If you follow me on Instagram, you might know that last week my car died on me and this week I bought a new one. This was the second car I bought on my own and each time is a learning experience. Car shopping can be very overwhelming if you’ve never done it before and don’t know what things to look out for, so I figured since I’m pretty much a pro now, I’d share some of my experiences and tips that I’ve learned along the way.
Buying a car is like reading a book or watching a movie over and over again. You always learn something new each time. Some of these tips I learned the last time I went through this process, and some of them I learned this go ’round. Hopefully I won’t have to do it again (fingers crossed), but if I do I’m sure that I will learn something else at that point too.
Tip #1: Research, research, research.
This was a hard and very expensive lesson to learn, but one that I will keep with my forever. I bought my old car on somewhat of a whim and didn’t look into the car at all. Turns out, the particular year and model that I bought had serious engine issues. Right after I bought the car, the dealership had to fix the engine for me (on their dime, since I hadn’t even made the first payment yet) and a few months later I found out that the maker was a defendant in a class action law suit. I should have learned my lesson then and tried to trade the car in for something else. But nah. Fast forward three years and a completely paid off car note: the car’s engine dies out of nowhere and it costs thousands of dollars to fix. I had it towed to a specialty shop and the mechanic that I spoke with said that he had another car just like mine on the lot with the same issue I had, and another car – again just like mine with the same issue – was on the way.
“Fool me once, you can’t fool me again”*.
When you’re looking for a car, you need to research the makes and models you’re interested in. Not just so that you aren’t having to replace the car three years later, but mainly so that you get what you want and need. Research the different trims (SE, LE, XLE – or whatever your particular maker calls them) and what option packages are included on each trim or need to be added (or are even available to be added) at an additional cost. Test drive ALL the cars. Salesmen will hate you for it, but test driving cars will definitely help you rule certain vehicles out. When you do the test drive, you’re not just testing how the car drives. You also need to pay attention to how you would interact with the features. Are the buttons in a weird spot? Is anything distracting you? Once you narrow down your options to a couple different cars, compare them to each other.
Doing the research before you go to actually buy the car will make sure that you’re well informed when you finally go back to make the final decision.
*I know that’s not the actual saying but it’s, like, my favorite George Bush quote ever.
Tip #2: Get pre-approved – from a legit lender.
This is something I halfway accomplished last time I bought a car. I actually did get preapproved for a loan. The problem then was that I used a lender that was not accepted by any dealership that I contacted, so it was pretty much like I wasn’t preapproved at all. Because of that, I was pretty much at the mercy of the dealership’s finance department when it came to on what terms I would be able to take the car home. The lack of preapproval wasn’t technically all bad, though, because I ended up with my car because the finance department wouldn’t approve me for the car I actually went to see – it was too old with too many miles, according to them. Instead they offered a newer, more expensive version and I didn’t have much negotiating power when it came to the interest rate and payment amount I would accept for that particular car at that particular price. I ended up paying a sky high double digit interest rate. (In hindsight, I could have just gotten preapproved with a different lender outside of the dealership, but I didn’t think it all the way through at that point.)
This time around, I learned my lesson and I got preapproval from a legit lender that I knew would be accepted by any dealership that I wanted to go to. It helped tremendously. The sales manager was fooling around with the finance manager trying to give me a double digit interest rate on a cheaper car that I actually didn’t even want, and I was able to slap my phone on the table like I was playing a good game of Bones and say “Nah, son. I’m already preapproved at less than half that rate with a much better payment”. I pretty much told them they could either meet or beat my preapproval, or I wouldn’t use their financing. And what do you know… they magically matched my interest rate. On the car that I wanted, no less. When you’re preapproved, you have power to negotiate what works best for you and you won’t be held hostage to the dealer’s terms.
Tip #3: Use the same lender.
When I went about getting preapproved this time around, I automatically went through my bank because I had heard that it was best in order to get the lowest rates. Unfortunately, my bank approved me for half of what I asked for, wouldn’t finance more than 80% value (I needed 100%), and had me at a double digit interest rate. I was distraught. I needed a new car NOW and knew that I was not able to get what I wanted with the amount that they approved me for and I did not have 20% to put down anyway.
I originally didn’t use my previous lender because I assumed the terms would be the same as before, so I begrudgingly put in an application and, lo and behold, I was approved for what I was asking for at a maximum interest rate of half the rate on my old loan. Since my previous payments were near perfect and I eventually paid my loan off in two and a half years (as opposed to the seven I signed up for), I got a “preferred” rate. Ultimately, after choosing the car and options I wanted, the interest rate dropped even lower to about a third of what my old interest rate was. Sticking with the same lender definitely helps because as you build a relationship with them they will be able to offer better and better rates. Most big lenders are accepted at any dealership, so if a finance manager tells you that they can get you the same rate with their “preferred” lender, think about the relationship building aspect before you switch to their bank. Chances are they want to switch you to a different bank because it benefits them, but you need to go with the option that will benefit you in the long run – especially if your payment is exactly the same or only just a tad bit different.
Tip #4: Know what car/options you want.
This is one of those things that I know, and I can tell other people how they should do it… but I can’t do it myself. I did all the research but still wasn’t really sure exactly what options I wanted. I’m happy with what I got but there are options that I wish I would have gotten (without increasing my payment, of course).
Do you want leather seats? A sunroof? Remote start? Power seats, locks, and windows? An SUV? Sedan? Coupe? My salesman was awesome so I wasn’t forced into anything that I didn’t want, but knowing exactly what you want will help with a pushy salesman that tries to sell you on stuff that you don’t.
Tip #5: Know what you want your payment to be (and stick with it!)
While the price of the car, the add ons, and the interest rate are important, I’m going to go on record to say that your actual payment is the most important. You need to know what you want to pay each month, all inclusive, and that will drive how much you can afford at a specific interest rate. If you can afford to pay $400 per month, then you need to make sure you are looking at cars and options that will keep you at $400 once all of the additional fees are added on. Keep in mind that, depending on your interest rate, adding or subtracting a few hundred or couple thousand dollars won’t make much difference in your monthly payment, so you might not necessarily need to stay under a certain price (don’t get crazy though).
When using car note calculators, make sure you are including the tax, title fees, dealer fees, and any protection packages that you want to add into the financing cost.
Be sure to check out my YouTube video below for tips 6 through 10!
Tip #6: Ask about extended warranty, GAP insurance, and other protection plans.
Tip #7: Be willing to walk away.
Tip #8: Test all of the features in your car before you drive off the lot.
Tip #9: Use a car buying service to save money.
Tip #10: Save money now so you can save money later!
Tip #11 – BONUS: Not all car salesmen are out to get over on you!
Have you bought a car recently? Do you have any car buying tips you want to share? Let me know down in the comments!