We strongly recommend only buying a car that you can pay cash for. Even if you just start with an old “beater” and then take the money that you would have spent on payments and pay them to yourself until you can afford to buy something better.
However, most people don’t have the cash to buy a car and don’t follow this “beater” system. Thus, they must finance their vehicle and end up paying extra for interest. To make matters worse, some buyers make the mistake of not doing their homework, and this causes them to lose hundreds or even thousands of dollars in a bad deal. Read on for advice on buying a car on a budget.
Shop Around
Most car dealers have websites where you can view cars, features and prices. This makes it easy to compare vehicles before even visiting the lots. Make use of these sites before you go to a dealership. You should research the average price of the vehicle you want. That way, if a seller asks more than the going price, you will know to walk away. Or, if possible, you could negotiate for a lower price. Another good resource is Consumer Reports they give reviews of almost every car model available. And you can subscribe for a single month for only $9. You can search multiple dealers on sites like Cars.com, which can also get you a CarFax report about the car which will tell you important information about a particular car’s history. Kelly’s Blue Book also lists vehicles for sale near you but it is also is a great resource for determining a car’s value since they give you the price a dealer will pay, the price a dealer will charge and how much you should pay a private party.
Read the Fine Print
Some sellers will offer terms that sound fine, but once you do the math and read the full offer you realize the deal isn’t quite as sweet. For instance, a dealer might offer you a lower monthly payment, but if the terms of the loan stipulate a repayment schedule of 72 months, then you’ll pay much more overall than you would on a shorter monthly agreement. Other tricks to watch out for are add-ons like fabric stain proofing, window tinting, undercoating, paint clear-coating, etc. All these things can needlessly add thousands of dollars to the cost of your vehicle.
Avoid Gamesmanship
Car salesman work on commission and they love to play games that boost them. The common trick is to claim that they don’t have the authority to negotiate the price. So they make you wait while they go talk to their boss. Mostly they sit and make you wait as a tactic to wear you down while they joke and drink coffee.
While they have you waiting they often rig their phone to actually listen in on what you are saying. So they know how eager you are to buy. But you can use this trick of theirs against them. Just say things like, “I think I like the one we saw at XYZ better” and “I’m tired of this foolishness let’s leave” and “the most I’ll pay is ‘X’ and if he won’t come down I’m leaving”. When they hear this they will come running back and make you a better deal.
Boost Your Credit Score
If you must finance your vehicle, be sure to know what your credit score is before applying for the loan. Those with the highest credit scores will often be offered the lowest interest rate and thus the lowest monthly payments. To boost your credit score, pay down your credit card debt before applying for the car loan. Lowering your total amount of revolving debt can raise your credit score in most cases. If you have any negative accounts or ones that have gone into collection, pay those off before you apply for the loan. Also, talk to your bank or credit union before talking to the dealer as they will often offer you lower interest rates. One of the ways dealers make money is by adding a few percentage points to your loan. This extra goes to them, not to the lender.
Car buying is stressful, especially if you don’t have a lot of money to spend. To save yourself money, research the vehicle you want, boost your credit score and try to negotiate terms as much as possible.
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