Question about buying a new car

**bjl584** · 12-05-2011, 07:11 AM

Do you have a trade? What's it worth? The dealership may try to give you less. Be prepared to fight for the price you want. They will gladly sell it for sticker, but there is always wiggle room. Tell them something like 26K and see how close they can get to it.

I don't know if you can afford it cause I don't know your income or your other expenses and debts. Can you post them?

**disneysteve** · 12-05-2011, 07:21 AM

Your loan should be for no more than 36 months with a payment of no more than 10% of your monthly income. That's how to judge if you can afford it.

If I were buying a new car today, I'd probably consider using one of the buying services like AAA or others. I know several people who have used them and they were all very pleased with the results and the ease of the process. You pay them a couple hundred dollars but they work out the price directly with the dealer. Either that or e-mail local dealers and get them to bid for your business that way. Take the best deal you can find.

Also, consider selling your car yourself rather than trading it in. You'll likely get a couple thousand more for it that way.

**kork13** · 12-05-2011, 08:02 AM

First off, I'm going to be in almost the exact same position as you in about 6 months.... I'm moving back to the states, and I'll need to buy a new car, mostly decided on one about $28k new. If the plan is to keep it for years on end, I personally think new is a perfectly fine (if not reasonable) way to go.

Originally posted by disneysteve View Post

If I were buying a new car today, I'd probably consider using one of the buying services like AAA or others. I know several people who have used them and they were all very pleased with the results and the ease of the process. You pay them a couple hundred dollars but they work out the price directly with the dealer. Either that or e-mail local dealers and get them to bid for your business that way. Take the best deal you can find.

Both of these options are excellent. I bought my first car through Costco's car buying service in '07 -- got a firm price from day 1, and was given the contact info at a dealership 100mi north of me to purchase it through and pick it up. I also did comparison shopping at 3 or 4 dealerships in my local area, and after a week or so managed to negotiate down to about the same price, though only after literally walking out the door and the guy ran up to me as I was backing out of my parking space (basically, I had to go through the standard car dealership act). It's sooooo much easier to use a service where you get a price upfront and all you do is go pick it up (which I did do, btw). When I buy my car in 6 months, I'll be doing it through USAA's car buying service.

Emailing dealerships are also a great option, because the "online agents" (as they're called) are given much more liberty to negotiate lower... The idea is that people who are researching online already know what they're looking at and how much it should cost, so it's better to just cooperate initially and secure a purchase. Basically, you shouldn't walk into a dealership unless you've already got a deal in place.

Oh, and speaking of that.... arrange for a loan through your bank before you go to buy the car. You should be able to get something pretty good, 5% or less. If the dealership offers you better than your bank loan, take it. If not, finalize the bank loan and use that one.

**ProjectX** · 12-05-2011, 09:26 AM

Max, it's always good to do your research first. Use edmunds.com to price out the car with the options and see if they subtract the incentives on there. I would also check kelly blue book, edmunds, craigslist, ebay, and autotrader to see what your current car is worth and see what others are selling it for. Next you can take your current car to carmax and see what they would buy your car for (it's free). The price they give you is good for about 10-14 days and gives you good negotiating power if you want to trade the car in at the place you are purchasing the new car. Note: do not mention trade in until you have agreed to a purchase price.

I have purchased 7 cars and I never buy new, but recently did this past summer. You will always get the best deal on a 3 years old car as they depreciate fast the first 3 years and slow down after. I would say a really good deal on a new car is about $500 above invoice. If you go into the dealership and suggest paying well under invoice they will not pay you any respect.

I would first call your bank and ask if they can give you a pre approved loan. Check the rates on the website. They usually have 36 month or 60 month which have had the same interest rate. If you are buying a new car they should be around 1.99% considering your credit score. I belong to Navy Federal Credit Union and they are offing a rate of 1.79%. If you have a pre approved loan, all you have to do is walk in there and write the check. Dealerships like to make money off of the rate too, but again you can negotiate that.

When negotiating for my car I emailed 5 different dearlerships in the area, and started the communication with them about the car and options. Dealer loves it if you have done your homework. I corresponding with them for about 4-5 days until I was satisfied with the deal and then went into the dealership and signed the paperwork.

Then flew the Germany to pick my car, but that another story.

Let me know if this helps or if you have any questions.

Originally posted by MaxPowers View Post

First off I know a lot of people here are very conservative and would want to talk me out of my purchase, but this is something I want and I know I can afford. I will be 27 this month, this is my second car, and I plan on keeping it for 10 years so I wanted something I would actually enjoy and want to be in.
I want to purchase a 2012 Kia Optima. According to KBB, the MSRP is 31,600. The dealer invoice is 29,395. I know I qualify for $1500 in incentives to include active military. My credit score is 720-780. I will be trading in a car that should be valued around 7k.

My question is how to I approach the salesman with a price? Do I tell him I want to pay 29,395? If he agrees, then I subtract the incentives? When are the incentives subtracted?

With my good credit score, where would I want to get financing from? Because I am buying a new car, what kind of rates can I expect?
Is 48 months a good time period for a loan? I will pay it off before then, but is it bad to have a longer time period?

Anyone have any more advice on buying a new car right now? I will probably get it by the end of the month. I am in no rush and do not feel pressured.

**MaxPowers** · 12-05-2011, 04:06 PM

Looks like USAA can offer a 1.79% for 36 months. That is without checking my credit. Is there any place that might give me better? I have great credit.
USAA's car buying service also places the price about 28100 with incentives and about 29500 without. So that gives me a starting place to not go above.
A used car lot offered me 7k for my car, and told me to come back in if I got offered more. If the dealership offers anything above 7k and then gives me 1k of incentives for a trade in, I will sell it to the dealership.

**photo** · 12-05-2011, 06:49 PM

I'd make up your mind (but tell no one) ahead of time but actually buy on December 30 or 31. Not only is it the end of the month, but it's the end of the year, so dealers are really crunching the numbers to make quotas.

Unless I were desperate, I wouldn't take out a loan on a car. With the exception of our first car, we've always paid cash. It's best to find out what the dealer actually paid and negotiate from there. We've purchased car stats from Consumer Reports, but I'm sure there are other methods, as well. Most sources I've read suggest keeping a new car purchase completely separate from selling an older car because you'll usually end up getting what sounds like a good deal on one at the sacrifice of the other.

**ProjectX** · 12-05-2011, 07:26 PM

I personally don't think it's smart to pay cash if the interest rate is 1.79%.

even in this market there are savings accounts out there returning more than 1.79%.

Use your cash to make money and its always better to have cash on hand.

**photo** · 12-06-2011, 12:40 AM

Originally posted by ProjectX View Post

I personally don't think it's smart to pay cash if the interest rate is 1.79%.

even in this market there are savings accounts out there returning more than 1.79%.

Savings accounts? Please do tell. ING Direct was down to .85% the last time I looked.

Use your cash to make money and its always better to have cash on hand.

Agreed, obviously one should have a lot more money than only the cash to buy the car.

**YLTL_Dan** · 12-06-2011, 05:53 AM

Originally posted by ProjectX View Post

I personally don't think it's smart to pay cash if the interest rate is 1.79%.

even in this market there are savings accounts out there returning more than 1.79%.

Use your cash to make money and its always better to have cash on hand.

I disagree. No one gets rich by 'gaming' the system and making less than 1% more on your money instead of paying cash. You get rich by buying what you can afford and living debt free (with an emergency fund of course).

My general rule... you shouldn't spend more than 20% of your income on a car. OP would have to make around $100k a year for that to prove out (with trade in).

I've been there... I was a Finance major out of college and knew I could afford a $28k car. I loved it for the first couple of months but soon hated it when I realized I had to pay the car payment every month. I know the OP didn't ask for this advice, but hopefully we all come to these forums to learn.

**thefrugallery** · 12-06-2011, 06:24 AM

I know you don't want someone to talk you out of this, but have you looked at used cars? You might be able to find one that is only a year old with relatively low miles. My husband was in car sales for a brief period of time and I've heard so many stories of sleazy car salesmen. I simply don't trust them. I'd rather deal directly with another person than a dealership.

**bjl584** · 12-06-2011, 08:29 AM

Originally posted by YLTL_Dan View Post

I disagree. No one gets rich by 'gaming' the system and making less than 1% more on your money instead of paying cash. You get rich by buying what you can afford and living debt free (with an emergency fund of course).

My general rule... you shouldn't spend more than 20% of your income on a car. OP would have to make around $100k a year for that to prove out (with trade in).

I've been there... I was a Finance major out of college and knew I could afford a $28k car. I loved it for the first couple of months but soon hated it when I realized I had to pay the car payment every month. I know the OP didn't ask for this advice, but hopefully we all come to these forums to learn.

Actually a lot of people on these forums game the system when it comes to credit card rewards and cash back. And, a lot of people have gotten rich by buying on margin. If the set of circumstances were right, then I would consider financing. If I could get 0% or a low rate, and the option of taking the 0% did not effect any cash back incentives, and I could get a guaranteed rate in a CD or some other similar investment vehicle, then I would do it. It's a unique set of circumstances but it is possible that things could come together for you.

**feh** · 12-06-2011, 08:50 AM

There's no way I'd spend $30K on a vehicle. Just not a smart use of money.

**YLTL_Dan** · 12-06-2011, 09:14 AM

Originally posted by bjl584 View Post

Actually a lot of people on these forums game the system when it comes to credit card rewards and cash back.

I hear you, but I'm quite familiar with rewards cards as I travel extensively for work and use one. Most of our flights and hotels are paid for when I go on vacation. However, this usually means we go on more exotic vacations and have to pay for a lot of other stuff. I truly believe we spend more because of this of the rewards I "receive". The DW and I are ok with it now as we don't have kids, and we have the money to go on these trips. We may not do them in the future though!

Originally posted by bjl584 View Post

And, a lot of people have gotten rich by buying on margin.

A lot of people have gotten rich by selling drugs.. but that doesn't mean I advocate it

Buying on margin and leveraging debt to increase your bets is dangerous... many people learned this during the real estate downturn. I'd rather go the Dave Ramsey direction than the Donald Trump direction.

I'm sure this all belongs in a different forum, but it's a fun discussion. I just don't like debt and the availability of "free money" makes most people spend more. Many of the regulars on this forum probably don't have that problem, but most Americans do.

**bjl584** · 12-06-2011, 09:24 AM

Originally posted by YLTL_Dan View Post

I hear you, but I'm quite familiar with rewards cards as I travel extensively for work and use one. Most of our flights and hotels are paid for when I go on vacation. However, this usually means we go on more exotic vacations and have to pay for a lot of other stuff. I truly believe we spend more because of this of the rewards I "receive". The DW and I are ok with it now as we don't have kids, and we have the money to go on these trips. We may not do them in the future though!

A lot of people have gotten rich by selling drugs.. but that doesn't mean I advocate it

Buying on margin and leveraging debt to increase your bets is dangerous... many people learned this during the real estate downturn. I'd rather go the Dave Ramsey direction than the Donald Trump direction.

I'm sure this all belongs in a different forum, but it's a fun discussion. I just don't like debt and the availability of "free money" makes most people spend more. Many of the regulars on this forum probably don't have that problem, but most Americans do.

Buying drugs = illegal
Buying on margin = legal

I don't deal in margin trades, but others have. Some have made millions, and some have lost their shirt. Too risky for me.

I don't like debt either, but sometimes you can use debt to your advantage. 0% interest loans and credit cards rewards are two examples. Dave Ramsey hates all debt, period. But Dave Ramsey isn't someone I would take investment advice from. If you want to get out of debt, then Dave Ramsey is your man. If you want to build a portfolio, then look elsewhere.

Question about buying a new car