Buying a car

Let’s face it – a car is the first big purchase that one usually does all by oneself. The universe of cars is huge and at every step, you ask yourself – Am I making a mistake? This is exactly the situation that I found myself in a few weeks ago. My family and I had decided to buy a new (or maybe a used) car. While it will take a lot of effort to describe exactly how and why we decided what we did, the reason I’m writing this post is to highlight the best things to do and the best things to avoid.

One of the first things you do is to hit the Internet and look for tips on car-buying. Here are the top five tips and my take on each of them:

1. Lease or Buy – Almost every site that I read had the same view – it’s always better to buy than to lease. The only exception is if you are the type that changes card every two to three years – in which case you should consider leasing. However, for almost everyone else, buying is the best option.

My take – Unless you are in the business of impressing your friends with the latest trendy sports car every two years (and have a millionaire father to feed you), stick to the Buy option.

2. Used or New – Again, most websites recommend buying a slightly used car – one that is about two years old and has less than 25000 miles on the odometer. The common word is that new cars depreciate the most in the initial two years, so by buying used, you get the best bang for the lowest buck.

My take – Decide on the car based on several key questions – how much driving experience you (or your spouse has). For example, even if you are a great driver, your girlfriend may be a novice. In such case, stick to a 6 year old used car. How much you have saved – if you are a student still in college, stick to a cheaper car that you can junk after a few years. How long will you keep it – If you’re like me and intend to keep your car for 8 years or more, buy something that’s less than two years old and less than 20000 miles.

3. When to buy – Most websites advocate buying used cars in the November to December time frame because that’s when dealers are desperate to sell the outgoing model and will lavish out discounts.

My take – The above is true only if you are buying the current year’s model new. If buying used, go for the March to May period after winter. If buying new, September to October is best for the current year’s model so that there’s something left on the lot for you and December for the new year’s model so that the euphoria for the new model has died down and prices are more reasonable.

4. Finance – where to get it? – Most websites advocate getting finance from your local bank of better yet, a Credit Union.

My take – Who cares? Go for the lowest total payment you can afford. Do your homework well. Go to all the banks you can as well as all the Credit Unions and get the best deal that you can and get it written on paper. At the dealers showroom, show them the letter and ask them for a match. You’ll be surprised how effective this can be. Keep in mind at all times the total interest you will be paying i.e. monthly payment x number of months minus loan amount. Ensure that the option you choose from has this value as the minimum.

5. Trade In – The tipsters say you should trade in only if you must. Dealers are more interested in selling you a new car rather than giving you a good deal on your old one. You are better off selling it to a private party yourself.

My take – They are right on the mark on this one. Trade in only if you absolutely have to. You are better off detailing your vehicle and then selling it to a private party. use Craigslist and auto sales websites extensively and you will save a pile of money.

Do you have any more car buying tips? Let me know.