Congratulations on your first loan, good luck with the new car!
One of the first rules of car buying is to not discuss financing or your trade in until you’ve settled on a price. My point about using the rate to bargain wasn’t so much on price, but on extras (I wasn’t clear on that). Say you strike a price and the dealer asks if you want financing. You say I’m already approved for 1.9% from my bank. The dealer says, well we might be able to do that. They run the numbers and say you’re approved for the special rate. You might say, well, I’d rather stick with my bank, but if I go with you, what can you throw in? Oil changes, accessories, etc.
No, you don’t want to completely trust the dealer but you have to realize that they want to make a sale and may give you a good deal to meet a sales goal. Going this weekend is a good move because it’s the end of the month. I would go Friday night or Saturday morning so you can test drive and have the freedom to walk away if you’re not getting the deal you want and still have time to try somewhere else. There are a lot of tools online to help you figure out the right price to ask. Check those out and go with a goal in mind. Educate yourself about the different trims/options so you can adjust that goal price if you, say, fall in love with the nav system or whatever. Use the dealer inventory search to see what they have in stock.
When dealing with the sales guys, remember the following:
#1 Be patient, emotionless, and firm when you set your price. There are some great sites with tips on how much to offer for a car, new or used. It’s basically the manufacturer’s cost plus a small percentage that lets the salesman make a living without reaming you. Your ultimate trump card is your ability to walk away. You can kill a sale and the salesman who’s counting on the commission from your purchase will hurt more than you. Go to another dealer and start over; eventually you’ll still get your car. 
#2 Beware the hand-off technique. A salesman who’s having trouble beating your hardball negotiating can hand off to a ‘manager’ who will be fresh and energetic and ready to continue the negotiating. Later they might hand-off again. All the while, they’re wearing you down. See #1 for beating that game. 
#3 Consumer Reports will repeat this every single year in their annual car issue: DO NOT BUY AN EXTENDED WARRANTY OR SIMULTANEOUS WARRANTY. There are so many exceptions in those ‘warranty’ clauses [does not cover – well, anything that really tends to need coverage] that they really don’t do a thing for you. You might as well have your bank just cut a check to the salesman and write in the memo field “Because I felt like it.” :smack:
—G!
Nobody gonna beat my car
It’s gonna break the speed of sound
. – Ian Gillan (Deep Purple)
. Highway Star
. Machine Head
Exactly. Car loans are a losing proposition to begin with, so if I get to refi time and the rates are much higher, I’ll just make double payments and pay off the note quicker.
AFAIK, there is generally not a penalty for early payoff on car loans. But that’s a good question to ask your lender.
Hey Annamika,
Did you end up with a new car this weekend? I anticipate looking at similar models in a few months and am interested in your impression of the new Accent and Fit.
No, it’s probably going to be this weekend. We spent the day on Saturday looking at every car around the price and all the way up to about $22K. I didn’t want to regret, you know. But I am positive now it’s going to be a Fit, so we’ll actually buy this weekend.
Great, good luck with the Fit!
Anaamika, this was me a couple of weekends ago, except my trade in was a 1999 Nissan Sentra with 113k miles and the “check engine” light on. My advice is to bring print-outs from sites like NADA, Kelley’s Blue Book, and Edmunds. In fact, look up your car on all three because their numbers vary. Be honest about whether your car is in “fair” or “good” condition. You probably won’t get that price for your trade-in, but what you’ll have are some numbers you can use to negotiate.
They offered me $1000 for my trade-in (which, frankly, is a pretty fair price). But with my print-outs as backup I got an additional $400 for it (it’s all a shell game, of course…you could say the $400 came off the sticker price of the new car or the trade-in value of the old one, but whatever).
Be careful about the KBB. It is now used mostly by dealers and insurance adjusters to trick dudes into thinking that the numbers are fair. There’s TWO KBB, one retail, one wholesale, and they show you whichever suits their purpose.
Edmunds is likely the best, as it shows retail, trade-in and private party figures.
I will do all that. A question:
I am getting really confused about the process of actually paying for the car. Say we’ve got it all nailed down. The final price is set, the trade-in value for the old car is set, and now let’s say I want to pay 13000 in cash and then use the trade in value and put the rest on the loan.
How do I do this? I have the 13000 in my savings acccount. Do I:
- transfer the money over to my checkings account and use the credit card attached to it?
- get a cashier’s check from the savings account? In this case, don’t I now have to go back to the credit union to get the check? Can I just sign for the car and not pay for it that minute?
- Something else?
I guess I’m just asking what they are going to want from me at that exact moment. I know I can’t have it all because I have to go back to the bank to get my loan stuff finalized anyway. Will they be flexible or will they insist on all the money up front? Can I sign under X terms, like “I will pay for this car within three days” or do I have to actually pay for it that second?
NM
I believe an above poster said that you can agree to pay the full price of the car within 3 days or something, a promissory note of some sort. You then have 3 days to gather up the money, and work with your credit union to get the dealership the papers.
But I have never done this so you might ask your credit union exactly what the procedure is.
Anaamika, sounds like it’s time you got yourself an education about how money works. I’d suggest starting at www.motleyfool.com.
You can borrow right now at very cheap rates, basically nothing. Money in the stock market will make a 10% return over 20 years (on average, yadda yadda). So, instead of plunking $10,000 of cash into a car and only borrowing a little bit, you could plunk $10,000 into the stock market and borrow it to buy the car. You’d make the spread (subject to certain contingencies and exceptions etc., which is why you need to read up on this stuff). This is how banks make money, they borrow at low rates and lend at high rates.
Read up. Learn some stuff. And then see if you are still excited about putting that much cash into a car.
With that level of funds, don’t bother with a loan. Just purchase something a step or two down from what you originally intended. I’ve never spent as much as $13K on a car. Nowhere near half that, even.
Cars depreciate; don’t pay someone else to fund that depreciation.
I don’t agree, especially since she’s buying a Honda Fit. In my experience, the depreciation on Honda autos is so slight that it’s not worth it to buy used, especially if one intends to keep the car indefinitely.
Yes, cars do depreciate. As they depreciate they both lose value and price. Now, yes, there is a huge amount of “once you drive it off the showroom” reduction in what you can sell the car back to the dealer for. That’s not really depreciation, that’s the difference between buying wholesale and retail. No doubt, a $20000 car can only be sold back to the dealer for say $15000 just a short time afterwards. But the dealer wont sell that used car he bought for $15000 for $15000, he’ll want $19000.
Try pricing almost new used cars and you’ll see- the* retail *price only goes down a bit.
And, the interest rate on a used car is always several points higher than new. In fact with promo deals out there, you can pay less for new than very slightly used, due to those promo deals, with 0% financing, etc.
To throw another monkey wrench into this- cars now last longer. No longer are they driven for 3-5 years and then time for another. Cars last 10+ years, and thus the depreciation is over more years.
So, buying new from a dealer is probabley better than buying used from a dealer.
That being said, if you REALLy know what you’re doing or really trust the seller, there are some great deals out there in private party used cars.
And Dewey Finn is correct about the Honda Fit. Much less “Price depreciation” that other cars.
It’s a great car.
You know, this is great advice , over the long term and with several chunks of $10K to invest. Over time, and given several chances, it’s bound to do better.
But the Op can’t take that risk. If the market tanks (unlikely but possible) she’s in trouble. Yes, this *is *how banks and millionaires make money- but she’s neither.
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I’m just not interested in stocks. Or borrowing against the stocks. Or borrowing much at all. It’s very important to me that I can afford the majority of this car out of pocket. My priorities are different from other people, is all.
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I certainly know about cars depreciating, which is why I did so much research and picked the Honda Fit. My cars last 10-12 years, and really they could last longer. But you know what, I accepted that (the depreciation) and I reason it is worth it to me to buy a new car. I don’t plan on selling it back to anyone in a long time and when I’m all done I will probably trade it in when I buy my next car…again, in 10-12 years.
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I want the Honda Fit; I can afford it, it’s an awesome car, with good gas mileage and good ratings and good longevity. The parts are cheap, and we can afford it. So why spend less money and buy a car I don’t like as much? I don’t buy cars as a luxury item; I buy them as a necessity, but I am willing to spend a little bit more for a car I will love for ten years. The Honda Fit is the best-rated car in its class.
All that being said, I really just came in here to post that I signed for my Honda Fit on Saturday. I actually got a really awesome deal on it, so while they didn’t have my preferred color, I was willing to wait on it just for the deal. I’ll probably update again when I actually get it. I put down a $2500 deposit and when it comes in, I will make good on the rest.
Thank you again for all of your help!
I have never known anyone to be unhappy with their FIT.
And I am not unhappy with my BRAND NEW FIT that just came in on Tuesday. In a delightful blue raspberry color which I am loving. It had THREE miles on it - no one had driven it except on and off the lot. No test drives.
Thanks for all of your help. I ended up not taking a loan at all since my dad gave me some money to help pay for it, and I own the car free and clear - no car payment at all.