Personal Finance: The Car Buying Process

Personal Finance: The Car Buying Process

Major Purchase #1: Buying a car is typically the second largest purchase that people make. But unlike a home, cars almost always depreciate in value. What does it mean if something depreciates in value?

Researching Your Purchase: Because cars depreciate, it s important to make this decision right. The Car: Toyota Camry Group #1: Three different reviews written by OWNERS of the car Group #2: Three different reviews written by a 3RD PARTY EX: Edmunds.com, Truecar.com, or Car & Driver Magazine Group #3: An expected price range for the vehicle based on 5 different dealerships

Before the Dealership: Research Before you ever go to a dealership, do your homework! What did the owner reviews say about Camry s? What did the 3 rd party reviews say? What is the price range we should expect to pay? What is the value in doing this kind of research in advance?

Before the Dealership: Finances Be able to verify your income Know your credit score & problems with it Get pre-approved Decide on a budget don t just plan on the payment!

Working the Deal: Your Needs Needs Assessment: the dealer will need some basic information about what you need and are looking for. QUESTION: What things would be good for the dealer to know to help you find the right vehicle?

Working the Deal: Your Needs QUESTION: during the needs assessment, if they ask how much you are looking to spend, what is the best way to answer? DO: tell them your general budget. Ex: If you can t spend more than $10,000, give them a range between $8,000 and $9,500 DO NOT: tell them how much of a payment you want. The car you look at is going to magically come back right around whatever you say.

Working the Deal: Negotiating Three keys to successful negotiations 1. Respect the other party The dealer has to make a reasonable profit to stay in business and pay their employees. Get the best deal you can but do not expect them to take a loss.

Working the Deal: Negotiating Three keys to successful negotiations 2. Never negotiate in ignorance Know a fair price range for your vehicle MSRP: Manufacturer s Suggested Retail Price 10% below MSRP is a good starting point Supply & Demand: dealers will be less willing to negotiate QUESTION: What are some examples of high demand vehicles?

Working the Deal: Negotiating Three keys to successful negotiations 3. Negotiate One at a Time Do NOT disclose a trade-in until after you negotiate the price of the new vehicle. QUESTION: why shouldn t you let the dealer know in advance that you are trading in a car?

Working the Deal: Trade-Ins Get a 10-Day Payoff Know the value of your trade before you go KBB.com NADA.com CarMax If you take less than you owe on a trade-in, it will increase the price of the car you are buying to make up the difference.

Finalize the Deal Buyer s Order: document prepared by the dealer to show the financial details of the deal Get it once price and trade have been agreed to. Starts with NEGOTIATED PRICE Then subtract: Down Payment Trade-in Credit Incentives And then add: Sales Tax Registration Fees Dealer Fees Out-the-Door Price: The total amount that you will pay

Finalize the Deal: Buyer s Order Con. Some of the things on the buyer s order are negotiable, but only BEFORE you sign papers. Once you ve seen the final out-thedoor price, make sure you will not be upside down on the car. New cars lose value as soon as they are purchased and become used Don t start out upside-down!

Financing: THE NUMBER ONE MOST IMPORTANT THING YOU WILL DO AT THE DEALERSHIP AND THROUGH THE ENTIRE CAR BUYEING PROCESS IS... Do NOT rush through it!! Trust, but verify. READ AND UNDERSTAND EVERYTHING BEFORE YOU SIGN

Financing: Applying Approval: based off income and credit Interest Rate: based entirely off your credit score/report No credit = higher rates. You are NOT required to finance through the dealership You may require a co-signer Secondary borrower needed if primary borrower does not qualify

Financing: Additional Purchases Gap Insurance: Pays the difference between what the car is worth to the insurance and the amount owed to the bank if totaled. Extended Warranties Service Maintenance Programs

Your Vehicle: Yeah! You bought a car!!! Before you leave Make sure it is the EXACT car you agreed on Make sure it is clean and full of gas

Your In-Class Vehicle: Review your budget and, using the decision making model, identify which of the car options is right for you. Fill out the Buyer s Order based on the car you buy. Communicate this purchase with the class car dealer. Update your workbooks accordingly. Happy shopping!!