Category: Money Mondays

All this weekend I kept hearing “Model Year End Sale Event” while watching TV.  It reminded me that this month marks my one year anniversary of purchasing my current car.  I planned years in advance, pushing the car I had been driving for as long as I could possibly, in hopes that I could save enough to afford the car I wanted.  Cars can be a big purchase and if you are going to spend that kind of money than you should do your homework.  Here is what I found out:

1. Check to see if you have money in your budget to buy a new or newer car. If not, then it is probably not a good idea to try and buy one.  A used car, might get you from a to b, until you can free up and/or make enough money to afford a car payment.  Experts suggest that you should spend no more than 20% of your household income to buy and operate car.

• If you have extra money in your budget but are not sure you can truly afford making car payments, then make pretend payments.  What are pretend payments? In 2008 I knew that my car was not doing well.  I had an idea that I would have to replace it soon but wasn’t sure if I could make payments on a car.  I decided to put aside an amount that I thought I could afford each month without hurting my budget. Each month I would write that “pretend car payment bill” to my savings account.  If within a year, I felt comfortable with making that payment then I could afford a car in that price range.  I then used a calculator to see how much car I could afford with that payment.  When it was time to actually purchase the car I had saved up $3000 to put as a down payment.

Research the kind of car you’d like to purchase.  If you are spending a good chunk of money on a car, doesn’t it make sense to do your homework first? MSN Autos is where I conducted most of my research.

• What kind of car do you want?
• Do you know the exact make and model?
• What do the experts say about it?
• What do other drivers say about it?
• What would the insurance cost to drive it?
• How much will you car taxes be and car registration?
• Do your thoughts change after taking it for a test drive?
• What price difference would there be if you got the same car in a different model year?
• Will it fill your needs?  ex: number of people you need to fit, luggage if you go on business, shopping at the outlets 🙂
• Where can you find your car?  carmax.com, autotrader.com, cars.com specific dealerships, private owners
• How much will it cost you to finance?  Total payments, final cost
• If you are in a car accident and have to get it fixed, will it put you in the money pit hole?
• Should you get brand new or certified?
• What does the warranty cover?
• Does unusual changes to the car like tints or a car alarm change your warranty?
• When is the best time to buy?  Newer models usually come out in September, so to make room for the next years model, they give better deals to get cars off the lot.
• If you are late with a payment does that change the conditions of your loan?  Does the APR note go up?
• How much will gas cost you, more or less than what you are currently driving?
• Will it need special tires in the winter time/summer time?  Tires can be costly, especially if they have to change with season.
• Will your car qualify as a trade in?  Or will it make more sense to sell it privately.  The Kelly Blue Book Website can give you an estimate.

Bring a friend.  It doesn’t matter who you bring as long as you bring someone.  If you are not ready to actually purchase the car and just want to take it for a test drive, then that friend can remind you of that….In case you drive the car and you just absolutely love it and want to buy it right then and there.  The person you bring could also be mechanically inclined…ask them to also take it for a test run.  It is always a comfort to get a thumbs up from someone who is more car mechanically inclined than you.  Luckily for me, my brother in law works with cars.  If you do not know someone perhaps someone you know, knows someone, NETWORK!

Is your credit in order?  I read in several places that the score for car loans is slightly different than what you would see on the typical credit score report.  It takes into consideration if you’ve ever had a car loan before or if you have recorded any car buying type transaction.  However, the regular FICO score is a pretty good indicator of where you credit is.  If you have time, evaluate your report, make sure that everything is accurate.  www.annualcreditreport.com is the website where you can acquire your report for free according to law.  Please do not sign up on some service to just receive a free credit report.  Myfico.com is a site where you can buy a single score; cost is about 8 dollars.  Make corrections to your report if necessary;  Inaccuracies are not good on your score.  Also try not to seek new credit 6 months to a year prior to applying for a loan.  Seeking credit also affects your score.

Ask yourself, do you really need to get a new/newer car?  If its a case like mine was, where the cost to fix your current car is actually worth more than what you paid for the car or could be the down payment on the newer car than yes.  But if you have the money set aside for the just in case emergencies and you can squeeze out more time driving the current car, than maybe it makes sense to make those pretend payments to a “car savings account” (a savings account intended for the future purchase of the vehicle you wish to purchase) and wait until there’s enough of a down payment or until you can not absolutely drive your current vehicle.

Do you currently have a car with payments?  I have known quite a few people that get really nice cars and a few years into it they want to get something newer.  Believe it or not a chunk of the amount left to pay on that current car will be tacked onto your new loan.  This is often referred to as an “upside down” loan, where the car is worth less than what you own.  The difference is then rolled into your new loan.

Ask drivers of the car you wish to purchase what they like, love and/or hate about the car.  You obviously share similar tastes and they’ll be more than willing to share the information with you once you let them know you are thinking about purchasing it and value their opinion.  One of my major concerns when purchasing the vehicle I have now was how it would handle in the winter.  Luckily for me, the car has ESP, an Electronic Stability Program.

1. Before you settle down on cars, figure out how much you can afford on the monthly payment, taking into account insurance, possible repairs and the regular tune up.  Check out loan calculators online to get an estimate of payments; pending on APR.  Find out what rates you can get from your current bank and credit unions to have an idea when the dealership offers you a loan as well, if you should take it or turn it down. It will arm you with better ammunition to negotiate the price on a dealer’s loan.  You can happily say that you’re more interested in the final price than you are about monthly payments, although that is important to find out.  A loan longer than four years significantly increases the total price on the car, so keep that in mind.  This is another place where they try and trap you, when they ask what are you looking for in a monthly payment.  If having no down payment puts you in that predicament, then you’re definitely going to be “upside down”.
2. Remember, you can’t really negotiate on insurance prices, other than shopping around and looking for discounts you qualify for, but you can negotiate on the price of the car you buy.  The car I looked at was sticker priced at $11,900. After going back and forth, I settled on $11,200.  Its not much in the scheme of things, but that is a little over three car payment months that I don’t have to pay.
3. When signing the finalized loan, be aware the “financial” guy you sit down with is usually not the person you’ve built a relationship with in pursuit of the car.  They will more than likely give you a list of additional add-ons that you really don’t need but he will give you reasons why you do.  Listen, maybe it is something that you need, but let him finish.  If it is something you need say yes. If not then politely say no.  All that extra money being added on by these extra packages can be saved up over the time of the car, so you’ll have the money set aside down the road when you need it, instead of paying extra for it initially.  Not to mention that all the add-ons can throw your budget out of whack.
4. Be weary, if after they check your credit they try to talk you into a more expensive car.  Do not focus on monthly cost.  Taking on a five or six year loan to afford the monthly payments on a “nicer” car is not smart.  And you’re smart!
5. Be careful of the dealership that advertises their butts off on TV and in fliers to get you down to the dealership for their low financing and their 99 dollar deals.  When my third used vehicle was starting to go on me, many moons ago, I drove miles to a dealership that had been advertising in the newspaper these ridiculous deals.  I thought to myself great!  I can afford that.  When I got there, I told them I wanted to take a look at the cars they were advertising, the ones that were “in great condition but they needed them off the lot.”  I was told sorry, they had sold all those cars.  I had just seen the flier again that very morning.  So the sales guy says lets check your credit and I’ll see what I can do….low and behold I was taken to see a newer model of a Honda Accord.  Now in my head I’m thinking yes my credit is good but there is no way I can afford that car.  I didn’t need to hear how much monthly payments would be before I thanked the guy for wasting my time, jumped back into my car and drove away fast.  Do not fall for bait and switch techniques from car dealerships.  Much to my surprise that dealership closed down a year or two after that incident.  Remember you can only screw people over for so long before someone catches on.
6. If you’re all contracted up, you get home and they call you back saying there was an issue….you need a new contract and the new terms are a lot higher, just return the car.  WALK AWAY!
7. If you hate the car within the first week, then you are more than likely going to hate it the week and months after that.  Most contracts have a window, that says within this time period if you don’t like the car bring it back for a full refund.  That is where you take advantage of that.
8. Most sold vehicles are also covered under the dealer’s warranty for 30 days.  If anything is wrong with the vehicle bring it in and they’ll repair it at no cost to you.  Take advantage of this, for all those little minor things that could cost you lots of money when it all adds up, if you wait til later to do it. 
9. If you settled on a used car, keep in mind of the following: How many drivers has the car had?  Has it been in any accidents?  Are there currently any concerns or repairs to take into consideration?  A carfax report?  Is there a detailed maintenance history/receipts for warrantied parts? 

Mr. Blueberry Salsa

 As you can see there is a lot to think about.  Take your time, do your homework and you should be well armed to face the auto industry.  Stay Tuned for next Money Monday when I tell you how affirmations can help with this 🙂