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Ready to begin the process of buying your first car? You’re in the right place!
Cars are a part of life. Without a car, it’s hard to do little things like buy groceries and commute to work.
Unfortunately, cars are also expensive, and there is a lot that goes into the purchasing process. It can be especially difficult for millennials who have never purchased a car before you know what to do.
5 new car buying mistakes to avoid
If you’re in the market for a new set of wheels, make sure to avoid these costly mistakes at all costs.
- Only Shopping At One Dealership
Before you buy a refrigerator, don’t you shop around first? You probably hit up Sears, Home Depot, Best Buy, Lowe’s and even Amazon looking for the best deals.
You do this because it’s a big purchase. Well other than a house, purchases don’t get much bigger than buying a car.
So it stands to reason that you should also comparison shop for your car as well. By going to different dealerships you’ll get a better idea of what type of deal the salesperson can offer you.
Keep in mind that the salesperson is there for one reason, to make a commission. They get paid based on a percentage of the profit made on the sale.
So it is in their best interest to charge you as much as possible. But if you decide to get up and leave, they get zero, zip, nada. This is why will notice that each time you’re about to leave, the price suddenly drops a bit more.
This is how you can assure yourself that you’re truly getting their best offer. So opt to leave the dealer and wait for them to lower the price one final time.?
If they have your contact information, you will get their absolutely lowest price on the phone later on in the day or the next morning.
- Shopping At The Wrong Time Of Year
Dealerships get new inventory at the beginning of the year and start over with the sales goals at the same time. That means they will be less likely to cut prices or make a deal at this time.
But at the end of the year, the emphasis is on clearing out old inventory and making the final push to reach their sales goals.So if you’re in the market for a new car, shop in the late summer or early fall, right before the next year’s models come out.
You will still drive away in a new vehicle, but it will cost you thousands of dollars less than had you bought it just a few months earlier.
- Believing The Sale Is Valid Today Only
Don’t be fooled by grand opening specials and test-drive incentives. It’s all a façade to lure you in. Don’t be so blinded by all the bells and whistles the dealership has, such as free hot dogs or crazy promotions that are of course valid that day only.
The salesperson will invariably tell you that this crazy insane sale is only valid today. This common sales tactic is used to get people to seal the deal without going to another dealership or taking time to think about the purchase.
Even if you’re happy with the price you have negotiated, take time to shop around a little bit to make sure you’re getting the best deal.
Resist the urge to succumb to high=pressure sales tactics and don’t sign on the dotted line until you’re completely comfortable with the purchase.
There is usually no return period on new cars, so once you sign and drive away you’re stuck with it.
- Focusing Too Much On The Monthly Payment
One of the first things a salesman will ask is what your budget is. But they don’t want to know how much you want to pay for a car, they want to know what kind of monthly payments you can afford.
They ask you how much you make every two weeks with the goal of seeing how much money they can squeeze out of you every month.
Auto dealers are experts at making that fancy new car of your dreams look affordable by finding ways to lower the monthly payment. Do not fall for these tricks.
They will tell you that you can drive off with this $16,000 car for only $350 a month and no money down. It sounds amazing, but what if you have to agree to a high interest loan for the next 60 months?
That $350 monthly payment translates to a whopping $21,000 over the length of the loan. You have essentially overpaid by $5,000.
This sucks especially because a few years down the line you’ll still be paying top dollar for a car that surely isn’t worth anywhere near the $16k sticker price and most definitely not anywhere near the $21k you will ultimately shell out for it.
Always ask the salesperson this question: what’s the total? No not the monthly total, but the total amount you will pay for the car, including interest.
This is the number that is most important and it’s the number you need to feel comfortable paying.
- Not Doing Enough Research On Your Trade-In
When you’re buying a new car odds are you’re going to be replacing your current car. The easiest way of doing that is to simply take it to the dealer and trade it in.
The value of your trade-in will be deducted from the price of your new car. Sounds good right? Well the problem with this is that you’re going to get peanuts for your car from the dealership.
You can always get a better deal by selling the car yourself. Your current car may only fetch $6,000 as a trade-in, but you might get $8,500 if sold privately. Is that extra $2,500 worth the hassle of selling the car?
That’s for you to decide, but keep in mind you could simply take a few pictures and list the car on eBay.
If you don’t want to bother with selling your car on your own, there is another option. You can take your car to CarMax and they will make you an offer on your car that may beat the dealerships’ offer.
You don’t even have to buy your new car from CarMax, you can just sell them your old one and then shop around for a good deal on a new car elsewhere.
Shopping around for the best deal on a new car is great, but you should shop around for the best offer on your trade-in as well.
Dealers want to pay as little as possible for trade-ins, so it’s important to come armed with information from the Kelley Blue Book app.
Before going to trade in your vehicle, do some homework on the current trade-in price for your car. With this information in hand you’ll have a lot more negotiating power because you’ll come prepared with an idea of what your trade-in is really worth.
5 ways to save money buying your first car
Buying a car is one of the biggest purchases you will make, but it is also important to think about how much it is going to cost in the long run.
That’s why it can be very beneficial to save money where you can when purchasing, so you don’t have to worry too much about future costs.?
Here are 5 tips on how you can save money so that you can buy your first car stress-free.
- First things first, work out your budget
It is crucial that you outline a budget for yourself, so you can determine whether you can buy new or used and how much you can afford in running costs. You have to be realistic about it.
Otherwise, you could run into problems later on, particularly if you little or no savings and your income drops unexpectedly. Consider using a budget planner, and that way, you’ll have a clear idea of how much you can spend.
- Don’t be afraid to buy used
If buying a new car doesn’t work for your budget, buying second hand is still just as good. You may be able to negotiate a lower price for a car that has been pre-loved, so be on the look-out for minor damage that may help you lower the cost.
- Time the market
It is well-known that cars become cheaper towards the end of the year, from September through to December. If that doesn’t suit your schedule, however, you can sometimes get a better deal at the end of the month if the sales staff are trying to meet their quota.
- Pit dealers against each other
The aim of the game here is to start a bidding war for your custom. Once you’ve decided the make and model you’d like, contact a handful of dealers via the web, tell them what you want and when you want to buy.
Ask them for their best price, but let them know that you’re speaking to other dealers and plan to give the sale to whoever gives you the best deal.
Try to make it a true comparison, so be very clear about what you want and what the price includes to avoid any fees added on later.
- Everything is negotiable
Add-on fees are often pre-printed on auto sales contracts, giving the message to buyers that it’s a fixed cost and non-negotiable. This isn’t the case, and smart buyers know it.
With enough negotiating, pre-printed numbers can be crossed out, or an equal amount can be subtracted from another point on the same form. Just be smart and recognize where you can haggle the cost.
9 things to do before buying your first car
- Create A Budget Before Buying Your First Car
Before you even think about buying a used car, figure out how much you can realistically afford. Most financial planners recommend spending less than 15% of your total budget on a car payment.
Don’t have a budget? You can read my guide on how to start a budget you can follow here.
Once you’ve got your budget created, see how much money you have left to spend on a car. Oh and you can figure out your estimated car payment by using this calculator.
Note: Don’t forget to include the cost of insurance in your budget either.
Yeah, I know, it really adds up!
- Research More Than One Model
I know you’re already saying that special car of your dreams. But before you make up your mind, open your eyes and look at other makes and models first.
Every make and model is different. Specific years even have their own pros and cons.
Before you make a purchase, research at least three different makes and models. Pay special attention to each vehicle’s weak points, repair costs, and resale value.
When you’re done, compare and contrast these statistics to help you make your purchase.
If you’re unsure where to start, two of the most popular vehicles for first-time car buyers are the Honda Accord and Toyota Corolla. Both vehicles are affordable, good with gas mileage and have low repair costs.
- Find Vehicles For Sale Everywhere
There are a number of places you can find used cars. Each has its pros and cons. Do you want to save a lot of money? Then buy a car off eBay or Craigslist. Do you want it to be easy? Then go to a dealership instead.
New car dealerships offer a range of new and used vehicles, while independent dealerships tend to offer a selection of used vehicles of different makes and models.
You’ll want to check all the hot spots first: cars.com, autotrader.com and truecar.com. Next, try Craigslist and eBay. Finally, head over to a local dealer once you are knowledgeable about what prices cars are going for.
- Understand Certified Pre-Owned
Some dealerships sell certified pre-owned vehicles at a higher price point. While these vehicles often come with an additional warranty, it may not be worth the markup. For example, while Honda and Toyota have extensive certification programs, other certified vehicles are nothing more than retired rental cars.
A certified pre-owned vehicle will cost you roughly $1,500 more. An alternative option for you is to buy an extended warranty instead, which should be cheaper.
- Check The Vehicle’s History
Always get a vehicle history report before you purchase a used vehicle. These reports will tell you if the vehicle has ever been totaled or had the odometer rolled back.
If you’re dealing with a friend or loved one, it can be tempting to skip this step. Don’t. You may learn information that the seller didn’t even know.
- Contact The Seller
If you’re buying a car from an individual seller, a preliminary phone call will help you gather information about the vehicle and build a relationship with the seller.
During the conversation, ask the seller about the car’s history, present condition, and reason for selling. These questions may reveal information that was not listed online.
This conversation also offers an opportunity to size up the seller. Do they sound shifty or honest? Are they willing to answer your questions, or are they giving you the runaround?
Remember that when you buy a car from an individual, you are taking a huge risk. Cars are sold as-is so there are no returns or refunds, even if the car breaks down on your way home.
- Inspect The Vehicle
When you’ve narrowed the search to one vehicle, arrange a test drive. This is the best way to determine if the vehicle is right for you.
During the drive, pay attention to the vehicle’s brakes, acceleration, transmission, and power steering.
If the drive goes as expected, you should arrange for an official inspection. Just because the car drives good doesn’t mean there aren’t issues you can’t notice.
Most mechanics will offer a pre-purchase inspection for around $100. You shouldn’t buy a used car without an inspection.
- Negotiate A Fair Price
Never settle on the sticker price. Most sellers expect to haggle with their buyers so they list the car for a few thousand dollars more than their minimum price.
When ready, make an offer that’s lower than the average resale price for the vehicle. The first number you throw out there will be the starting point of the negotiation, so you don’t want to start too high.
The seller will make a counter-offer, and you will go on from there until you arrive at a price you’re both comfortable with.
- Don’t Be Afraid To Finance
Many how-to guides will encourage first-time car buyers to avoid financing your vehicle at all costs. Obviously it’s best to save up your money and buy a car without a loan.
But we also have to be realistic. Typical first time car buyers are recent grads who are saddled with student loan debt and will need to start putting their degree to good use right away.
If you will use your car to go to work, then your car is crucial to you making money.
If you have above-average credit, it is entirely possible for you to qualify for a loan with a decent interest rate.
Do you have any tips you can share with millennials about buying your first car?