If you are seriously contemplating buying a car in 2017, make sure you fully research your options prior to taking the plunge on this big purchase. Depending on your heartfelt desires for which type of car you want; whether it’s a cheap runaround to carry out the daily essentials in life, or a dream sports car that you’ve had your eye on for a while. Regardless, a car is typically an expensive purchase. Read these 10 tips to make sure you buy a car you can afford and will be satisfied with.
1. Determine your budget. Whilst you might have your heart set on a specific car, you won’t be able to drive it out of the showroom unless you can afford it. A solid rule of thumb is to spend no more than 25% of your monthly household income. This figure should also factor in the monthly car repayments but other vehicle costs, such as fuel, ongoing maintenance and insurance.
2. New, pre-owned or used? Buy or lease? Thanks to an increasing number of lease returns, a wide array of used cars that are around three years old are readily available on the market. This makes buying a used or certified pre-owned car more interesting than in recent years. In addition, there are more inexpensive new cars available than ever before making choices ever more confusing.
You should be able to get the most car for your money if you buy used, though you’ll be paying a higher interest rate, have a shorter warranty period and won’t know the car’s full history. If you lease, you might get a more pristine car for your dollars, but then you won’t own the car outright and will need to be cautious around the terms of the lease to avoid chunky penalties. A new car for the same amount would undoubtedly have fewer features, but you will have a full warranty and pay a lower interest rate, and often you’ll get free roadside and maintenance for a limited period. For many, a certified pre-owned car is the best compromise, as they are cheaper than new models, but also typically carry an existing warranty and meet the criteria to help ensure their reliability and condition.
3. Narrow your choices to few options. Begin by researching the cars that have caught your attention. Make sure you review the best car review websites and independent auto sites to assess the features that are important to you and note MSRPs (manufacturer’s suggested retail prices) and invoice prices. Check local inventory listings to see what is available in your area, and choose cars that would cost at least 5% less than your monthly budget to give yourself some room to cover operating costs. Narrow down your shortlist, and save the best available options for your needs and always shop around before heading to the dealership.
4. Assess your ownership costs. Using your short list of cars, determine if each would fit into your budget by estimating the ownership costs. An auto research website such as redbook.com.au or goauto.com.au can provide general overviews of ownership costs in your area, but these figures will vary depending on your personal situation. Therefore, do your own calculation on fuel costs based on the number of cars you drive annually, and acquire a car insurance quote on the vehicles you’re considering that would apply to you. Make sure you have the full specification of the vehicle to get an accurate quote.
5. Secure financing – before you visit the dealer. Dealerships will always want to offer car financing in addition to the sale of the car. That’s because they typically receive a commission on the car loans they arrange, regardless of whether the credit is from the manufacturer or lender. You can review car loans using the FriendlyFinance car loans comparison table and apply herein once finding the best option for your requirements. There is also the option of various credit unions who offer car finance solutions as another alternative.
6. Don’t assume financing at the dealership is your best option. Whilst you may be drawn to a certain car because of a compelling ad in the paper for a low-interest rate, it’s really of no use unless you qualify. Only around 10% of car buyers qualify for the 0% or low-interest rate automakers offer. Even if you do qualify, you might be better off taking an automakers cash rebate and securing financing through your own bank.
7. Learn the overall invoice price. Based on your previous research looking through automotive websites, you should have a good idea of the invoice price (for new cars), or wholesale price (for used cars), as well as the manufacturer’s suggested retail price (new cars), or the dealer’s asking price for used cars. Whereas invoice pricing on third-party information sites isn’t 100% on point, it is a strong indicator of what the dealer paid for the car and is a great place when you begin negotiating. Always try to reach an agreement near the sale price which is close to that number before any discounts are applied.
8. Research all possible discounts well in advance. No doubt you have seen ads promoting cash-back deals, and these incentives should be deducted after you negotiate the price. In addition, many automakers offer discounts to students, civil servants and even members of certain credit unions. These discounts can be stacked and can be combined with the cash-back rebates on the model. Check automakers websites for these incentives in their “Offers” section.
9. Don’t rush your test drive. Now that you are at the stage of taking your cars of choice for a test drive since most car shoppers these days keep their cars for five years or more, take your time with the test drive to make sure you really love the car. Don’t be shy to ask for more time behind the wheel to ensure you like the driving experience, and spend time in the car while it’s parked to adjust the seats, experiment with the controls and determine whether passengers would be comfortable and your regular cargo would fit well.
10. Smart negotiation strategies. At the point, you have decided which car you would like to buy, remember to factor in all those discounts you researched and bring them to the table before you consider offering your existing vehicle as part of the deal. You are better off negotiating the sale price of your new car separately to the trade-in value proposition. Ensure you have researched your current car’s value online so you’ll know whether you are being offered the right price when the trade-in conversation arises.
Once you’ve reached an agreement to buy, be prepared to say “no” to all the extras you may be offered. Instead, say “no” and do the research at home for whatever add-ons interest you, and contact the dealership at a later date to negotiate fair prices for those items. When you are presented with a sales or lease contract, go over all of the details carefully, making sure that you aren’t paying any unnecessary dealer fees and that everything you negotiated verbally is spelt out in writing.