rate. If you meet the qualifications set out by the car dealer -- perhaps you're a first-time car buyer, or you have excellent credit -- you may want to consider going through their finance department. Just make sure you read the fine print. An APR of 1.9% sounds great until you realize that is for the first year only. You want a low rate for the entire period of your loan.
Of course you can check out the rates at local banks and credit unions. But, you may find some of the most competitive rates on the Internet! Check out Web sites like ELoan, Lending Tree and PeopleFirst. The key to a great deal is to get the best price on the car as well as the best possible financing rate.