Buying a car is a huge event. I mean, second to your house and maybe education, it’s pretty much the most expensive thing you will buy.
It’s ironic, therefore, that it’s also one of the most stressful things to buy; the negotiating with salesmen, the fear of buying a lemon and the whole final sale part is what really gets me. Why is it that our largest life purchases are the only non-refundable ones?
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Luckily there are some things you can do to make the whole process of buying a car easier and also save some money along the way.
The tips below will help you avoid some of the common car buying pitfalls and help you make the right decision on which vehicle to purchase.
If you have kids and are looking for a new car, make sure to also read the 6 things for parents to consider when buying a car.
How To Save Money To Buy A Car
Before we even get into some tips and tricks for saving as much money as possible when buying a car, how do you even save up enough money for a car in the first place?
First of all, you will probably need some kind of financing in order to buy a new car, unless you have a huge chunk of change under your mattress. The good thing is that there are often great promo rates for car loans, in fact my current car loan is 0% for 5 years.
Make sure to shop around for your car loan, don’t just rely on the dealer rate. Check online and ask your bank what they can offer as it may be better than the dealership offer. Also make sure to look into any discounts such as military rates that apply to you.
You do normally need some kind of downpayment when you take ownership of a new car plus there are all the other fees like license plates, insurance, snow tires and any other extras.
There are few ways to prepare for a new car purchase that will help you save the downpayment:
- Put away the estimated amount of the car payment for a few months. This will prepare you once the payments start and the money you save can go towards the downpayment
- Start cutting your budget as much as possible to make the downpayment painless. You can do that by saving money on your grocery bill, spending less on “wants” and adopting a more frugal lifestyle.
READ NOW: 21 Frugal Living Tips For A Better Life
How To Make Money To Buy A Car
Trimming your budget can help to give your savings a boost but if you need some ways to make money quickly, there are a few side jobs that you can do in your spare time that will help you pay for your new car.
If you already own a car:
If you don’t have a car:
Consider offering your services on Fiverr if you are handy online or make some extra cash around the neighbourhood babysitting, doing odd jobs or even cleaning houses.
More ideas for making extra money to pay for a car: 80+ Ways To Make Money That You Can Start Today
Once you have your deposit and financing sorted it, it’s time to pick your car and get the best deal possible.
Tips For Buying A New Car And Saving Thousands
1. Don’t treat your car purchase as an investment
A coworker told me her dad told her to get the best car she could afford. His logic was that the vehicle helps you get to work so it is an investment in your career and future.
What? A car is a depreciating asset which loses value the second you drive it off the lot. It is never an investment.
Good wisdom says to buy the cheapest, most reliable and roadworthy car you can get.
If it can get you from A to B without breaking down on the regular, you are doing great.
2. Don’t view your car as a status symbol
Don’t be swept up with the keeping up with the Jones’ and feeling that you have to drive a top line model.
Instead of being impressed by someone driving a fancy car, consider how much extra they are paying in payments, repairs & premium gas just to “look the part”. Not sure I’d take financial advice from them!
If you work in a sales or customer facing job, don’t be drawn into the myth that a nice car will impress your clients. The top sales people are cost effective and try hard to get the best deal for their client and for their company.
Flashy car and clothes do not equal success, do not be taken in by appearances. Some of the richest people I ever met drove old Toyotas. Maybe that’s why they were rich?
3. Buy, don’t lease
Leasing is just a no-no.
I honestly cannot think of any circumstance where leasing makes financial sense in the long term.
Sometimes people think that leasing is worth it because if you will always have a car payment anyway, why not drive a newer car?
But why will you always have a payment?
Is it because you are going to keep buying new cars every few years? Realistically you should be keeping each vehicle 10-15 years so enjoying at least 10 glorious payment free years after the financing term is over. If you bank the payment amount during those years, you might even be able to pay cash for your next car.
Another argument for leasing is that at the end of your term, you just hand the car in at the end and walk away scot-free.
That was not my experience at all. I leased a car and only drove it for work. I had it detailed before I handed it back and I had bought the protection package from the dealer which was supposed to cover any dings and scratches. Perfect, right?
Well, somehow I got charged over $1000 for a scratch and a windshield chip that I had already had repaired at the dealer! I spent hours online googling for information and it seems that what happened to me is very common – the dealer needs to recoup their money somehow and charging you for wear and tear is how they do it.
Do I need to say it again? Don’t lease a car!
4. Keep your car for as long as possible after you have paid it off.
Some people think you should buy a new car every three to five years so you don’t have to worry about repairs and are always driving a newer car. I even know people who buy a new vehicle as soon as they have paid off the existing loan!
You might not be worrying about repairs but you will be worrying about your bank account! I agree that if the repair cost of your car exceeds its worth, then it may be time for a new vehicle but that does not normally happen every 3-5 years.
You should get 5-10 more years out of your car before you need to consider trading it in for a newer vehicle.
Also, consider buying a second-hand car with lower mileage instead of a brand new car, you can normally get a much better deal plus more bells and whistles for your money.
As I mentioned above, a good trick for saving money for your next car is to put the money you would have spent on a car payment into a separate account once your car is paid off. That way, you will have a nice stash when it is time to get a new car.
5. Get your timing right
Save money when buying a car by being smart about your dates. Month’s end is normally the best time to buy as sales people are trying to meet their monthly quotas. They might be in a panic to meet or exceed monthly targets, and be more willing to go the extra mile with price negotiations.
New car models normally come out in September so it’s often a good time of year to buy last year’s model as dealers clamour to get rid of inventory. The end of December is also a good time as you get the quota double whammy of end of year and end of month.
6. Negotiate the little fees
Make sure to negotiate hidden fees such as delivery, keys, window etching etc. These can all be waived at the discretion of the dealers and can add up to a couple of thousand of the total buying price.
I’ve also found that some dealers will not let you charge more than $1500 on a credit card (for your deposit). This is because of the 3% merchant fee for using a credit card. I’ve been able to get this rule waived with a little negotiation. It’s not much but every credit card point counts, right?
7. Ask for extras
Once you have exhausted your negotiating powers in getting the best price possible, don’t stop there! Dealerships have the power to give you a ton of freebies if you play it right. This is especially true if you are buying a midrange car with a little more wiggle room in the dealer’s profit.
TIP: Make sure you ask for any freebies AFTER you have negotiated the actual car cost so that they can’t build it into the sale price.
Things to ask for:
- Accessories such as winter floor mats, window tinting or mud flaps
- Protection packages for rust, fabric or paint.
- Extended warranties
- Services – oil changes, window etching or tire rotation.
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