CAR BUYING TIPS
Purchasing a car is a major financial decision. We offer top considerations before you sign on the proverbial dotted line.
SO, YOU’RE IN THE MARKET FOR A NEW CAR — EXCITING! FOR SOME, BUYING A CAR IS A FAMILIAR BI-ANNUAL AFFAIR. OTHERS ACT FAR LESS FREQUENTLY, PURCHASING A VEHICLE EVERY DECADE OR MORE.
Whatever your cadence, purchasing a car is a major financial decision. As such, there are a number of considerations that can help ensure your purchase meets your expectations. Below, we offer a few of the more prominent:
Do your homework
While many people rely on salespeople to steer their buying decisions, today, there are numerous independent sources of information that provide details on nearly any car. Scour the Internet, you’ll be spoiled for choice. And feel free to reach out to a neighbor who has a car that catches your eye.
Make a budget
Once you reach a dealer showroom, it can be easy to get swayed by fancy tech and beautiful aesthetics in choosing a vehicle that may be above your practical price range. As a result, crunch figures before you leave home, coming up with a bottom-line figure that you’ll want to stick to, no matter the salesperson’s pressure.
New vs. used
If you’ve determined the make and model of your dream car but the monthly payment is too much for your budget, consider whether a used car is affordable. Most dealers lease cars for three years, after which the car is returned to the dealership. They then sell these cars as used (pre-owned). The price savings from a new vehicle can be substantial. Additionally, many used cars come with generous warranties that can help offset unexpected system defects.
Once you find the car of your dreams and head back to the dealer’s office to sign the paperwork, the add-on pressure begins. You’ll be presented with extras that are positioned as “just a few bucks more each month” that protect you from damage to your vehicle — paint scratches, upholstery tears, etc. There’s also an extended warranty if you’re purchasing the vehicle, nitrogen in the cars … the list of extras is creative and endless. If you’re truly interested in such products or services, you are likely to be able to find them from other sources, like your insurance company, for less money. Check around before buckling to sales pressure at the dealership.
Buy or lease
Buying or leasing your vehicle is an important decision, and there are advantages (and disadvantages) to consider for both. When you buy your car, you own it — the payments you make will accrue equity in the vehicle, money that you can put towards a future car purchase. On the other hand, buying a car puts the maintenance responsibility on you. In addition to the routine costs — oil changes, for instance — you’ll foot the bill for any and everything associated with the car that isn’t covered by a warranty, like new tires, which you’ll need every few years. When you lease a new car, except for routine maintenance costs, like tune ups, most things should be covered under the car’s warranty. And unless you’re putting on tens of thousands of miles each year, you’ll more than likely be able to get by without replacing the tires before your lease is up.
Nothing can frustrate a car buyer more than sitting down to sign paperwork, only to find that the salesperson “forgot” to mention taxes, titles, and fees. Before agreeing to purchase a vehicle, ask the salesperson for the all-in costs — that is, the total amount that you will be paying out-of-pocket for the car.
Additionally, are you required to make a down payment? If so, does it include the title and fees? Make sure you understand everything before the paperwork is printed, to avoid an unsettling conflict when it comes time to finalize your purchase.
While your dealer will be pleased to coordinate your car loan (they typically earn a fee or a commission for each that they initiate),
compare loan rates at area banks and credit unions and seek a preapproval before heading out to purchase a car. That preapproval gives you some leverage and gives you a firm benchmark when sitting down with the dealer and reviewing their rate options.
Research discounts and cash-back deals at areas dealerships, which you can expect to deduct after you negotiate a sales price.
You can often find discounts if you’re a student, military member, or member of a credit union. You can generally combine these
discounts with the cash-back rebates that are offered.
If you need assistance assessing the amount to budget for your car purchase, seek the help of a financial professional.
Thanks for checking out the blog.
Gregory Armstrong , CFP®
This material is for general information only and is not intended to provide specific advice or recommendations for any
individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive
outcomes. Investing involves risks including possible loss of principal.
This material was prepared by LPL Financial. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and
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