I’ve owned three cars in my life and they have come from Grandma, grandparents and my mom. Nothing like the family discount when you’re buying a car 🙂 Today, PF Pro contributor, Melissa Hoffman takes a look at what it takes to buy a car.
The event I’ve been dreading is arriving… no, it’s not wedding planning (although that’s around the corner) (just kidding, fiancé! It will be great!). It’s buying a new-to-us car. I loathe the car purchasing process. Why can’t we use the car until its wheels fall off? Unfortunately, my fiancé’s car has reached the point in its life where it’s more expensive to repair than fix. It’s been a good car, but once it’s more expensive to fix, you know it has to go.
For only owning one car ever in my life, I’ve been to car dealerships a lot. My parents leased cars for a while, then my Dad went through his midlife crisis several times and bought several cars (after privately selling the others first). Sometimes I remember my teen years as practically living on a car lot. However, I’ve learned that what I thought was torture (all day at a car dealership haggling) is apparently very common. According to all of my coworkers, we should expect to spend 8 to 10 hours at a car dealership.
Not one to waste precious hours on haggling with car salesperson (after all, I could be spending that time side hustling), I discovered there are several ways to approach purchasing a new car. Instead of going into a car purchase blindly, take a look at these steps and let me know what you think. Especially if you’re going through or have recently gone through the process of buying a car, I’d love to know your thoughts!
Step One: Set a Budget
Ah, setting a budget! That first, crucial step that many people overlook yet everyone should do. Before even looking at cars, set a budget for yourself. Edmunds.com says you should spend no more than 20% of your take-home pay on car payments, but you should establish a budget works best for you.
If you use your car all the time, or need specific things to make your car more comfortable (for you or the people you’re transporting), you may want to spend a little more to get that specific car. On the other hand, if you’re like me and just need your car to take you from Point A to Point B, you may have more leeway in your budget to get something cheaper.
Take into account all the non-tangibles associated with your car, including insurance, maintenance, and associated fees. Many people don’t consider about the long-term cost of maintenance on their car. While the car may be a 2012 in great shape, what does the long-term maintenance look like for that make and model? Check out online forums where people can review their cars – you may be surprised (pleasantly or otherwise) about how people feel about the car after 5 to 10 years of driving it.
If you’ve been getting by without a car, don’t forget to take into account fees associated with owning a car. Depending on where you live, you may be charged parking fees (both at work and/or at your residence, if you don’t have a garage) or toll road fees. All of these factors should be calculated into your budget to go into your total car payment.
Step Two: Set Up Your Financing
Unless you’re paying in cash, consider getting approved for an auto loan from your bank or credit union. This is not to say you can’t or shouldn’t go with the dealer’s financing option. If the dealer ends up giving you a better deal on financing than your bank, you can still go with it. However, by walking into a dealership (or private sale, etc.), you’re able to keep the negotiation of the car separate from the financing itself.
The last thing you want to do is walk into a dealership and let the car salesperson jockey you around the lot, enticing you into a car you, in the end, can’t really afford. You have a lot more power going into the negotiation with your own financing, and you can dictate the conversation based on that number, and no higher.
Step Three: Find Your Dream Car (Or 2, or 3…)
Thought you were done after setting a budget and getting approved for financing? Not quite yet… take some time to look online and pick a few cars you might like. Even if you absolutely can’t think of any particular type of car, surely you’ve sat in a friend or coworker’s car and thought, wow… this is a nice car!
Maybe you can’t afford the Toyota Camry, but what about the Corolla? Or if you want the Camry, check out similar cars, like the Honda Accord. It may be worth buying the latest Recommend Cars list from Consumer Reports, and narrowing your search from there. Sites such as Autos.com and Edmunds.com are also great places to look, and you can often find forums or reviews from car owners who will discuss the positives and negatives of their cars.
Step Four: Take a Couple Test Drives
Here comes the fun part! Auto nerd or not, most people love getting behind the wheel of a new car and giving the car a spin. And when I say “give the car a spin”, I mean it! If you like to drive it like it’s hot, test drive the exact same way – faster speeds and quick breaking included (within safety regulations, of course!)
By driving the car like you would normally drive your own car, you’ll have a better much feel for how that car will respond to you. If it doesn’t break as fast as you need it to, it may not be the car for you. However, unless you test drive it like you normally drive, you’ll never know, and then you’ll be stuck with a car that doesn’t mesh with your lifestyle.
That’s the best part about test driving cars – you can test drive as many as you want until you find that fits your style of driving. Take advantage of this one time in your life where you can drive as many cars as you want – maybe even take some of those more expensive cars out for a test drive, just to see how they feel and respond.
Step Five: The One Car to Rule Them All
Now that you’ve narrowed down your list and gone through test drives, it’s time to pick that one car you really want. By choosing one car, you can focus in on price and any amenities that are “must haves” (sunroof, keyless entry, etc.) Also, by picking one car, you will be able to focus on only price when evaluating offers from competing dealerships or private sellers.
If you’re having trouble narrowing down your list, come up with pros and cons between the cars. Let’s say you’re trying to choose between that Camry and Accord. Maybe there is a slight price difference, but more things that you like come standard in the Camry and not the Accord. Don’t forget the intangibles too: if there isn’t a big price difference, which one did you like more? Which one felt more “you” or felt like it would be better for your family? Don’t negate these little quirks when it comes to your pros and cons list. Something that annoys you a little bit now may come to be your biggest problem 5 years from now.
Step Six: Buy a Car!
Once you’ve chosen your new car, it’s time to buy! Whether it’s a brand new car or a new-to-you car, there are several ways you can purchase your new car.
- The Old Fashioned Way: my least favorite way to purchase a car is at the dealership, but a lot of people like this method! Something about haggling and walking away from a purchase, only to be lured back with a better deal… If you like this atmosphere, just keep in mind your ultimate price, and don’t get pressured into purchasing more car than you originally wanted. Also, make dealerships compete for your business! After getting a “final offer” from one dealership, take that offer to another dealership and see if they’ll beat it. Remember: this is a big purchase, one that you’ll keep for many years. Don’t settle!
- Private sale: more common thanks to Craigslist, private sales involve a little more risk than the dealership. If you choose a private sale, make sure to get the car inspected by your mechanic, and pull the car’s CarFax report. Take the car for a test drive, and if anything seems too good to be true (the car selling for $5,000 when it should be going for $15,000), get a second opinion.
- Car-buying clubs: My favorite way to shop for a car (like I like to shop for almost everything) is on the internet, and car buying clubs make this even simpler. While you can work with car dealerships through Internet-only too, you can also choose your car through credit union or Costco’s Auto Program. Often you can get special pricing, the ability to customize your car (telling your contact exactly what you want your car to have), and, my favorite, not having to haggle with anyone or waste hours on a hot car lot!
If you’ve recently purchased a car, or are considering purchasing a car, what are your must-haves and what are you willing to settle on? Do you choose a car based on price only, or do you factor in the non-tangibles (like family lifestyle, environmental friendliness)?
Track All Your Accounts With Personal CapitalPersonal Capital lets you see all of your accounts in one convenient place. Sign up now for free.
-Melissa @ PF Pro