Tips For Buying A Used Car At Auction

on Sep 29 in How to Buy tagged auto auction, car buying tips, used car auction by jasonl

For most of us, buying a car is the second largest financial commitment we’ll make in our lifetime. So naturally, we all want to get the best deal possible for our dollar! If you’re looking for used cars for sale, an auction can be a great way to pick up a quality new set of wheels, often at a bargain price.

Here are a few easy steps to follow to ensure your visit to the auction yard is a great experience: Read More

Essential Money-Saving Car Buying Tips

on Aug 22 in Buying tagged car buying tips, save money by jasonl

The great thing about being a customer for a new car is that it is you sitting in the driver’s seat. While some dealership sales people might not want you to think so, you  call the shots. While painless car-purchase may sound like a contradiction in terms, the determined among us can achieve this minor miracle because – ultimately -we control the process.

Winners when it comes to car deals are those who, in the face of sales pressure, succeed at paying market value or less for a specific vehicle. Even if you’re sitting at a one-price dealership and they refuse to budge, you, the potential purchaser, have all the cards in your hand…you will win eventually if you have patience and stamina.

Some Car-Wise Buying Tips

There are just a few rules to observe if you want to land that perfect deal:

• Firstly, line up a few establishments to visit, including, preferably, some that have been recommended by acquaintances or by popular social review sites like Yelp.com or DealerRater.com
• Once there, remember that while the salesperson is stuck all day working at the same dealership, youhave the freedom to walk away. Use this to your advantage.
• Set a time limit for yourself and adhere to it strictly. Put the salesman under pressure by stating at the outset your intention to spend a specified maximum time (say, 60 minutes) on their premises.
• Take things up a gear by pointing out what tempting offers Y and Z dealerships are currently running, showing that you are on the horns of a dilemma. With that possibly greatest of all negotiating tools under your belt, the onus shifts to the salesperson to present you with an unbeatably attractive deal.
• If you’re a cash buyer, ask about paying with your rewards program credit card. You can always pay off the statement at the end of the month, and the points you earn could buy you a plane ticket.

Be A Buyer Who Has Done Their Homework

The best ammunition the purchaser can be armed with is the fruits of research. Know all you can about the model of car you are pursuing, about list prices for the various years. If you are buying brand new, make sure you know the invoice price. [NOTE: Edmunds.com has some price info called True Market Value that can be particularly useful when negotiating the price of a new car – Editor.)

Be prepared to be bold and to commence negotiating by offering under the invoice price. Don’t be tempted to take pity on the salesperson who spins the story that there is little profit for the company in the sale of a new car. While this is often true (since dealerships really make their money from used car sales, parts, and service), it doesn’t matter to you and your transaction. All that matters is the final cost.

Use The Information Revolution

If a used car is what you have in mind, vehicle background checks from Carfax and AutoCheck are well worth taking advantage of…especially because most dealers will provide one or both of these reports to you for free. A vehicle history report enables you to gain details of the history of their prospective wheels, including true mileage, accidents, salvage damage, lemon law claims, as weel as the estimated number of owners. Remember however that Carfax and AutoCheck are only as good as the data they receive;  they’re not a substitute for a physical inspection from your local mechanic.

The final point to keep at the forefront of one’s mind is: be observant. Nothing replaces a thorough personal examination. If you are going to ride around in it, get acquainted with it!

Annie is the frugal blogger for Credit Card Finder, the free Australian credit card comparison tool.

Should You Buy An Extended Warranty?

on Sep 08 in Warranties tagged car buying tips, Warranties by jasonl

Extended warranties aren’t for everyone, but they can be a good purchase for a lot of consumers. Here’s how you can decide if an extended warranty (aka service contract) is right for you:

1) Do you have the ability to pay for a big repair? The worst-case scenario with any vehicle is that a major part (like an engine or transmission) fails and you get stuck with a huge bill – $1,500+. The good news is that huge bills are pretty rare. If you feel confident in your ability to come up with that kind of money, than you may not need an extended warranty.

2) Are you buying a reliable vehicle? Before you buy a new or used car, you should spend some time figuring out how reliable it is. Do some reliability research on new cars, and check out our advice for figuring out if a used car is reliable. If you have any doubts about a particular car’s reliability, buying an extended warranty might be a good idea. Of course, if you have doubts, you should also consider buying a different car.

3) Is the car for someone else? Are you buying a car for someone else to use? If so, are you concerned that they might be taken advantage of? Extended warranties prevent your friend or relative from being talked into unnecessary repairs, especially if you’re not close by to help them out. [Far away college students and older relatives come to mind.]

4) Budgeting is easier than paying for repairs. Even if you can afford to pay for an emergency repair, there’s a budget advantage in buying an extended warranty – especially if you can finance the cost with your loan. Adding a comprehensive service contract to your car payment costs the same amount every month, ensuring that you know exactly how much you’re going to spend on repairs every month.

The main advantage in buying an extended warranty is that you don’t have to worry about repair costs. You pay up front knowing that whatever happens during the term of your service contract, you don’t have to worry about paying for repairs. We’ve seen warranties pay for new engines, transmissions, transfer cases, engine control modules, etc. They can definitely pay off. The main disadvantage in buying an extended warranty is that you may not get your money’s worth. If you pay $2,000 for a 6yr/100k mile comprehensive warranty, and your car never needs a repair, your $2,000 was wasted.

My official advice – if money’s tight, an extended warranty is a good bet. While you may not get every dollar you spend on an extended warranty back, there is a good chance you’ll need to fix something. Considering that a “cheap” repair is a few hundred dollars, buying an extended warranty – especially if it can be financed with your car – makes sense for a lot of people. On the other hand, if you’re well off enough to pay for repairs (even really expensive repairs), then an extended warranty is not for you.

Used Car Value: How Much is a Used Car Worth?

on Jan 30 in How to Buy tagged car buying tips, Used Cars by jasonl

We recommend three car valuation guides that are popular with both consumers and auto industry experts: NADAguides.com, kbb.com (Kelley Blue Book), and Edmunds.com.

When it comes to a used car, each of these guides will give you two numbers – the wholesale value (also known as the trade-in value) and the retail value.

Wholesale or Trade-In Value: This is what you can expect to get for a vehicle that has normal wear and tear. It’s usually a fair price for vehicles in average condition for their mileage and age. Because this is an average, half of the vehicles on the road will be worth more, and half will be worth less.

Retail Value: This is what you’ll pay for a vehicle that is completely free from defects – it has been 100% refurbished, and it’s as nice a car as you can hope to find for that year and for that mileage. Dealers and private individuals will try to charge full retail value, but keep in mind that less than 3 percent of the cars in the United States are in such excellent condition and worth retail value. In other words, retail value is usually the most you should ever pay for a used car.

When figuring out a fair price for a particular vehicle, it’s important to remember you must adjust for miles and condition. Here are some of the things you’ll need to account for:

• The average annual mileage in the U.S. is 12-15k miles. If the car you’re looking at or trading in has more than twice the average, you should expect to deduct more than the recommended mileage deduction. It’s commonplace to double or even triple the mileage penalty for extreme mileage situations (this is particularly true with NADAGuides).
• If the vehicle needs tires, deduct $400-$600 from the value of the car– if you’re not sure how much you can always call the local tire store and find out.
• If the vehicle needs a windshield, deduct at least $300 from the value.
• If the vehicle needs minor scratches repaired or small dents knocked out, that again will cost a few hundred dollars.
• If you can stand five feet away from the vehicle and see dents or scratches on the car, you should have a body shop look at it to get a sense of how much it’s really going to cost. Believe it or not, a seemingly minor cosmetic flaw can run into the hundreds or thousands of dollars.
• If you’re looking at any substantial body damage, get a second opinion. Body estimates can vary widely.
• Whatever the damage is, it’s best to have an estimate in hand. That will make determining the actual value of a car much easier.

It’s important to remember that you should be just as aggressive valuing your own car as you would a car you’re trying to buy – fair is fair.

The process of valuing a car using kbb.com or Edmunds.com is only a guide. The actual price of the car will be determined by factors such as the local market, the time of year, and how available that type of vehicle is. When you come up with a value, don’t feel like that is the only acceptable one. Too many times people get caught up in a specific number – instead, tell yourself that if you can get within $500-$1000 of the value you’ve determined, you’ve done pretty well. Besides, if you’ve done your homework and you’ve followed all our car buying negotiation tips, you’re going to get a good deal.

As always, take your time when buying a used car. Do your used car research, get multiple used car financing quotes, and feel free to contact us with your questions.

What is Dealer Holdback?

on Jan 30 in New Cars tagged car buying tips, New Cars by jasonl

Holdback is money that an auto manufacturer pays a dealership to stock their inventory.

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You’re probably wondering why a dealership needs to be paid to stock inventory. After all, if the dealer wants to sell cars, don’t they need cars on the lot? Why do they need to be paid for that?

The answer is that most dealerships need to borrow money to put cars on their lots. Think about it this way: if a dealership has 200 cars, and the cars cost an average of about $25,000 each, that’s $5 million in inventory. Dealerships, like most other businesses, don’t have that kind of cash flow, so they need to borrow the money to pay for every car on the lot.

Of course, when you’re borrowing $5 million you’ll have some pretty expensive interest payments. These interest payments are known as “floorplan.” This floorplan can add up to an awful lot of money very fast. Depending upon the interest rate, it can cost anywhere from $3 to $20 per day per vehicle in inventory. It doesn’t take long to do the math to figure out how expensive it is to stock inventory. Because of this expense, many dealers decide not to stock a lot of vehicles.

Thirty or forty years ago, manufacturers, eager to sell as many cars as possible, decided that it made sense to pay dealers some “floorplan assistance” so that they would be able to stock more cars. Today, dealers receive 2-3% of the price of every vehicle back from the manufacturer when they sell the car. That money is supposed to be used to offset inventory costs.

For many dealers, holdback is a necessary part of their income. However, you’ll also find dealers with such high turnaround that holdback is a type of profit for them – they actually make money on the interest subsidy because they’re able to sell all their inventory very quickly. Having said that, it’s very difficult to expect a dealer to share any of their profit from holdback with you. Most dealers are already operating with a pretty thin profit margin, and they feel like the holdback money belongs to them. Besides, most customers don’t know about holdback or ask for it.

If you’re trying to get the best deal, follow our standard car negotiating advice, and also remember to go online and get multiple quotes. If there’s a vehicle the dealer really wants to sell and you’re interested in it, you might be able to convince them to sell it for less than invoice. Even if they don’t make a profit, they’ll still have their holdback money, and you would have gotten the vehicle at a bargain price.

7 Tips For Buying A Car From A Private Seller

on Jan 24 in Buying tagged car buying tips, Used Cars by jasonl

Buying a car from a private party can be a great way to save some money. Millions of people buy and sell their cars privately every year, and 98% of the time the transaction is honest and forthright. Nonetheless, it’s imperative that you that you follow these tips so that you don’t get taken advantage of.

1) Be Suspicious: We’ve heard unbelievable stories about people getting taken advantage of by private sellers. People will lie about how they got the car, who owned the car, why they’re selling, etc. Don’t always believe what the seller tells you: take everything with a grain of salt.

2) Take your time: If the person trying to sell you a car is a con artist, they’ll want to consummate the sale as quickly as possible. If they’re trying to “pull a fast one”, they’ll offer you anything to get you to buy immediately.

3) Ask a lot of questions: If a person is trying to sell a car that doesn’t belong to them, they’re going to have a hard time answering questions like “when did you buy your car,” or “has it ever been in an accident,” etc. It’s also smart to ask lots of questions because you’ll be surprised what the seller will volunteer. Just make sure that you listen to the answers carefully.

4) Get the car inspected before you buy: There’s absolutely no reason why a legitimate private seller wouldn’t let you take their car to a mechanic to have it looked at. If the seller is trying to hide something from you (like a bad transmission, flood damage, etc.) they won’t let you get the car inspected. If you can’t get the car inspected, don’t buy it.

5) Compare the seller’s ID to the title and registration: Before you buy from a private party, it’s important to compare their ID to the car’s title and registration. Everything should match, but if it doesn’t, you should tell the seller you need to meet the actual owner (the person on the title and registration). If you can’t meet the actual owner, you might consider walking away. If you buy a car from a person whose name isn’t on the title, you could be buying a stolen vehicle.

6) Ask for emissions test records, inspection records, etc.: You will need these records to register the car after you’ve bought it.

7) Complete a Bill of Sale: A Bill Of Sale is a good idea – it will help protect you from any future problems (in case the sale was illegitimate), it’s a good record to have, and it may be necessary for insurance, registration, etc.

As always, take your time when buying a used car. Do your used car research, get multiple used car financing quotes, and feel free to contact us with your questions.

When Is The Best Time to Buy a New Car?

on Jan 07 in New Cars tagged car buying tips, New Cars by jasonl

Just like fruits and vegetables, there are good times of year to buy a new car, and there are bad times. The car-selling season officially begins in March, and it runs through mid to late October, but that doesn’t necessarily mean that those are the best times to buy.

For instance, if you’re looking to lease a vehicle, the best time to do that is March thru May. That’s because late in the first quarter and early in the second you’ll get good residual values, good rebates from the manufacturers, and good lease rates. In fact, you may even be able to get a good lease deal as early as January. However, once the second quarter ends in June, good lease opportunities tend to go away, and leasing becomes a lot more expensive as the manufacturers shift their focus away from leasing to purchasing.

The best time of year to purchase a new car (with either cash or financing) is August or September. Our advice here is to buy the current model (not next year’s), the reason being that manufacturers and dealers offer their best incentives at the end of the model year. The only problem with waiting until the end of the model year is that you may not get what you want: inventory levels are usually depleted by the end of September. If you’re trying to get the right car at the right price, it may make more sense to start shopping at the end of July (especially if the car you want is kind of rare or special).

Of course, you can wait until October or November and get a really fantastic deal, but because inventories have been picked through by then you may not find exactly what you want. In our experience, it’s better to get a car you like than to get a good deal because you’re more likely to trade-in a car you dislike earlier than you should. If you’re looking for a specific color, feature, etc., it’s best not to wait too long. But if those things don’t matter to you, the end of the year is a good time to almost steal a new vehicle.

One thing we come across all the time that we think is really bad advice (and is among the reasons we started this website), is that many people will tell you that buying a new car at the end of the model year is a bad idea. They’ll tell you that you’re basically getting last year’s model, and even though you’re getting a discount, the resale value is going to be lower.

However, none of those reasons should matter – you really shouldn’t be buying a new car if you’re worried about resale value, especially over the next two or three years. New cars are for people who intend to keep their vehicle for a very long time (5 years +). If you’re only going to keep the car you buy for only a couple of years, either lease or buy used – you’ll save a lot of money.

During major holiday weekends manufacturers spend a lot of time and money on marketing and incentives – think about buying during the July 4th, Labor Day and Memorial Day weekend sales. Dealers are aggressive and incentives are good.

As always, take your time when buying a new car. Do your new car research, get multiple new car financing quotes, and feel free to contact us with your questions.

Car Buying Tips: Don’t Get Emotionally Involved

on Nov 19 in Buying tagged car buying tips by jasonl

First, a little philosophy. Cars are not worth being attached to. They’re just plastic, aluminum, iron, some rubber, and some oil: they’re just a “thing.” They get old, they wear out, and even worse, they can be destroyed at any time. You can park your car on the side of the road on a Friday or Saturday night and find out that somebody ran into it at 2 a.m., and it’s been totaled. If you’re emotionally attached to it and it’s been destroyed, you’ll probably be devastated. Why go through that?

There’s another good reason not to get emotionally involved with a car — when it comes to buying a vehicle, salespeople can tell if you’re emotionally involved. Like sharks can smell a drop of blood from miles away, salespeople can smell emotional involvement. They’ll use it against you; they’ll tell you that somebody else is going to come and buy the car you want if you don’t buy it today, right now. They’ll tell you that this is the best price you’ll find on that car …it’s a really nice car and people love it: anything to reinforce the image you have in your head that the car you want is the best in the world.

It’s also important to know that when people get emotionally involved, they often make bad financial decisions. These emotions can get so strong that a person might decide that even though they’ve set a budget of $350 a month, they really really want to buy a particular car. They’ll “cut back” here and there in order to be able to afford a higher monthly payment, just so they can get the color they wanted, or a special feature or two. I’ve found that people make these decisions because they think it will make them happy (because they’re emotionally involved) but they end up putting themselves in a difficult situation financially.

Emotions don’t just apply to the car you’re buying either — they often can apply to the car your trading in. While it’s normal to have a special place in your heart for your trade-in, don’t let that keep you from getting a good deal. If you take a step back and look at your trade-in objectively, you’ll usually have a better idea of what it’s worth.

Steer clear of emotions when buying your next car. Figure out your budget, figure out what you need out of your next car, do your research, and you’re guaranteed to get a good deal.

Car Buying Negotiation Tips: Patience and Walking Away

on Nov 19 in Buying tagged car buying tips, car dealer tips, negotiation tips by jasonl

When it comes to buying a car, be patient, and don’t be afraid to walk away.

First of all, patience is a blessing when it comes to buying a car. Any buyer that doesn’t have to buy right away has the advantage. Sellers have to sell within a certain amount of time. A private seller might only have the weekend to sell a car, while dealerships usually have no more than sixty days to sell a used car. As for new cars, the dealership has only three or four months before they decide that it’s an old piece of inventory and they have to sell it. So if you have patience, and you don’t have to buy the next deal that comes your way, you might be able to go back to a dealership in a month or two and make an offer that’s a little low and get the car just because it’s a little old.

One of my best car buying tips is that you should always be willing and able to walk away from an offer. This can be your best negotiation strategy. By walking away, you make sure that you’re getting the seller’s best offer. Here’s why:

• Most sellers (private or dealership) realize that if you leave, you’re probably not going to come back. They have one shot to sell you a car.

• Sellers know that they need to make you their best offer before you go – they feel that if they tell you their best price and you still leave, then it just wasn’t meant to be.

• Here’s the best part of the “walk away” strategy: if you tell a salesperson or a private seller, “Thanks, but this just isn’t the deal that I’m looking for,” and you leave, they might call you in two hours to say they’ve got a better price.

• If you don’t hear from the seller, and you really want the car, you can always call them back and tell them you’ve changed your mind, that you realized it’s a nice car and a pretty good deal, that you’re willing to take it now, etc.. You can do this and know that you’ve negotiated for the best price while also saving face.

As always, take your time when buying a new or used car. Do your car research, get multiple used car financing quotes, and feel free to contact us with your questions.

Car Buying Tips: Get Your Own Car Financing

on Nov 19 in Financing tagged car buying tips, Financing by jasonl

One of the best things that you can do if you’re buying a car is to get your own financing. There are a few good ways to do it, but one of the best ways to go about it is to get multiple quotes. The more quotes you get, the more options you have. There can be a lot of variance in the quotes, and every lender has its own scoring system: some lenders will give you points for being a college graduate, others will give you better terms because you had a good account with an affiliated company, etc.

It’s also a good idea to get multiple quotes and have your own financing available because it gives you power. If you have your own financing available, you can use it as leverage to get a better rate at your local dealership. If you walk into a dealership and you don’t have any financing lined up, you don’t know anything about your credit, etc., they might be able to convince you that you have bad credit when you really don’t, and they might be able to charge you 3 or 4 percent more in interest than you can get otherwise.

But remember when you get your own financing that dealerships tend to have the best lending rates. By using the quotes you get on the internet, it might be easier for you to get a special rate or a discount. The dealership is likely to have millions of dollars in loans, and the bank will be more willing to work with the dealership for a special interest rate than they would an individual who has only one loan for a few thousand dollars. That’s why it’s a good idea to get your own financing lined-up on the internet, you can still finance at the dealership, but you can use your outside quotes as a bargaining tool.

In addition to using our recommended car financing quote services, you should also consider calling your local credit union. Sometimes credit unions offer better interest rates, and they’re a good resource you should check into.

Before you look for financing, you should:

• Review your family’s finances to find out just how much you can afford to spend. You can use our budget calculator and read more about figuring out how much car you can afford.
• Make a list of all the vehicle features you will really need.
• Keep in mind that the car’s sticker price does not mirror the full cost of owning a financed vehicle

Securing reasonable financing is easier than ever in today’s changing consumer market, with increasing competition between car dealers and financial institutions. Pre-shop for the car that fits your budget – use the library, the Internet, your neighbors, competing car salesmen – every available means to learn who is offering the lowest financing and interest rates.

As always, take your time when buying a new or used car. Do your car research, get multiple used car financing quotes, and feel free to contact us with your questions.