Here’s an article I posted on my Morning Show blog. Please comment below if you have anything to add.
Money saving tips for buying a new or used car…
Buying a new car is big deal. It’s probably the second largest purchase you’ll ever make. It will be well worth the effort to give the process some thoughtful consideration.
First, lets assume you’ve done your research and you’ve chosen the right vehicle (sounds like a no-brainer, it’s not). Here are five tips to help you save some money when buying a new or used car.
1. Cash or financing?
Cash is best, if you have it. Even if you only have some of it. Finance only what you have to.
Cars are depreciating assets (actually, they are more like a liability). As soon as you drive off the lot, your car starts to become worth less and less. Carrying $25k in debt seems fine if you’re driving a brand new car, but still carrying $23k in debt when that car is 4 years old is not as nice.
If you do need to finance the car (or part of it), you should know that the financing offered by the dealer is not the only option. Check with your bank – if the car place is offering you a 5% loan, the bank may be able to offer you a 3% loan and who knows; your in-laws might be happy making 2%, so shop around.
2. What about 0%
Here’s the exception to the “don’t finance your purchase if you can help it” rule.
It seems like a lot of car dealers are offering 0% financing lately (usually just on new models). If 0% is available on the vehicle you want, take it. Bank your money and use theirs to pay for your car.
If you put the $25k in the bank for 60mnths at 3% you’ll make about $3,600 in interest. So keep your $25k in the bank while you use their $25k interest free for 60mnths. You will end up $3,600 ahead after 60 mnths.
3. Wait on the Trade In!
This is where most people get it wrong. You go into the dealership saying “well, how much will you give me for my clunker?”.
If you are trading in your old vehicle, bring it up only after you have already negotiated the best possible price for your new car.
You should research the value of your old car so that you know what it’s worth. Search for similar vehicles to your trade in on Kijiji or Auto-trader and see what others are asking for your make and model. Keeping in mind “asking prices” are not “getting prices”, this should give you an idea on what to expect for your trade in.
4. Give it a Couple Days
Do not buy on impulse. Do not buy because you need a car in two days for a road trip.
You will be in the best possible position to deal on a vehicle if the salesperson is more anxious than you to get the deal done. So, walk away and come back in a day or two. You may change your mind on options, on financing or you may even decide to put off the purchase for a while.
If you find yourself saying, “but I love this car”, it’s time to walk away for a day or two. It’s only a car.
5. To Haggle or not to haggle
I know you don’t like to haggle, but you have to.
The price on the sticker is the MSRP (Manufacturer’s suggested retail price). That is the price the guy that made the car wishes he could get for that car. If it’s a used car, that’s the price the guy thinks he’d like to get for that car. These prices are high. Always pay less than MSRP.
Research all of the factory intensives available, like rebates and other price reductions and take those off the MSRP.
Use the Internet to see the prices of similar vehicles in other cities and at other dealers as well. This should give you a good idea of what to offer.
Ask to see the factory invoice. Typically, if they show you the factory invoice (the price the dealer paid the factory for the car), experts say a fair price is $200 over the invoice price.
Comments, questions or suggestions? Email Mike Benny
Here is some more reading from a CNN/Money article.