Ahhh… That New Car Smell!

AKA: Allen Gunter

Got the new car urge? It’s hard not to – ads are everywhere touting the 2020 models and all of their wonderful new features. And then there are the apparently great clearance deals you can get on a 2019. So if you’ve got the new car bug, here are some car-buying tips. (My next blog post will talk about leasing and how you can get to the point of being able to pay cash for a car – the cheapest way to buy!)


Look at it this way — who knows more about structuring car deals…the dealer who makes them daily or the car buyer who only makes one every few years? While it certainly is attractive to do everything in one place – buy your new car, sell your old one, get your financing – there are just too many moving parts. Some you won’t see until the very end when you’re tired and just want to get in your new car and go home, and some you’ll never see! 


To get the best deal, you have to think about more than just the monthly payment. Instead, you need to balance four financing factors: 

  • How much in total you want to pay for that car or truck (yes, that includes how much you’ll pay in interest)
  • How much of that you can pay today
  • How long you want to take to pay the rest, and
  • How much per month you want to pay.


Unfortunately, these four factors don’t always play nicely with each other. So…

Step 1:  Get Credit Where Credit is Due

Start by checking out your credit reports (free once a year) and scores (small fee; varies by credit bureau) at your preferred credit report site. You might be surprised by what you find! Most credit reports have errors, many of which are serious enough to affect the interest rate you’ll get. Clean those up and it could lower your rate. If the reports are accurate and your credit score is still low, there are ways to increase your score in a fairly short period of time.


Step 2:  Finance First, Buy Later


Even those dealer financing specials with really low interest rates or no interest until 2087 aren’t giving anything away – they’re making it back by not discounting the price of the car as much, by sticking in add-ons, etc. And the worst part is that when you go sit down with the dealership’s finance manager, the interest they have for you may be higher than the rate they will be paying their lending source. That’s right, dealerships can also make money by charging you a little bit higher interest rate and keeping the difference.


So before you ever step onto that car lot, check out the financing at a couple of credit unions and banks. You don’t have to be a current customer to get a rate quote, and you don’t need to know exactly what you’re going to buy. You’ll find the info you get about the effect of different down payments, length of loan, etc. is invaluable! 


The shorter the loan, the better:  42 months is great, but no more than 48 months. Yes, I know, there are a lot of car loans being written for 60 months and longer – I’ve seen as long as eight years! Anything longer than four years, though, and you’re just setting yourself up to be sucked into a never-ending money trap. 


The problem with longer loans is that you will owe more than the car is worth for most of the term of the loan.  Known as being “upside down,” it puts you in a real bind if you should need to replace your vehicle before the loan is paid off. Like when your insurance company declares it totaled after what seemed like a relatively minor accident.


Step 3:  Don’t Mix Old and New


Whatever you do with your old truck, don’t get it mixed up in the purchase of the new one. You’ll get the most money for your old car by selling it privately. Yes, that can be a hassle, so at least shop it around to several used car dealers. CarMax, for example, will make you an offer that’s good for seven days. Kelley Blue Book, Edmunds, Nada Blue Book and CarFax are great sources for getting an idea of what your current vehicle is worth.


Step 4:  It’s The Total That Counts


With your old car out of the picture and your financing issues worked out, you’re ready to hit the dealerships. You’ve taken everything off the table except for one – the total cost. And that makes negotiations a lot simpler because…


You only have one number to think about, the total, bottom line “drive-out” cost. That cost should include tax, title, license, and any other little goodies the dealer wants to slip in like dealer prep, advertising costs, roadside assistance.  All you care about is the bottom line cost to take that truck or car home with you.


How that total gets allocated to various items in the dealer’s paperwork doesn’t really matter. And if you think you’ve agreed on that number but the paperwork comes back with something different, get up and walk out. (“That extra $75? Oh, sorry, I just found out from my sales manager that the shop had already applied leather conditioner to the seats.”) If you say, “Sorry, that’s not what I agreed to” and get up to leave, you’ll be surprised at how quickly that extra $75 disappears. 


Just remember: You have the power! That dealership doesn’t make a thing unless YOU say so! 


Step 5:  Enjoy Your New Vehicle!


And the peace of mind you’ll have knowing that you got a great deal because you made it happen!