Chances are, the way you went about buying your last car will be totally different than the way you will buy your next vehicle. The days of easy credit and no down payment are over. But if you have good credit and a substantial down payment, you can really score a fantastic deal on a car right now.
Money Magazine has come up with a few new rules for buying a car, listed below. These suggestions can really help you prepare before you go to the dealership and can help save you money on your next car purchase.
1. “You can find a deal anywhere, and we mean anywhere.”
First of all, there’s a ton of inventory right now. Automakers are cutting back on production because there’s a ton of cars sitting on dealer lots. From 0% financing to thousands of dollars in cash back incentives, it’s hard to find a car brand that’s not giving huge discounts right now.
You’ll also see incentives on the full range of cars. Recently, it was just the gas guzzling SUVs and trucks that had big price cuts. But now, small and mid-size cars are getting big incentives too. Even Toyota just started giving incentives on its popular Prius hybrid.
Get pre-approved for your car loan before you go to the dealership. This will allow you to negotiate on the financing. Check your local credit union or online lenders for financing. Go to the dealer with your pre-approved loan check and see if the dealer can beat the rate you already have.
Don’t be afraid to negotiate the price of the car. If the salesperson doesn’t want to give you the price you want, simply walk out. Chances are they will run after you and beg you not to leave.
Here’s a good tip from Money Magazine’s rules: “Finally, when deciding between cash back or a low-rate loan, consider your time frame. Cash will usually beat cheap interest if you plan to get rid of the car or pay off the loan within three years.”
Ports are full of import cars that are ready to go to the dealerships, except that the dealers’ lots are full too.
2. “Lenders are playing tough, but only with some borrowers (hint: not you).”
As mentioned earlier, easy credit is gone. But if you have a credit score higher than 720, lenders will be falling all over you to give you a car loan. Don’t expect those six and seven-year loans any more though. They’re basically gone. If you can get one, you’ll end up paying a higher percentage rate. Expect to see car loans with terms of five years and less.
The shorter the loan term though, the less interest you pay, so this could be a good thing.
Don’t worry though if your score is less than 720. There are still car loans out there. You will have to put at least 10 to 20% down though. You also may have to pay a higher interest rate.
3. “Cheap leases are disappearing…”
Remember the guy down the street who wasn’t rich but drove a BMW? He definitely didn’t own it. He was leasing it. Leases were the way for Americans to “keep up with the Joneses” by leasing expensive cars they never would have been able to afford if they bought it.
Now though, lease payments are getting more expensive and are much closer to the car loan payment for the same car. Leasing companies took such a huge loss when all the SUVs came off lease and were worth practically nothing. They have to make up the money some way, right?
If you have prime credit (720+) you can still lease a car. But don’t expect to see those $0 down deals. You’ll likely have to put a few thousand down and your lease payment will be higher.
4. “…but you can still profit from their glory days.”
All those SUVs that came off lease recently and are worth practically nothing are good cars to buy if you need the size of an SUV. The dealer will inspect the car, fix any problems, give it an extended warranty and sell it as a certified pre-owned vehicle.
Make sure the extended warranty lasts a few years longer than the original manufacturer’s warranty. You should get another few years on top of the original warranty. Money Magazine suggests negotiating the price of the car down enough to cover the cost of the additional warranty.
5. “Buyers need to read the business pages too.”
If you don’t know that the Big Three might go into chapter 11 bankruptcy, you may not want to buy one of their cars. But then again, you shouldn’t worry because the warranty should still be honored. Parts probably will be available too.
If you read in the news recently that GM is killing several Pontiac models, you probably don’t want to buy one. That model’s value will drop so much, it won’t be worth a lot at all when you decide to sell or trade it in.
Just be aware of what’s going on out there in the automotive news world. Keeping yourself up-to-date on the current situation can help you when you purchase your next car.
Image via americanthinker.com.