Buy a Car – The Best Way to Buy a Car
Have you ever heard the saying: “money talks”? What this means is that when you have money, you have the power to negotiate. Apply this to buying a car, and you will have great leverage for negotiations. The problem is, you don’t have thousands of dollars just lying around that you can use to buy a car, right? Of course you don’t. But it does not mean that you can’t get it. All it means is that you need to get your auto financing together before you go to buy a car.
The Best Way To Buy A Car
Most people fall in love with a vehicle before they have any clue about how they are going to pay for it. Then, they fall victim to the sales person doing all the work to find financing. This is the way I used to do it, and the way it is usually done.
The problem is, when you let the sales person handle your auto financing you are giving them too much control over the bottom line cost of the car. When the car dealership starts negotiating the price of a car with you, most times you will be asked what kind of monthly payment you can afford. What you will not be asked is how much you want to pay for the car. The amount of monthly payment you can afford and the bottom line price of the car are two different things. By letting a salesperson know how much you can pay, you are allowing them to add money to the bottom line price of the car. The following is a classic scenario:
You fall in love with a $15,000 car and you sit down with the salesperson to figure out how you are going to pay for it. The salesperson then asks you what amount you are able to pay each month for a car payment. You tell them “around $400/month”. The salesperson goes in the back “to talk to the manager” and returns to tell you that you are eligible for an auto loan at an interest rate of 10% and a payment of $425/month for 5 years (60 months). They ask if this payment is okay with you. Excitedly you say yes, they write up the deal, and you drive off in your new car with a monthly payment of $425. Not bad right? Wrong.
What they did not tell you is that your 5 year loan at the 10% interest rate was for a loan amount of $20,000 – giving you a monthly payment around $425… But the car was on the lot for $15,000, right? Well, originally it was. Yet you were tricked into paying an additional $5,000 that is now hidden in your monthly payment. And where does that extra $5,000 go? It’s simple. It goes right into the dealership’s pocket. It’s a shady practice, but it happens every day.
If you had secured your car loan financing ahead of time, you would have been able to get the $15,000 car for $15,000 and not a penny more. And guess what else… the monthly payment on $15,000 at the same 10% interest rate, for just 4 years (48 months) is only $380.44. This is less than the $400/month that you wanted to spend – and you will pay your car off a year sooner!
As you can see, by having your car loan in order before you go shopping is the best way to buy a car. If the car is already financed, dealerships will never walk away from cash in hand.
Ken S., Founder
© 2010