Monday, September 9, 2013

Purchase a New Car lately?

My teenage son did this.  If you have a teenage driver you know the stress, worry and money it takes to ''let" them drive.   The one phone call you don't want is, the report of an accident.   This accident was my sons first accident.  He's had his license over a year.  It was minor. No one got hurt (except his car) the other driver and his pickup truck were fine.  This did total this car of ours.  He was sad, we were sad, but so grateful no one was hurt.  Cars can be replaced.

My husband and I now had some decisions to make regarding a new car purchase and how we were going to let our son "feel the consequences" of his accident.  One rule we have before the kids get there license is that they have to have the insurance deductible in there savings account.  If the have a job they pay for there own gas, we are providing the car and paying the insurance.  If the kids do not have a job then we have given them a gas budget.  If they burn through it fast then, oh, too bad I guess you are staying home friday night.  If you have an accident then you will now have to pay for the increase in insurance.  A second accident or many tickets, You get to pay for it all, the car, insurance, and gas. This really has worked well for our family.  Having a drivers license is a great privilege and responsibility.  It isn't a right everyone in society is given.  We want our children to understand this and appreciate this.
We live 15-20 minutes out of town, and my son does have a job so he needs a car in order to keep it. So we knew being down a car was going to put a lot of stress on mom running him back and forth.   So we began searching for a new car.

Buying a new car can be stressful.  Everybody wants to get what they want, and they want it to be shiny and fun, but reliable and affordable.  So what is the best way to approach this large purchase?
I thought I would share what we have learned over the last 21 years that we have owned a car.  In that time we have owned a total of 11 cars.  We've made some bad purchases, but we have learned from them.  Our last several (5) purchases have been great deals and nice dependable affordable cars.  However you can take this information and use it or you can not...just thought I would share.

You always want to start with a budget.  
A realistic budget.  So sit down and go over your finances before you even start looking at vehicles.  You are going to determine how much money you have for a down payment.  Are we going to have  a car payment, if so what's the amount you are comfortable with.  I like to have a range.  For example I 5-10,000 dollars was my range for a new car purchase.  We have 4 drivers in this house and depending on what I found would depend on who was going to drive the car.  I have room to shuffle things.  

Next call the bank.  Check around for who has the lowest interest rates and what they are.  Taking note of older cars will have an higher interest rate than newer cars.  Also most of the time a Car Dealership can get you an even better rate than the bank.  DO NOT have them run your credit or have an application open for this.  You are still in the information gathering phase.  You are not certain what you are going to do yet.  If you know however, that you don't want a larger than 200 dollar car payment then ask questions like: " 5,000 dollar loan with a 200 dollar payment at the current interest rate would take how long to pay off?" Or, "A loan for a 10,000 dollar car on both the higher and lower interest rate.  That is the payment?"   Once you have an idea of  the numbers then we shop.

I shop for cars everywhere.  The side of the road, Craig's list the thrifty nickel, online, and at dealers.  I start looking to see what's out there.  I make lots of phones calls and start weeding things out Based on year of vehicle, amount and mileage, and if the car has been wrecked.  

Then I find out all I can about the cars I like.  
So I'm looking up on line at reviews. I'm finding out what the car is worth..not what the people are asking but what the car value is. You can do that by calling the bank, checking on Edmonds or Kelley Blue Book.  YOU NEVER, NEVER want to pay more for a vehicle than what it is worth.  NEVER!  Always find out how much the car would be if buying brand new too.  Why?  Well its a good thing to know how fast the car is depreciating.  How much is this car really going to cost you to drive it.  I also like to call the insurance company and know how much the insurance will be on the vehicles we are looking at.

Then we test drive.  I am a have to see, touch, feel and hear kind of gal.  I will not purchase a car sight unseen.  To high of a risk for me.  (I do tend to be picky!)   I want to look at the car.  I want to see all the nooks and crannies.  You cant tell a lot about how well the car has been maintained by the condition the car is in.  It's a great feeling to go test drive a car that you know all the specs on.  How much it should be worth how much the insurance will cost.  The reviews.  All this information will help you to decide if you really want to proceed or walk away.  The dealers don't like informed shoppers. They can't get the money out of them that they would like.  They also don't want you to leave.  They know if you go home and do some research , it will be a lot harder to sell the car to you.

Then Next,  If I like then car I always take it to a mechanic to have a peek at it.  In this case that is my Dad.  Find someone who knows a lot about car motors. Not the mechanic at the dealer you are trying to purchase the car from.  Not the sales person either.  Someone whom you trust to give you an none biased opinion.  They should be able to tell you what the most common problem that piticular engine has.  Not all engines are equal.  There are a few vehicles my dad has told me to run from.  

You have to consider the mileage on any car you purchase.  Mileage does matter.  Around town with lots of stop and start mileage is harder on a motor than a vehicle that has been out on the highway.  How do you know if the car is highway miles or town miles?  One of two ways.   The first is if you can find out the story of the car.  Who's been it's owners.  Second look at the body of the car.  Town driven cars have way more door and body dings than cars that have been mostly on the highway.  Above all remember mileage is wear on the car.  A car that has 150,000 miles on it obviously has more wear or more worn out than a vehicle with 50,000 miles.  Keep that in mind especially if you are taking any kind of loan out on the car.  A great question to ask if you have to take a loan is ..."  How much more life will this car have when I'm through paying it off."  Ideally any car you purchase you want a long life and no car payment.  

Then if you found the car you love.  Go home and sleep on it.  If everything still looks great the next day..proceed to purchase your new car.  

Something that's happening right now with used cars is they are over priced.  Most cars we looked at were 1,500-2,000 dollars over what the car at the most should be worth.  No one was that willing to come down at all either.  So keep looking!  Be smart!  Sometimes think out of the box a little.  There are some great deals on new cars.  Some dealers still have brand new 2012's sitting on there lots with the 2014's soon to arrive.    In this case we bought Dad a new car and shuffled.  We were going to have to spend $10,000 dollars on a car that had over 100,000 miles on it and take a loan at the 4.8 percent...NO WAY!  So we upped the budget bought a 2012 with 30,000 miles at 1.8% for 6,000 dollars more.  It's not the color we wanted but the numbers, mileage, and everything else ticked off the list.  In the end it was a better purchase for us.

Good luck in your next car purchase.  Biggest thing...DO YOUR HOMEWORK on it.  NEVER make a blind car purchase.  Shiny wheels are great..but what's under the hood and in that pocket book is what really counts!

Also when thinking about the car loan Dave Ramsey, Suzie Orman and many other financial advisors, advise to always pay the car off in three years or less. 

What have you learned about purchasing a new car?

Keeping It Simple