Learn Why You Must Properly Prepare for Your Car Purchase by Obtaining the Needed Knowledge on the Front End
On this day I felt the topic of car buying was worthy of discussing even though it is an area of wealth accumulation that I don’t usually focus on. However, with the large number of people that I have seen buy cars in the wrong manner or a manner that is adverse to their long-term success—I felt it was now time to address this topic in a manner that could better serve those who are considering buying or leasing a car at this time.
Proven Car Buying Strategies for those in Various Financial Positions
Whether you decide on a new car, a used car or you decide to lease—you must choose in a wise manner! In this discussion we will address car buying in the following areas:
Car Buying Options:
- Purchase car from a dealer
- Purchase car from a private seller
- Lease car from a dealer (ok—not technically a buying option)
- Occasional rental of car (again—not technically a buying option but may be helpful for your situation)
Purchasing Car from a Dealer
You can choose to “purchase a new or used car from a dealer” and you would want to have the right preparation and knowledge on the front end before even entering the dealership.
You would want to know the make and model that you were considering, the mileage if used, the yearly maintenance costs and the blue book price prior to going to the dealership.
You would also want to know your credit position and credit score, have your own financing in place and know all of the fees involved at that particular dealership.
Tag, Title and Taxes (3Ts) is fairly commonplace at most dealers, however many dealers also have additional fees so be sure you know what they are and/or be prepared to negotiate them out or take your business elsewhere.
Be aware of dealerships that offer to finance your vehicle as there are often language in the financing that works against (such as can’t pay loan off early without penalty, high interest rate or terms, a number of references required and many other terms and conditions) your best interests.
Purchasing Car from a Private Seller
Purchasing a car from a private seller varies depending on your Country and from state to state in the United States. In the State of Georgia private sales are now taxed at the state level. Private sales can be a great bargain if you do your homework and you are properly positioned to purchase.
Again, you want to get your own financing upfront—or if paying cash be sure you know the true market value of the vehicle you are purchasing, the mileage on the vehicle you are purchasing and be sure to have the vehicle thoroughly inspected by a qualified auto technician prior to purchase.
In addition, be sure that you are purchasing from a responsible party who has properly taken care of the car by maintaining and driving the vehicle appropriately. You don’t want to purchase from a “speed demon” or someone who has improperly maintained the vehicle.
In Georgia and many other states a bill of sale would normally consummate a sale between a private seller and a buyer—and in many states the vehicle is sold As Is with no “Implied Warranty.” Many sellers will include the AS-IS statement on the bill of sale or attached document and also state that there is no “Implied Warranty” whatsoever. The Certificate of Title would normally be signed over from the seller to the buyer.
Tag and Title Application would be applied for through the Department of Revenue (DOR) in many states so that you could get the new tag and new title that would provide ownership proof. If you had a loan (lender involved purchase from a private seller) and purchased from a private seller—the lender would receive title and upon payoff of the loan you would then receive title.
Leasing Car from a Dealer
If you were uncertain as to whether leasing or buying would be more advantageous to you at this time you would want to compare whether leasing or buying was the best car option for you based on your mileage usage on an annual basis and other factors.
You must effectively run the numbers based on your expected annual mileage, your expected down payment and your expected monthly payment and other fees and determine if it is in your best interest to lease at this time.
You can normally shave several hundred dollars per month off a normal (financed) payment and based on your car usage patterns you may find that leasing is a better option for you than buying.
Occasional Rental of Car
You may determine that you have no need to purchase a vehicle and an occasional rental of a car may suit your intended goals.
If you live in a city where public transit is adequate you may be in position to rent occasionally for trips out of town, grocery shopping and the like and not have a need to buy or lease a vehicle.
Many cities now offer car rental kiosks at reasonable prices to those who qualify.
Final Thoughts on Car Buying in the Current—or Any Economy
- Be sure to search online for the review and ratings of the car model that you anticipate purchasing or leasing—consider certified pre-owned and warranties especially if buying used
- Be sure you are aware of road-test scores, fuel economy and whatever else you consider important to your driving habits and comfort
- If purchasing new or used be aware of the best and worst cars available and avoid purchasing the worst at all costs
- Be aware of the reliability ratings on the model that you are considering purchasing
- Be aware of the yearly maintenance costs on the vehicle that you are considering for purchase
- Be sure to pay particular concern of test results for safety, braking, real-world fuel economy and ride comfort
It is important that you accurately determine the market value of the vehicle that you are considering for purchase or lease. You can use kelly blue book, edmonds.com, autotrader.com, carfax.com, truecar.com and other car sites to determine market value and get other reviews on the vehicle that you are considering for purchase or lease.
In addition be sure to purchase at the “right time” as car dealers and private sellers will increase the price when they know that money is readily circulating in the economy such as during the tax season, during economic stimulus times and any other time that they know that money is rapidly circulating in the economy (during boom times).
A better approach may be to purchase later, however by doing the research above and utilizing the knowledge that you will gain you can make the car buying experience a rewarding one for you and your family—regardless of the time of purchase.
Other Car Buying Tips
Consider purchasing a new car every 10 years and invest the savings that you would be making for the car payment. For example after the payment of a 60 month car loan at $500 per month in five years continue saving or investing the $500 payment in your retirement accounts or outside of your retirement accounts depending on your future goals. By doing so that relatively painless strategy could provide you the cushion that you need so that you can live out your retirement years more abundantly.
If you are in a strong cash position and have addressed all areas of your finances effectively consider purchasing your vehicle with cash from a private seller or dealer. Use your imagination and creativity to find other creative ways that you can make car purchasing or car leasing work better for your long-term interests.
Be sure not to over purchase on your home and auto and become house and car rich but cash poor. You must ensure that you have money left over on a monthly basis to pay your house/rent payment and car payment and enjoy life at a comfortable level as well as save for your future. Keeping your monthly debt at 50% or less of your income and having a six month emergency fund at a minimum in place will help mitigate against future emergencies whether car related or otherwise.
We have seen many purchase luxury cars and too much house and when major repairs were needed they had to borrow to repair due to an insufficient emergency fund reserve and high monthly debt.
Although they appeared to be living a lavish lifestyle many were living on the margins and when an unforseen occurrence happened they found themselves in a difficult position.
Do your best to avoid that scenario in your life by keeping your finances in balance and making major purchases in a wise manner.
Regardless of the approach that you take be sure to follow the steps outlined in this discussion at a minimum—and additional steps if your car purchase situation warrants that you do so. Always keep safety and reliability in mind as you do not want to have breakdowns and other issues on the roadway.
It is the desire of TheWealthIncreaser.com that this discussion will help you if you are now contemplating a car purchase or you desire to prepare your mind now for a car purchase in your future.
About This Article:
The above article was written by Thomas (TJ) Underwood on March 10, 2015. Thomas (TJ) Underwood is a licensed real estate broker in the state of Georgia and is the writer behind The Wealth Increaser, Home Buyer 411, Home Seller 411, The 3 Step Structured Approach to Managing Your Finances, Managing & Improving Your Credit & Finances for this MILLENNIUM and CREDIT & FINANCE IMPROVEMENT MADE EASY—FREE GUIDE.
He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future.
You can contact him from a number of sources but the most direct way is to contact him through Realty 1 Strategic Advisors Website. You can also get highly relevant tips on “living your life more abundantly” and possibly earn revenue at the same time by linking to TheWealthIncreaser.com.
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