What Is Your Car Buying Method?

[Staceyy]

Please share your car buying methods. How do you save for your down payment? Do you pay cash for your cars? How do you finance? Do you buy used or new? Do you trade in your old car? Do you pay your cars off early? Do you have any tips you'd like to share?

[Broken Arrow]

I plan on-- or rather, am hoping feverishly on-- saving up for it and buying it outright. That's the ideal way to go IMO.

I am personally interested in the best value possible, and while that may be a new car, chances are very good that it will be an used car almost every time.

[getforfree]

Paying cash only for a 2-3 yr-old used car is the way we buy our cars. When a car is 2 yrs old, it's still new and doesn't depreciate as much as a brand-new.

[flatrock]

were a 2 car 2 job family. We buy one brand new car every 5 years. We pay at leat 50% cash down & always pay it off & finance the rest thru the credit uinon for 5 years. We always pay it off 1 to 2 years early. The other vehicle is bought 2 to 4 yrs old and we only buy it when the new one is paid off using the same method 50% down pay off balance in 2 years. We never have 2 car payments at the same time.

[eisor]

I bought my used car with cash. It was older than I wanted, but had VERY low mileage. The plan is to keep it for at least another 5 years. DH bought his used car with cash. It'll need replaced in the next year or so. Unfortunately, I don't think we'll have enough cash saved up to buy a used car outright. A major Honda dealer here is doing 60 months 0% interest, so we are hoping we can find a similar deal next year or the year after when we need to buy his new car. We are still saving for it though. We'd like to put 25-50% down and then use the 60 months to pay off the car early at no cost. We'll see what really happens.

[Scanner]

Here's what we do.

We wreck our car every 3 years and then desperately scramble trying to figure out what to do.

[anonymous_saver]

My car buying method is the cheapest one out there... I don't do it! I live in a large city and just walk everywhere or take the bus. It is so cheap (only $45/month pre-tax from work) for my buspass, that I could never rationalize not taking the bus. I think since I have planned on not having children and not having a car, that I will be able to retire earlier too.

[MonkeyMama]

Save up cash for a used car.

I always sell my old cars private party as well, to get top dollar. At one point I sold my old car for more than I bought my "new" one for. (Was an interim car - wasn't quite ready to jump to a minivan).

I think I had financed all my other cars for 6 months to a year. All 0-3% interest. I plan to pay cash for a much newer car next time (hopefully I have a good decade to save). The cars we can afford have increased with time.

I actually did trade in my last car. I paid around $800 and drove it for 3 years. The car dealership offered me $500 for it. I knew I couldn't get more so I made a trade-in exception that time. Just depends.

Dh loves small cars and you can get some pretty decent newer cars in the $10k range. We figure we will have $30k in a decade to buy a little car and maybe a hybrid. We try to save around $3k/year towards our next car purchase.

[Ima saver]

When ever we pay a car off we keep making payments to ourselves. We do like new and sporty! I have a feeling a new sporty car will be gracing our garage very soon.

[jodi]

It has varied in the past, but in the future we would ideally buy a 2-3 year old car with cash, or at least a large chunk with cash. I'm adverse to car payments
Our last four cars:
1. bought used (1 year), financed most of the cost, paid off two years early. Drove it into the ground (I did not take care of it as I should have) and traded it in.
2. DH's car - bought used, financed. Drove it into the ground. Traded it in after the clutch went for the third time. Got $750 for a car that didn't run and had body damage. (we haven't been able to sell our cars for anything because we just didn't take care of them as we should have)
3. Bought used in cash, traded in car #2 after it died. We didn't have any time for research, so we basically took the first car we found.
4. The only car we have ever bought new (and the last) - traded in car #1, paid $8k cash and financed the rest. Paid off over two years early.
Now we have no payments and two cars (2000 and 2005). I hope we won't need a new car for at least 3 more years. Should give us time to save up so we don't have to get stuck with payments ever again.

[disneysteve]

Here's how we got our current cars.

1. 1998 Toyota Camry, purchased in August 1998 as a dealer demo with 11,000 miles. I traded in my 1991 Camry with 127,000 miles. I put down a couple thousand cash. I shopped around and found the best loan rate in town and got the dealer to match it. A week after doing that, I took out a home equity loan at 2% lower interest and paid off the car loan.

2. 2000 Toyota Sienna, purchased in September 2002 with 34,000 miles after DW wrecked the van she had been driving. The insurance check covered most of the purchase and I paid a few thousand cash to make up the difference. No loan needed.

How will I buy the next one? I'll probably trade in or sell the 98 Camry to buy a 2-3 year old Camry from a dealer. If interest rates are low, I may take out a short loan and pay it off early (1-2 years) or I may just pay cash. Depends on where things stand at that point in the big picture.

[poundwise]

There are few absolutes.


Having said that...

1) Never trade-in. Ever.

2) Never arrange financing through the dealer.

3) Never buy extended warranties.


More casual, "what would I do" comments...

1) Buy used. Two or three years old, low-mileage.

2) Pay cash. If not, at least put something down and do not finance more than 36 months.

[disneysteve]

Originally Posted by poundwise

2) Never arrange financing through the dealer.

Why? Each time I've bought a car, I did my homework online and by phone and found the best possible loan rate I could get. In every case, the dealer matched that rate, so why not take the loan from the dealer knowing that I can't beat it anywhere else?

[safari]

I am going against the majority on this board, but I like buying new cars. I know it doesn't make much sense financially, but I have the money, and I am still saving over 30% of my income every year. When I was in college, I was driving used cars, my first car cost $1,500 and my second car cost $5,000. I didn't buy my first new car until I got my third job, which was paying substantially more than my previous jobs. That car cost $19,000. My next car cost $41,000... This may sound extravagant to some people, but it's all relative to the income.

One advice I can give you to people who want to buy a new car is to send emails to all local dealerships and ask them to give you a quote for the model and options that you like. It's a lot easier than personally visiting different dealerships an negotiating in person. My last car buying experience was totally painless. I knew what kind of car I wanted and I sent a request to about 10-15 dealerships in my area and got back some quotes. I purchased the car from the dealership that gave me the best deal, and it was over a $1,000 below the next best offer that I received. When I came to the dealership, the car was already waiting for me, so I just signed the papers, shook hands and drove off in my new car. Of course this method will only work if you live in an area where there are multiple competing dealerships.

[disneysteve]

Originally Posted by safari

I like buying new cars... I have the money, and I am still saving over 30% of my income every year.

Nothing wrong with that at all. If having a new car is a priority for you and you can comfortably afford it, go right ahead and enjoy it.

[InDebtInDC]

1) Do research on the car you're buying. Make sure you know the pros and cons of a particular model, and especially the year. Read consumer reviews. Browse forums. Talk to people in the service waiting room. Flag people down in the parking lot. Do whatever you have to do to get your information.

2) Never buy a car in its first year of a model design. Chances are even good companies like Toyota usually bonk their first year of a new model. Consider the last model year of a good tried-and-true design. You can probably get a great deal on a new car at the end of a design when the new design on the lot because people usually want the new stuff.

3) Never buy European or American if you're on a budget. If you insist, make sure you know what you're getting into. Not all Asian makes and models are great either so do your homework.

4) A 2-3 year old car usually yields the best value in terms of useful service life and cost.

5) Always do a CarFax on a used car. If there is even a blemish, walk away. A CarFax smudge can never be fixed, and it stays for the life of the car.

6) Do a prepurchase inspection by a mechanic you trust if possible. I would be weary if you're not mechanically inclined. Don't trust the dealer.

7) Don't be afraid to be aggressive with a dealer. They're trained to agitate, frustrate, stall, pressure, etc. you. Don't be afraid to speak up for yourself when you see something you don't like. It's all the same. 9 out of 10 times I can predict what a salesperson will do before they do it.

8) Brush up on your local DMV's requirements so you don't waste time.

9) Don't be afraid to ask questions. If they can't explain it, you shouldn't do it. If you don't feel comfortable, walk away.

10) Do your insurance shopping before you get to the dealer.


And the most important tip, know exactly what you need, not want. No more. No less. Dealers will pressure you to take what they have in inventory, and sometimes it will be a better deal. But make sure it's exactly what you need. Don't buy more car than you need.

[Staceyy]

I heard of a man who saves his tax refunds for several years and uses this to buy a new car. Then he continues to save until the next new car is needed.

[eisor]

InDebtInDC - I completely agree with every tip you listed! I unfortunately had a horrible experience buying my car. The car is now in great shape, but the dealership really tried to screw me over.

[InDebtInDC]

Originally Posted by Staceyy

I heard of a man who saves his tax refunds for several years and uses this to buy a new car. Then he continues to save until the next new car is needed.

That is the worst way to save. Ideally you want to break even or owe a little bit on your tax return. It's better to reduce your withholding and put the difference away each pay check.

[poundwise]

Originally Posted by disneysteve

Why? Each time I've bought a car, I did my homework online and by phone and found the best possible loan rate I could get. In every case, the dealer matched that rate, so why not take the loan from the dealer knowing that I can't beat it anywhere else?

AAA: To Drive A Better Deal Get Financing Before Shopping For Car

DealerTricks: The Finance Office

Bankrate: Dealers hold the cards when they finance your car


Mainly, the suggestion for avoiding dealer financing centers around the fact that dealers don't finance. They have you sign a finance contract (I forget the exact term for this) and the sell the debt to someone else with whom they have pre-arranged the deal. This doesn't make them evil or anything but it does put them in a position as a middle-man where none is necessary; and one which most likely doesn't put your absolute best interest first always either.

AAA and other sources, like Clark Howard (whom I'll quote here) also suggest that you "Keep the financing separate from the car-price negotiation..." The implication being that you are able to get a better overall deal on the price of the vehicle when the financing is already arranged ahead of time.

The folks at Edmunds.com think so too, "...if you arrange financing before you go to the dealership, you are in a much stronger position to negotiate. This important step presents a number of advantages because it keeps negotiations simple in the dealership and allows you to shop competitive interest rates ahead of time. It also removes dependency on dealership financing and encourages you to stick to your budgeted amount."

Now, could one do enough homework ahead of time to change things? Can you still get a good deal and good financing at a dealer? I suppose so, yes.

But the question is why?

For example, I'm not sure why I would bother to use the dealer if I had already found the lowest rate elsewhere. So what if the dealer could match it?

I also believe its best to arrange your own financing because, then, the whole process is transparent (to you) and you are in control of where you seek a loan. You also save yourself the hassle of "dealing" with the dealer and their finance contracts, waiting for them arrange things for you and then the hassle (no doubt) of having to deal with the fact that they will try to tack on credit insurance and so on.