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A vehicle is one of the most expensive things most people will purchase besides their home. It’s important to be armed with the right numbers before you enter the car dealership. That's what I'm diving into on this week's episode of the Money is Emotional podcast: Numbers to Know Before You Buy a Car.
If you’re trading in or selling your current vehicle, you need to know certain numbers.
Unless you’re buying your first car or giving your current one to a friend or family member, chances are good that you’re selling or trading in your current car or truck. The numbers you need to know are: what your current car is worth (trade-in and private party sale), what you owe on your current vehicle, and/or what your current lease terms are. Don’t be clueless about your current car when you walk into the dealership because it can cost you dearly!
There are three important personal numbers you need to know.
You won't be surprised to hear that number one is your credit score. Your credit score will affect the interest rate of your car loan or your lease price. The better your credit score, the less you’ll pay for your car if you’re not paying cash. (Check out episode 16: Demystifying Credit Scores) The second number you need to know is how much money you will put down on the car in addition to any trade-in. The final number is your “walk away price” for your new car. What is your top dollar?
Research the vehicle you want to buy so you know the price range for the options you want.
Shop for the total purchase price, not the payment! Most people only pay attention to the payments that fit their household budget. You need to look at the TOTAL cost of the vehicle, with all options, fees, and taxes included (even before your trade-in is considered).
Leasing is the most expensive way to drive a car that you don’t get to keep. It’s essentially a long-term rental. After the lease, you must surrender the car or buy it out. Pay attention to ALL the lease details: mileage allowance, penalties, buy-out price, etc. I also talk about a number that most people never look at: the cost of ownership! Know the numbers of your new car forwards and backward before you go to buy it.
If you get financing through the dealer, you are buying two products.
If you use dealer financing, you’re buying two products: the car and the loan. I recommend settling on a final price for the car first, then discussing dealer financing. Before you go car shopping, visit your local bank and see what their car loan particulars are. It might be better for you to get financing through your credit union or bank. If the dealer says they offer 0% financing, be wary! They have to make money, so either they’re pumping up the price of the car, or only people with 800 credit scores get that deal.
Understand your emotional triggers during the car buying process.
Car salesmen are trained to use certain psychological tricks to get you to buy. I know because my ex was a used car salesman, and he told me all of them! I explain the tricks they use in detail: Incentives to get you in the door, good guy/ bad guy, scarcity, and using your own words in their favor. In the podcast episode, I also reveal the three keys to being a good negotiator.
The less emotionally attached you are to the vehicle, the better deal you will get. You must have “walk away” power! I use the 24-hour rule. I have to sleep on the decision! Awareness of your emotional triggers and car sales tactics is half the battle!
Don’t make a car-buying decision you’ll regret later! Arm yourself with the numbers, knowledge, and emotional fortitude to be an intelligent consumer.
Watch or Listen!