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Essential Tips & Tricks for Buying and Selling a Car

Buying a car can be a momentous but stressful occasion if you’re unprepared. There are many things to consider throughout the process, from the research phase through to signing on the dotted line. Here are some things to consider to help you become a savvy buyer and get most bang for your buck.Things to Consider:

1.      There is no right on wrong car choice. It will depend a lot on your personality and what you want to spend your money on.  Some people want to drive a new car all the time, so leasing a car for three years may make sense to those people.  Also, if you’re  a business owner and can deduct your car expenses, leases are sometimes more tax favorable than purchasing.

2.     How to know what cars are a good deal.  Research cars the rental car agencies are buying. Rental car agencies care a lot about price and not so much about the model, so when there are lots of extra cars out there the rental agencies will buy those,  and that will tell you which cars they made too many of which likely means there are plenty for average consumers to purchase as well….remember supply and demand from economics!  This is especially true with new cars. 

3.     Know your budget and don’t go over it. It’s easy to get sold on a nicer version,  but remember that a car’s job is to get you from A to B.  It’s not who you are as a person.

4.     Research the models you like that fit your budget. Once you have your budget, narrow down the car models you are looking at and do some research on the cars themselves.

a.     Test drive them all and buy none. Say you are test driving different models in that class and run away from the “I’ll make a special deal for you today” salespeople.  Most car salespeople these days know people are doing their research.

5.     Know that they are trying to sell you. Know that the Finance Guy is the highest paid person at the dealership. Everything he sells has very high margins which means it is a lower value to you.

6.     Make sure your budget includes maintenance costs.  High performance vehicles have higher maintenance costs. Know that if you want to drive a BMW, when it breaks it’s going to cost a lot more to fix.

Budget for:

a.     Tires and gas

b.     Oil changes

c.     Break downs - if you don’t have an extended warranty, you should have money in savings for repairs

7.     Trade in or sell on your own as a private party. Look at the price difference between trading in and selling your old car yourself, then act as though that is your new second job. Couldn’t you use a 2nd job for a few weeks at $100/hour?

8.     For maximum value, buy a used car. Initial depreciation (loss of value) for the first two years is high.  Know what is not in demand. As of right now, late 2019, that is sedans, so there are great deals on used sedans.

a.     Add-ons that you might want are cheaper for used cars, so the person who bought it new paid a lot for the heated seats, but you get all those amenities at a discount.

b.     There are instances – typically 0% financing – but also market conditions, that make buying a new car a better option in some circumstances. 

9.     Don’t fall for the Certified Pre-Owned.  Buy the extended warranty instead.  Buy your car from a dealership that does not sell new cars of the brand you are buying.

10.  Do your research on features. Know the models and trim lines and respective costs for those features and packages you are looking for.

11.  Know the insurance costs for the car. Newer models can be much more expensive to insure because when they get into accidents, all the sensors, electrical components and wiring have to be replaced.  The sportscar seems like a great idea until you realize your insurance rates just doubled.

12.  Separate the financing from the price, but know that you can leverage the financing at a dealership to get a better deal and then refinance later. Salesmen like to ask you, “What’s most important, the payment or the price?”  This is a bullshit question as the payment is the price + financing charges and the monthly payment is based on the term of the loan.  Run away from these types of salespeople.

13.  When determining the true long-term value of the car, look at the cost of the extended warranty.

a.     Do your own research with sites like https://www.endurancewarranty.com

b.     Don’t take the dealers first offer for the extended warranty. You can always buy it later, and it’s very negotiable.

c.     Only buy the warranty if you need it, such as situations where you rely on the vehicle and don’t want to have to worry about it, or you don’t have savings to cover car repairs.

d.     Know the deductible of the warranty and research repair costs.  These can be shocking. For example, a double turbo replacement on a BMW could cost you $10,000.

14.  Patience is your best friend. The best negotiating strategy is knowing how the money game works with vehicles. The magic number is 180 days on the lot, so if you’re looking for deals, look at how long the vehicle has been sitting on the lot.  

Want to be a super savvy car buyer? Follow these rules:

1.     Know what you want but be patient to get it.

2.     Know the long-term value based on extended warranty cost (regardless of whether you want to purchase the warranty).

3.     If you don’t buy the warranty on a used car,  be sure to have a mechanic look at it before you buy.  When you buy a house there is an inspection, so do the same with your prospective car.  It’s worth the few hundred dollars.

4.     Track the time it has been on the dealer lot and wait until 180 days.

5.     Have your financing ready with your credit union but be open to discounts for financing at the dealership.  Know the refinancing is easy.

6.     Don’t buy any other add-ons the dealer wants to sell you, and if they increase the price while you are there, walk away.

7.     Everything is negotiable, even when it says it isn’t.

8.     Have no loyalty. It’s a transaction. No dealership is special, but some do have better coffee.

 Resources:

Don’t forget to also listen to the podcast we did on this, You can find it here.