Buying a Car

My daughter and her husband recently purchased a new car. This is my advice to her as they worked their way through the process.

Most people love a new ride, I know I do. If you're buying a car and you're also buying new, do your homework. Make sure you know what options you want, what they list for and what manufacturer or dealership rebates are currently running. Information here is key because what you don't know will cost you money. The three pieces of information you need are the list price of the car with the options you want (go to Consumer Reports (www.consumerreports.org) for a better idea of what the price for a new car should be), the trade-in value of your car (if you have one) and the current interest rate for a new car from your bank.

Try to choose at least three car makes and models that you would be happy to drive for the next six to ten years. If you zero in one car, then you’re more likely to take whatever ridiculus offer the dealership makes to you. You need to be willing to walk away from your “dream car” and go to another dealership and start the negotiations all over again. I always tell a salesman this phrase, “You have one hour to sell me a car. At the end of an hour, I’m going somewhere else. I’m buying a car today and I’m not going to spend all day doing it.” This does several things all at once, a) it notifies the salesman you’re not just “kicking the tires”, b) you will not be held hostage by tricks until you get tired and frustrated and give in to whatever bad deal he offers up and c) you’re willing to go explore opportunities at other dealerships for a car. It sometimes has the added benefit of upsetting the salesman. Hah!

When negotiating with the dealership over a car, keep in mind the salesman is used for negotiating the price of the new car and the value of the trade-in. The business office is where you negotiate the interest rate you’ll pay over the life of the loan. I strongly recommend a loan term of no longer than 60 months. If you can’t make the payments at 60 months, then you really can’t afford the car. Obviously, a shorter term is better. Don’t be suckered into taking out a loan with a balloon payment at the end. I don’t recommend leasing unless it can be written off as a business expense and the car has a high residual value.

I use Kelley Blue Book ( www.kbb.com ) to get an idea of my trade-in’s value. Try to get as close to this amount as possible or consider selling it youself.

Make sure you talk to your bank or credit union to find out what the going rate is for “New Car” money. I use the tactic of asking the dealership to beat whatever interest rate I get quoted from my bank.

Don't forget to check with the insurance company about the cost of insuring your dream car, rates vary widely because of safety equipment, the cost of the repairs and the safety rating. Sometimes you can afford the car payments, but not the car payments and the insurance payments too.