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The following is a guest post. To learn more about guest posting on iHeartBudgets, please contact me.
The other day, I was reading Jake’s article, Things I Couldn’t Do If I Had A Car Payment, and as soon as I read it, I thought about my little sister. She can’t stand her ‘99 Buick. Unfortunately, she’s dubbed it the pimp-mobile and has promised to trade it in. I’ve told her to sell it on Craigslist but, she refuses. So, I’ve given her a list of rules to follow when she finances her next car.
5 Ways Not to Get Screwed When Financing a Car
#1 Know what you want before you get there. Most people are like sitting ducks during hunting season when financing a car. They don’t know what they want or how much they’re willing to pay for it. As soon as you arrive most car dealers will ask you, “What’s your price range; and, do you have a specific car in mind?” You should already know the answer before you arrive.
Luckily, we have the internet today. So, you can choose your car from home. Once you’ve decided, print off the entire ad. Then, head to the dealership. This way, you won’t have to worry about price manipulation or being limited to vehicles you don’t want.
#2 Get Outside Financing. When you shop for a car, you don’t want to negotiate with the dealer. Unfortunately, all the cards are stacked against you because, they have the money and the product. Gain some leverage by showing up with the ad you printed off, and your pre-approval letter.
Another reason you want to get pre-approved is to avoid any inflated finance charges and hidden fees. Plus, car dealerships tend to submit your application until a finance company approves the loan. This results in multiple inquires on your credit report, thus reducing your score.
#3 Don’t go it alone. Purchasing a car is a big expense for most families. It’s usually only second to buying a house. You’re required to get your home inspected before closing the deal. You should do the same when buying a car. So, be prepared and show up with a professional. If you don’t know a good mechanic, ask your family and friends who they trust. This is an easy way to avoid buying a lemon.
#4 Read it, don’t believe it. Never believe a salesman. I don’t care how nice they appear. If it’s not on paper, it doesn’t exist. Reading the fine print is crucial. Most car dealers don’t want to piss off a potential customer, for obvious reasons. So, they’ll agree to anything in order to make a sale. More than likely, you won’t find out what you’ve gotten yourself into, until you’re driving off the lot. Then, you’ll spot the high APR, ridiculous finance charges, and hidden fees.
#5 Sell it, don’t trade it in. One of the biggest mistakes car buyers make is trading in their old vehicle. Every good salesmen knows, the more he gives you for your car, the less he’ll make when he sales it. It’s just good business. Make sure to sell your old car before buying a new one. Most people avoid this step but, it will save you a lot of money in the end.
If you don’t want to do the leg work, at least trade it in the right way. At some point, the car dealer is going to ask, “Are you going to trade-in your old car?” Don’t make the mistake of saying yes. Say anything but, yes. Personally, I would say something like, “No. I don’t plan to.” Wait until the price is set and everything has been confirmed with financing before mentioning your trade in. This is how you prevent them from raising the asking price to diminish your car’s trade in value.
iHB thoughts: Jackie, these are some great points on how to deal with a dealership if you are purchasing a car there. Heck, I say avoid the dealership altogether and, if at all possible, don’t buy a new car. It sounds like you really love your sister and want the best for her, you’ve got a big heart. Let us know if she ends up selling the “pimp mobile”, trading it in, or keeps it.
About The Author: Jackie is the sole author at Debt Free Bread, so give her some love and go check out her site (clean design, too, I should really take some notes!). Thank you Jackie for the guest post, and let’s hope your sister can heed your advice and save thousands!