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Frugal Car Buying: A Complete Guide To Getting The Best Deal

Jeff — Thu, 06 Aug 2009 09:00:56 +0000

Are you sure you know how to get a good deal on a car?

Several people are buying cars these days. I guess the Cash for Clunkers program was just the deal that many were looking for to get them in the car buying mood. However, I wonder, “Are they really getting the best deal?“

I think this question haunts us all when we go to buy a car. It seems that the dealers have so many tricks up their sleeves to milk us of every penny possible. That’s why it is so important to arm yourself properly before buying a car.

Knowledge is power in this game So, I’ve assembled this guide to help you get the best deal possible the next time you decide to buy a car.

7 frugal car buying tips to save you from getting ripped off

There is a lot you need to know to get the best deal on a car. Walking into a dealership or even going to a private seller without doing your research up front is a dangerous thing to do. Lack of knowledge and naiveté can cost you hundreds, if not thousands, of dollars.

This article is full of great resources to properly equip yourself so you won’t get ripped off. I have zeroed in on what I consider the seven most important things to consider to get the best deal. Here they are:

1. Decide what you want before you go to buy

As I’ve already said, you do not want to wander on to a lot like a sheep being led to the slaughter. It will cost you money. You probably already know in your head a short list of models that you’ll be considering. Research them online or visit car dealers when they are closed to gather information and to window shop. Develop a short list before you visit a seller. This will help you avoid getting swept off in the wrong direction.

2. Decide whether you want a new car or a used car

This is an important question to consider. Personally, I think that buying a car that is two to three years old with low mileage is the best way to go, but everyone needs to consider this question for themselves. In order to get the best deal, try to separate your emotions from this decision. Sure, it is nice to have a perfect new car, but is it the best deal? You decide!

3. Decide if you will be buying or leasing

A car is a major purchase. For most of us, it is the most expensive thing we’ll ever buy besides our home. That’s why you need to really put some thought into it. Of course, a part of getting a good deal is wrapped up in how you pay for your car. There are basically two options. You can either buy it or lease it. I think buying is the better choice. What do you think?

4. Decide on paying cash or financing your car purchase

Yes, there really are people out there that pay cash for their vehicles. Paying cash saves you tons of interest charges. In order to get the best deal on a car, you have to look beyond your ability to afford the monthly payment. You have to look at the big picture. A car loan can cost you thousands of dollars in interest over five or six years.

5. Decide your tactics for getting the best price

Negotiating the best deal on a car is tricky, there is no doubt about it. The dealer is a very experienced at this process. They do this all day long and they’ve honed their skills over many years. This is their business and they know it well.

You must be prepared to spend some time and walk out if necessary to get the best deal. Also, don’t forget, the negotiating doesn’t end once you get to the finance guy. He is also going to try to sell you things like car loans, leases, paint coatings, accessories and extended warranties. Don’t let down your guard!

6. Decide if going green is worth the money

There is a lot of talk nowadays about more environmentally friendly cars. You can buy hybrids, electrics and plain gas engine vehicles that have higher fuel efficiency. However, in some cases, you may pay more up front for these vehicles. You have to decide if the benefits outweigh the costs.

7. Decide how you will insure your car and what it will cost

Don’t forget that you are going to have to buy insurance for the car you purchase. It is a good idea to research this ahead of time so there are no surprises after you have bought your car. You don’t want to find out after the fact that your new pride and joy is going to cost you hundreds of extra dollars in insurance.

These frugal car buying tips will help you save a boatload

It certainly takes time and patience to research your best deal on a car, but it is well worth the investment. You can literally save yourself thousands of dollars. I know you’ll find this list of resources a valuable aid in your next car purchase!

What is your best tip for saving money when buying a car?

Photo by ktylerconk

I’m Saving Up To Pay Cash To Buy A Car

Jeff — Thu, 26 Jun 2008 11:00:36 +0000

I am beginning to save money to buy a car. My wife and I became debt-free except for the mortgage back around February of this year. Since then we have been pouring money into our emergency fund. We are now satisfied that we have the equivalent of three to six months of living expenses socked away. We used some of our bonus money, tax refund, and economic stimulus check for a big chunk of this. We are already contributing to my 401k at work so, one of our next priorities is starting to save for a newer vehicle.

The kind of car that I’ll be looking to buy.

I say newer instead of new because I intend to buy something used. I’ll let someone else take the big depreciation hit that occurs in the first few years after a car rolls off a dealers lot. I’ll probably be looking for something like a Nissan Altima that is 2 to 3 years old with low miles and some nice features. The Altima seems to get good ratings in quality and customer satisfaction plus there are tons of them around. This means that it won’t be hard to find a good used one when I’m ready and I’ll probably be able to negotiate an attractive price.

Right now, I drive a 1997 Ford F-150 pick-up. I’ll probably be switching from a truck to a car when I make this purchase. With gas prices up above $4.00 per gallon with no relief in sight, it only makes sense to go with something that gets better gas mileage. Nissan is now offering a hybrid version of the Altima so, by the time I’m ready to buy, I might be able to go green. The Altima Hybrid gets around 35 miles to the gallon. This would be a significant improvement over my F-150.

I’ll definitely pay cash for my car.

I’ve paid enough interest in my life. I’ll be paying cash for this vehicle. Based on the budget right now, I think we’ll be able to save the $12k-$15k necessary in 18 to 24 months. I am creating a subaccount at ING Direct to segregate my emergency fund from my car fund. This should help me easily keep track of our exact progress toward our savings goal. If you haven’t tried ING Direct, you should consider giving them a try. We just set up our account a few months ago and so far I’ve been very impressed. I’m also earning more interest than I would in my normal savings account.

I’ve heard that dealerships aren’t that excited about customers paying cash. I guess they make most of their money from financing and selling extended warranties. Overall, car sales are down this year. According to an article at Bloomberg, based on June figures car sales are down 20% from this time last year. With this news, word on the street is that automakers are getting ready to offer all kinds of incentives. You’ll probably see gimmicks like 0% financing and rebates out the wazoo. My favorite right now is the so-called “Fuel Price Protection” offered by Dodge. I will not be falling for Dodge’s crafty $2.99 gas guarantee or any other marketing ploy. I’m going to stick to paying cash for a slightly used vehicle.

I’ll probably look at buying a car from an individual.

As an individual that sells things occasionally, I love it when people pay cash. However, like I said above, I understand that dealers aren’t as excited. I’m concerned that if a dealer sniffs out that I’m going to pay cash before the negotiations are done, then they might jack up the selling price to create some profit. Therefore, I’ll probably look at buying my vehicle from an individual. Of course, this isn’t without risk.

We got stung once when we bought a car from an individual. Apparently, the vehicle had been in a wreck prior to our purchase. This was definitely not disclosed to us and the repairs that had been done were subpar to put it nicely. The shop told us that the wheel was about to fall off due to the damage that had been done to the front-end. After several hundreds of dollars in repairs, we ended up trading it in to avoid future issues. I’ll think long and hard about getting the car I plan to buy checked over by an independent mechanic prior to closing the deal to avoid a similar fiasco.

Buying a car is a big deal.

For me, buying a car is a big purchase. I want to do it right. Fortunately, I have plenty of time to research my options and prepare while I’m saving my money. If you are thinking of buying a car in the near future, here are a few articles you might want to take a look at first:

My experience buying a used car with cash @beingfrugal.net
Buying a New Car? Skip the Negotiations @My Dollar Plan
Money Mistake Monday – The I Fell For Another Car Lease Syndrome @My Two Dollars
Shaking the New Car Itch- A Tale of Priorities @Get Rich Slowly

Do you have any tips on car buying that might help? If so, please be sure to leave a comment below and let me know. Thanks!

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Photos by johnny_nissan and Baltimike

Please Let Me Talk You Out Of Buying a New Car

Jeff — Fri, 28 Mar 2008 12:21:21 +0000

Buying a new car is fun and exciting, but it is one of the worst things that you can do financially. In America, we are obsessed with the automobile. What you drive has become a statement of who you are. The marketers have done a fabulous job of selling us on this and we have bought it. Let’s face it, we often want a new vehicle for the image it portrays rather than for any practical reason. I’m guilty of this too. Here are some examples of the marketing spin that we are being sold.

If you drive a…

Xterra, Jeep, or Hummer you are adventurous and nature loving.
SUV, minivan, or Volvo you are practical, family-oriented, and safety conscious.
Scion or Honda Element you are hip, cool, and young.
Lexus, Mercedes, or BMW you are successful, smart, and sophisticated.
pick-up truck you are manly, hard-working, and all-American.
hybrid you are green and financially wise.

Do the math before buying any car.

Of course, what the sales and marketing people are selling doesn’t usually tell the whole story. For instance, let’s take the example of a hybrid. Lots of people are thinking of trading their cars for something that gets better mileage since gas prices are so high. Now don’t get me wrong, I am as environmentally conscious or green as the next person. However, there are some financial considerations that one should take into account before buying any vehicle. For instance, you will pay more up front for a hybrid. Let’s say that you buy a Ford Escape Hybrid and that you pay $3,000 more for it compared to the standard gasoline version. According to Ford, the hybrid gets 30 miles to the gallon in the city compared to 22 miles to the gallon in the standard gasoline version. If gas costs $3.00 per gallon and you drive an average of 15,000 miles per year, you are saving an estimated $543 per year on gasoline. This means that it would take you over five and a half years to make up the $3,000 premium you paid up front for the hybrid! Your situation may be different and there are other reasons to buy a hybrid. The point is to do the math before making an emotional decision about buying any kind of car.

Logical considerations in buying a car.

For most Americans, their car is their second most expensive possession behind their home. However, we will trade-in our perfectly good, existing automobile for a new one on a whim. If you consider this from purely a logical perspective and remove all the emotional marketing hype, it is ridiculous. A vehicle is simply a mode of transportation. It is not who you are. We don’t get all jazzed up about buying a washing machine. We don’t trade in our old one knowing that we are going to lose money just to get the latest model with the new digital display. We don’t do these things because washing machine manufacturers haven’t brainwashed us into thinking that our washing machine defines us.

Interesting facts that drive my point home .

Facts don’t lie. Here are some that are very interesting:

The average new vehicle costs over $28,000.
A car on average loses 45% of its value in the first three years.
The monthly loan payment on a $28,000 vehicle is over $540 for five years.
Over 11 million cars were scrapped in 1996 and 25% of the material was landfilled.
About 20% of new car transactions are leases.
Leasing will cost you at least, $11,000 more than buying over a ten year period.

What else would we spend so much on that is going to depreciate so rapidly? If you take the $540 you will pay in monthly payments for the average car and invest it in a growth stock mutual fund that earns 10% annually, you will have over $40,000 in 5 years. You could then pay cash for a vehicle and have money left over. Plus, if you did this, you would save almost $4500 in interest!

I’ll keep my 1997 Ford F-150 pick-up truck.

At this point, you might be wondering what I drive. I have a paid for 1997 Ford F-150 pick-up with over 120,000 miles on it. It is dependable transportation that is very handy when I occasionally need to haul or pull something. It isn’t the million mile truck, but it has a few scratches and it makes a noise here and there. However, it is worry-free and debt-free. I’m going to hang onto it until I can pay cash for something else and then I’ll buy something that is two to three years old. I’ll let someone else take the hit on the depreciation. I hope its not you!

Photos by gmeurope and Lutz-R. Frank and Mikey aka

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