Home > 2014 > Auto Loans

10 Ways to Buy a Car for Less

Advertiser Disclosure Comments 0 Comments

After a house, a vehicle is probably the biggest purchase you’ll make. Unfortunately, while your house might appreciate — that is, gain value over time — your car will eventually turn into a nearly worthless hunk of metal, plastic and upholstery.

Rather than pour oodles of cash into something whose value is going to drop like a rock, use these 10 tips to spend as little as possible on a vehicle that will safely serve you for years.

1. Buy Used … Usually

You knew this would be the first bit of advice, right?

Of course it is. How could it not be when Edmunds reports that the average new car loses 11% of its value as soon as it’s driven off the lot? That means your $20,000 car is suddenly worth less than $18,000. Then, after five years, it will likely be worth only slightly more than $12,500.

So it almost always makes sense to buy used. Wait two or three years and you can often get a much cheaper car that is almost as good as one fresh off the assembly line.

However, if you’re planning to get a car that’s only a year old, in some cases a new car may be cheaper when dealer and manufacturer incentives are factored in. Edmunds has a list of vehicles for which it may make sense to buy the new version rather than one that is last year’s model.

2. Do Your Homework

Regardless of whether you’re buying new or used, you need to do your homework first. That means researching the going price and available options for the cars you’re considering.

Of course, KBB and Edmunds are good places to start, but don’t stop there. These sites tell you what cars should be selling for, but, in the end, capitalism rules. Supply and demand where you are will dictate actual prices.

Cruise Craigslist and browse the online ads to get a feel for prices in your area. You want to have a good grasp of local prices before you set foot on a dealership lot and get talked into a “good deal” that really isn’t a deal at all.

3. Get Your Trim Right

OK, this one might seem silly to the gearheads in the audience, but for everyone else, make sure you’re doing an apples-to-apples comparison when shopping around.

I’ll go ahead, risk looking the fool and confess to this mistake. I recently bought a Toyota Sienna with an LE trim but was comparing it with vehicles with an XLE trim when doing online research. It wasn’t until after I got the vehicle home that I realized my mistake.

Though I still got a good price, it wasn’t the totally awesome deal I thought I had negotiated.

4. Embrace High Miles

I don’t think I even owned a car yet, but I still remember that old Kia commercial with the car driving until the odometer on the roof rolled over to 100,000. Wow! The car was so cheap and yet you could still get 100,000 miles on it. It was downright amazing!

How times have changed. Today, your car is almost guaranteed to get 200,000 miles or more. So why are you freaking out about buying a used car with 110,000 miles on it? On many models, once the mileage starts going north of 100,000, the price starts dropping through the floor. By saying no to these high-mileage cars, you’re saying no to a lot of good deals.

I speak from personal experience. Prior to my most recent purchase, I was driving a 2004 Oldsmobile Silhouette. I bought it about five years ago for nearly half the KBB suggested price. Why was it so cheap? That’s because it had nearly 170,000 miles on it, and no one wanted to take a chance on such a high-mileage vehicle.

However, my current vehicle at the time was a 1997 Plymouth Grand Voyager that was pushing 300,000 miles. The Oldsmobile miles came largely because the one previous owner had a two-hour round-trip highway commute each day. I did my homework on the reliability of the car, bought it and drove it to 265,000 miles before it started giving me trouble a few months ago. Now, it’s been replaced by a 2008 Sienna that has 141,000 miles.

Not every high-mileage car is a good buy, but if you find a reliable make and model, you can get good quality at a low price.

5. Time Your Purchase Right

There are two facets to this piece of advice.

The first is to buy on the right day. As you might guess, the end of the month is often a good time to buy a car, particularly if salespeople are trying to meet their quotas or qualify for a monthly bonus.

However, the very best day to shop could be Dec. 31. Not only is it the end of the year, but there may be fewer car shoppers, meaning more incentive for sales reps to close a deal. Plus, if you’re shopping for a new car, dealers may be eager to make room on the lot for next year’s models.

At the same time, be aware of seasonal trends in your area, especially if you’re buying from a private party. Four-wheel drive trucks may be in demand in the winter but cost less in the summer. Meanwhile, convertibles and some jeeps might be cheaper in the fall.

And you might want to avoid shopping in the spring if at all possible. When tax refunds start hitting bank accounts, there could be a lot more shoppers in the market and that could drive prices up.

6. Forget the Monthly Payment

We drive by a car lot on our street nearly every day. Right on the corner is a shiny new SUV with “$198” plastered to the side. My obviously not-yet-money-savvy teens and tween have all on separate occasions oohed and aahed over the car and its low, low price.

That’s exactly the response the dealer is undoubtedly hoping for. It’s also why the sales rep wants to talk monthly payments as soon as you walk in the door. If they can get you to think in terms of a monthly cost rather than a total cost, they’ve increased their odds of selling you more car than you intended to buy.

Remember, the dealer can work some mathematical magic to make an overpriced vehicle fit into even meager budgets. As a result, your auto loan may last almost as long as the average American marriage. Shockingly, nearly 20% of new auto loans have rounded the six-year mark and are heading into the territory of a seven-year repayment term.

Avoid the trap of ending up with reasonable payments for an unreasonable length of time by negotiating the total price rather than a monthly amount. To make sure you are negotiating in the right price range, ask a local bank or credit union if they offer a preapproval process so you can find out in advance what you can afford.

7. Don’t Mention Your Trade-in

Along the same lines, don’t mention your trade-in unless it absolutely has to be part of the transaction because you still owe on it and can’t afford two payments. However, in that case, I would gently suggest you consider whether it would be better to wait until you’ve paid off your current car before buying a new one.

Otherwise, tell the dealer you haven’t decided what to do with your current vehicle. Once you have negotiated the cost of your new purchase, you can then negotiate the price of your trade-in. This method helps ensure you not only get the best price on your new car but that you’re maximizing what you receive for the trade-in.

8. Think Twice About Trade-in Promos

Another trick dealers use is luring in shoppers with promises of huge trade-in values. If you can push, pull or drag in your old vehicle, you’ll be guaranteed thousands of dollars for your trade-in.

That sounds good until you realize that the offer applies only to certain vehicles on the lot. The sales representative will steer you toward the $15,000 vehicle and enthusiastically share that it will be only $12,000 with your $3,000 trade-in. It sounds like a deal too good to pass up, except you had only planned to spend $10,000.

Or another tactic used by dealers is to bump up their car prices before running a trade-in promotion. Either way, you end up spending more than you wanted to or needed to for your new wheels.

9. Offer to Pay with Green

Buying with cash is a strategy that may or may not get you a discount.

New-car dealers make more then 20% of their income on financing and insurance sales, which means they have little incentive to accept cash. On the used lot, you might get a little more negotiating power, especially if there is a smaller financial incentive for the dealer and the salesperson is eager to avoid the hassle of completing financing paperwork. In my case, paying with cash dropped the price about $500.

However, private sales are where you’ll probably see the biggest discount for a cash payment. Sellers may be eager to unload their vehicles and if you can offer cash, that’s often all they need to come down on price.

10. Buy from Private Sellers

Speaking of private sellers, you’re likely to get a better deal from them even if you don’t do any wheeling and dealing. That’s one way Money Talks News finance expert Stacy Johnson found a near mint condition $5,000 car.

Dealerships have huge overhead expenses, which means they have prices higher than what you find on the private market. Of course, established dealers have a reputation to uphold so they may be more likely to stand behind the cars they sell.

If you’re buying from a private seller, be sure to get a full inspection from a mechanic of your choosing before forking over any money.

This post originally appeared on Money Talks News.

 More from Money Talks News:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team