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New car smell, soft leather seats, shiny new paint and, these days, a technological dream… the car-buying experience really is “sense”sational. Eying that new car can be like having a new crush – everything seems worth it and it can be tempting to jump right in. Like any new relationship, it’s important to think it through and not let our emotions get the best of us. So, before you drive off into the sunset in your shiny new whip, consider these car-buying tips to help you keep yourself – and your budget – together.
Do Some Recon: The internet makes it easy to get the dirt on a new purchase. Educate yourself online before negotiating with a dealership or private party. Truecar.com is a great resource to see what the car of your dreams has been selling for in your local area.
Don’t Be Needy: We recommend arranging financing through a bank or credit union, prior to heading to the lot, as rates may be more competitive. It can also be quite amusing when the dealer agrees to come down on price, thinking they can increase your interest rate to make up for it.
Remember, Timing Is Everything: If you decide to purchase your car from a dealer, timing is everything. If possible, consider waiting until fall to buy when dealers are anxious to make space for new models. Show up towards the end of the day when sales people and managers are eager to close the deal and get home. Waiting until the end of the month or quarter when sales targets need to be met can also give you negotiating leverage. Finally, consider buying from a local dealership. They may be more flexible on price with the hope that you will use them to service your car in the future.
Consider Your Options: It’s easy to get swept away by the newest model, but is it worth the price? You could pay as much as 30%-40% over the price of a three year old model. Granted, buying new comes with peace of mind about the condition of the car, plus an extended warranty from the manufacturer. However, there are tools such as CARFAX, available to help minimize the risk of buying a used car. Even better, many dealers offer Certified Pre-Owned cars that have undergone extensive screening and qualify for an extended warranty.
Define the Relationship: Although television ads make leasing appear incredibly inexpensive, it can have major drawbacks and can end up costing much more overall than buying a car outright. Leasing works best if you would trade your car in every three to four years anyway, don’t want to hassle with maintenance and don’t drive more than the mileage allowed (typically 15,000 per year). A major downside to leasing is that you are forced to make a major financial decision every few years. Will you negotiate a new lease or buy the car? The more prudent financial decision is to skip the lease and drive your car for seven to ten years.
Think Beyond the Honeymoon Phase: Most important, don’t forget the additional financial commitments you may be making – especially if you’re upgrading. You may need to consider increasing your auto insurance liability limits and comprehensive coverage. On top of traditional insurance, you may want to consider “gap” insurance, which will pay the difference between what you owe and what your car is worth if it gets totaled. Gap insurance is often cheaper through your insurance company so, when the dealer offers it – and they will – decline. On-going maintenance, car washes and gas add up; it’s not just the monthly payment you have to consider in your budget.
Oh, and remember the registration you paid for on your old car? Consider it gone. You won’t get a refund, even if you paid in November and sold/traded in your car in December. Again, consider timing.