One of the first, and most basic of all purchases is your car. However, the purchase of a car is considered a bad investment by many investment professionals. Why? As we all know the moment a car is driven off the lot its value goes down… a lot, and continues to decrease until there is little or no value and you have to buy another.
Nevertheless, it is one of the most important purchases you will ever make.
First determine why you need a car. Basic work transportation? Do you travel, and how do you like to travel? Do you take a careful of kids to school, or practice? Do you need to carry large items? Are you status oriented and need to look good? Each of these reasons will require a different decision.
Once you decide why you need a car, you should ask yourself if a used car will do, or do you need to buy new. Since most cars depreciate 20-30% when you drive it off the lot, a vehicle a year old will usually prove to be a better value. Many vehicles are so well built that they remain reliable for many years, so an older car might prove to be a good balance between price and quality. Dealers also offer “Certified” vehicles which are used but come with warranties and are certified to be accident free and have been tuned up. Many also come with service packages. This gives you many of the benefits of buying new without the high price tag.
Ask yourself: What is your budget? Can you pay cash, or will you need financing? How much payment can you afford? How large a down payment do you have? Can you sacrifice style or color to get the price/payment that fits your budget?
Where do you find your car? It used to be simple: for a used car there was the dealership, the used car lots, or want ads. Then came Auto Trader, a great source for research. Now, with the internet there are too many choices, but the many sources will tend to give you a better value as competition is stiff. For new cars the internet is a great source for finding the best prices, learning what the dealer pays, where your make/color is located. If you find your car at a dealer a distance away, a local dealer may be in a position to bring that car to you, while other dealers will be happy to deliver right to your home.
It will be to your advantage to have your financing arranged ahead of time, as dealers will try to sell at a higher price knowing you are focused on the payment instead.
Do your homework. Know what the real numbers are; know what the dealer paid and how much he expects to make in profit. Dealers are often satisfied in making $200-400 on a $20,000 car, as they need to sell current inventory to get their next delivery. The very end of a month is often the best time to buy, as they need to turn their inventory and make their sales quotas.
Don’t be afraid to walk away if the negotiation isn’t going your way. And don’t fall for the extended warranty and under coating, as these are just pure profit and of no value to you.
If you do your research and don’t buy with emotion, you should be successful at getting what you want at the price you are willing to pay.
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