How to Save Money on Your Next Vehicle Purchase
Second to buying a home, a car purchase is the most expensive purchase most people make. Unfortunately, many people make it more expensive than it has to be. Between paying high interest on car loans and spending too much at the dealer, many people could be saving thousands of dollars over the life of their car. Here are a few tips to save money on your next car purchase.
#1 Buy used. The plain and simple truth is the moment the dealer puts those keys in your hand, your car is worth as much as 20% less. That means a $40,000 car is now suddenly worth $32,000, just because you own it. That’s eight thousand dollars just for driving it off the dealership lot. And some cars depreciate at that rate for the next couple of years. If, however, you buy a used car – and we’re talking only two or three years old, then you’re saving thousands of dollars on the price of the car. And chances are the car is still under warranty and still in great shape.
#2 Consider buying privately. Dealers mark their cars up; it’s how they make money. And used cars are marked up as much as 30%. That means a car that’s worth 10K through a private seller may go for as much as 13K or more through a dealer. It’s not uncommon to see a used car marked up 50% at a dealer.
However, buying from a private seller does have some risk. The risk is reduced by making sure you can get a car fax, by having the car inspected by a mechanic and by taking someone with you when you test drive the car. Make sure you have a buyers/sellers agreement signed and purchase the car with a certified check or money order, and you should be just fine. Also trust your instincts!
#3 Do your research. If you’re committed to buying a new car from a dealer, then make sure you do your research first. Find out what the car’s value is by visiting Kelly Blue Book or Edmunds, and make sure you have a good credit rating going into the purchase. A one or two percent increase in a car loan interest rate can add up over the course of the loan.
Knowing how much a car is worth will give you room to negotiate. And if you have a trade-in or ability to make a larger down payment, you’ll have more negotiating room. Car dealers make money not only on the sale of the car, but also on selling your car loan to other lenders. Having a good credit score gives you some wiggle room.
Now, negotiating makes many people uncomfortable and dealerships know this. Here’s a small bit of advice. Make a list of cars you’re interested in buying that are in or slightly above your price range. Write down how much you’re willing to spend each month on a car loan. Or if you’re paying cash for the car, write down how much you have to spend.
Now put the car you’d most like to own, or the one that’s perhaps a bit outside your price range, at the top of the list. Then put the next expensive one under that and so on until the least expensive car is at the bottom. Now go to the dealership of the most expensive car. (Presumably you’ve taken test drives and are certain you’re interested in this car.)
When they start the negotiation process with you, you have the knowledge of exactly how much you can spend. Don’t go over it. And if you can get the car for less than your budgeted amount, congratulations! This tactic works because you’re armed with knowledge and a boundary. Most people struggle with negotiation because they don’t go into it with boundaries and a solid idea of what they want to get out of it.
And always be willing to walk away. You have your list of cars – if the first one doesn’t work out, go to the next one or try another dealership. Each negotiation is a learning experience. Use it and save money on your next car purchase be sure to check out Sunset Ford so Sumner for all of your vehicle needs.
Rob Benton says
I agree that it is a good idea to buy a used car as opposed to a new one. My family has always done so, and we have not experienced more costly issues than the expense which purchasing new cars would have created. I think that as long as the vehicle is looked at with an observant eye, then you won’t have too much of a problem with it, even if it is used.
James Hobusch says
I like what this article mentions about depreciation. I am looking to buy a car, but I plan on selling it when I have to move in a few years. It’s interesting to read that new cars can depreciate up to 20% just by driving it off with your name on the title. I definitely think that the best value for me would be a used car if I sell it. I will definitely have to keep this in mind. Thanks for sharing!