Planning for a New(er) Car
By Randall | December 21st, 2007 | Category: Uncategorized | 10 comments 1,811 views | 10 Comments » |
I’m one of those that plans to keep their car until it either falls apart around me, or just gives up the ghost one day and turns out to cost more to repair than to replace.
So, I’ve still got a number of years left on my cars, with good care and careful driving. But I started thinking about what steps to take when I DO get a new car.
Is it Time to Shoot Bessie?
Cars should last for a couple hundred THOUSAND miles or more with regular maintenance. Today’s vehicles are a lot better-built, and much better engineered than their ancestors. It isn’t surprising to hear about cars passing 200k miles nowadays. SO, when is it really time to turn the old busted in and get a new hotness?
- Recurring repair bills are mounting – Pick a number as a rule of thumb, say $3000 and add up the amount of money you’ve spent on your vehicle in the past year. If it’s over your amount, maybe it’s a candidate for the scrap heap.
- The Vehicle is Unsafe – Even maintenance can’t keep some cars on the road. If your car is starting to exhibit signs that it’s just structurally unsound (mysterious rattling no one can locate, significant rust throughout the vehicle, etc), get it examined by a mechanic you trust and ask their opinion on buy-or-keep.
- Fuel prices are Killing You! – This should always be an in-addition-to criteria. Today’s cars are much more fuel efficient, especially hybrids and electrics, but the decision to get a NEW vehicle shouldn’t be based solely on fuel prices. The ROI on fuel savings is such that even hybrid vehicles take years to make up in savings what they originally cost.
The Car Search
Once Bessie has been declared ‘going out to pasture’, it’s time to look around for a replacement. It’s time to hit the books, or in this case, the Internet. There are many sites that give valuable information on cars. Go through your criteria; Who will drive/ride in the car? Is it just for work, or for all activities? How much car do you want.
Do Your Homework – There’s a number of sites where you can compare car types, makes, models, and estimated prices.
- Edmunds.com
- Carmax.com
- Cars.com
- KBB.com (Kelly Blue Book)
Make the decision on what kind and year of car you’re looking for before you ever walk out the door. At least that will give you a decent idea as to what to expect when you start talking about purchase price.
How Much Payment Can You Afford? Wrong Question!!
One of the main ploys for used car dealers is asking what kind of payment you want/can afford. That’s the wrong approach. Go in with the end in mind. Buying a car for cash (if possible) at the lowest reasonable price.
Idea – By the time Bessie is on her last legs, you should have enough saved up to replace her, if you’ve been putting back a little each paycheck. Set up a separate account somewhere, and have an automatic deduction of $50-100 dollars go to this each month. If you plan on running your car until it folds like I do, you should have a hefty nest-egg saved up to replace your faithful mechanical steed.
It can also double as an ‘emergency’ emergency fund.
Americans have gotten out of the practice of haggling prices, unlike many of our friends in foreign countries, where it’s still a common practice. So most people that walk into a dealership are IMMEDIATELY confronted by a situation they’re not particularly trained for, or comfortable with. The car buyer, buys a car every few years, the car salesman SELLS EVERY DAY. Who do you think is going to be better in this situation?
Just keep your eye on the target, and CONSTANTLY remember two things.
- You don’t HAVE to buy a car (from here, or a specific type). If you get too uncomfortable, or the hard-sell gets too much, walk away. There’s hundreds of the same type of car you’re looking for out there, THIS ONE IS NOT UNIQUE.
- The car salesman has a pre-set routine that they go through to increase the price you’re paying. That underbody coating or the detailing that they’re ‘throwing in’ has already been calculated into the price beforehand. Buy as much car as you need, and leave off the extras.
Taking Baby Home
Once you’ve found a car you’re happy with at a price that you can live with, then comes the "How will you Pay For This" questions.
Ideally you should be able to pull out a wad of cash and flop it on the desk saying "Take it out of that", and be done with it. Too bad more people can’t do that.
Alternatively, the best approach is to have your local bank or savings and loan make you a car loan for the car. They know you better, and usually have a little lower interest rates than the dealership loans.
Rule of Thumb – You should always be able to pay off the car within 18 months, otherwise you may be buying more car than you should. Stretching the payments out as much as possible only benefits the DEALERSHIP, never you.
Driving Around in My Automobile, With no Particular Place to Go
For the first-time and younger car buyers, a couple of things to remember.
Car Insurance is Required,.. Immediately – For the young car buyer, the sticker-shock of getting insurance for that new hot car they just financed may come as a blow to the gut. Young drivers with ‘performance’ cars usually find their insurance payments are almost as much as the monthly car payment. Take that into account when trying to decide between the Taurus and the Mustang.
Taxes, Tags, License, Fees, Fees, FEES!!! – Many states don’t allow you to roll ancillary fees, like sales tax and license registration and tags into the price of the car. That means depending on the price of the car, coming up with a few thousand dollars within a couple of weeks to stay legal.
So good luck on your new car purchase. If you plan carefully and do your homework, you might not have to do this for another ten years or so.
If you have any tips on car ownership or purchases, or would like to recount a car-buying story, please leave us a comment.
I wrote about buying a used car for cash a couple of months ago, and one thing my readers told me was not to tell the salesman that you’re paying with cash until after you negotiate the price.
I think the most important thing is to be willing to walk away. It’s amazing what kind of a deal the sales manager will come up with, when you stand up and say “I guess we’re not going to be able to work this out.”
Hmm, Hadn’t heard about that ‘don’t tell’ about the cash. I guess it might be because they make a lot of their profit off the in-house financing?? Don’t know. Good tip though.
It’s all about control. Don’t ever let the dealership be in control. If you’re not happy with things are going, leave. Tell them you are going to eat and you might come back.
Start at invoice minus $1000 and negotiate up, don’t let them make the first offer. i would never pay more than invoice or trade minus $500. Play dealerships and sellers against each other. It’s a competitive market, use them against each other to your advantage.
Oh, and they love to wear you down by making you wait. Don’t wait, when they leave to go do something, tell them they have 5 minutes to come back. if they don’t, leave.
Good article!
Yeah, they hope to get you for extra money when financing. So they might be willing to negotiate a much lower price (because they add on $1000 or more when they think about it…depending on how expensive the car is).
Some places get so upset about this that they’ll spend long periods of time trying to convince you to finance, telling you you’re crazy, and whatnot (can’t remember which blog, but someone had this experience recently). As Lynnae says, be willing to walk away (if they’re not willing to give you a good price). But if it’s a good deal and they’re just stalling about financing vs. cash, be willing to fight it out. After all, then you’ve got the car at a much better deal than they wanted to give you. It might be worth a bit of arguing.
Car insurance is only required in certains states. Where I live it’s not. Not that I would ever recommend anyone driving without it!
@MDP,
True, some states don’t require insurance. They usually DO require no-fault insurance, which is considerably less. I just mentioned the insurance because I remember buying my first car (a Firebird, couldn’t qualify for the Camaro). and finding that the monthly insurance premiums were $22 MORE than my monthly car payments.
Shocking to an E-2 in the Army!! I didn’t do much other than pay for that car, and its’ insurance, for the next two years.
Not wanting to bag on dealers because they are just trying to make a living in circumstances where their industry has taught them all of the tricks of the trade BUT buying slightly used these days and from a private party (For Sale By Owner) means that you can get much more bang for your buck! Cars are much better made, as this article states, and will go a lot further for less maintenance. The way that the economy is presently, there is always someone selling their own car to get out from underneath heavy payments to dealers and so there are cars available at every price point! Unless someone is vastly wealthy, the idea that we can all just trade up on a whim is just false and putting a lot of hard working people in uncomfortable debt positions. I write about this a TON because people ask a lot so I feel pretty passionate about it.
@Miss Mota Mouth
I didn’t go into it on this post, but I definitely don’t believe in purchasing new. Both of my cars were trade-ins that someone had brought back less than a year after purchase new. So I got the price break from buying new, and a little bit of shakedown by someone else. It still SMELLED and RAN like new, but cost me about $5k/vehicle less than new.
I did go with dealers, but only because there was a larger variety to choose from, and I was a little desperate for a vehicle (transmission going out on last car, used it for a $500 trade-in and LITERALLY coasted it onto the lot.
I don’t see cars as status symbols or fun toys anymore (past that age) so getting a good deal is more important to me. I’ll let those with MUCH more wealth ‘break-in’ my car before I buy. There’ll always be those ‘trade-in-each-year’ folks.
Randall- I kind of had you pegged as that kind of guy that would prefer to buy slightly used!
because it does make so much more sense. It is funny but I had almost the exact same experience with the last car that I traded in at a dealer coasted in) and I used the trick of not telling them I was paying cash. They are less likely to give you a discount for cash because they will make so much more money if they are able to finance. My other car was a slightly used eBay purchase from an individual and I got a lot of car of thr money that is going t last me a long time. I really appreciate your writings! Keep up the great work!
A few points,
1. “The way that the economy is presently” The current debt problems are not so much related to the economy as they are tied to irresponsible decisions people are making with their futures.
2. Buying new does cost more, but sometimes it’s the only choice if you want a specific vehicle/feature combination. Also, a new car owner can do a lot of harm to a vehicle during the first year. Simply skipping on oil changes might negate the cost savings down the line.
3. No one has to haggle anymore—at least, not in person. We bought our new 4Runner over the internet. I emailed around 15 dealerships with my request. Only a handful responded because the Northwest only had 3 or 4 runners with the third row seating option!
We ended up paying $950 over invoice (again, we’d have paid much less if the vehicle wasn’t so rare). Although we avoided haggling, we still had to listen to the sales spiel by the financing lady before she would take our check!