Top 10 Things To Know Before Buying a Car

Top 10 Things To Know Before Buying a Car
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5. Finance Rates Bank vs Dealership

Now that you know your credit score, you can learn the size of loan you can get and the associated interest rate.

Start at your bank or financial institution to find out how much of a loan you can get approved for and what borrowing the money will cost. This is handy information to have before heading to a dealership because the automaker’s finance rates may be different than your bank’s. Compare the two rates and find out which one works best for you.

Interest rates can also change at the dealership depending on the car you are interested in. Some newer or more popular models may have a higher interest rates than other vehicles on the showroom floor.

SEE ALSO: Car Loans 101: What You Need to Know About Financing a Car

  • ISDMVB

    Who wrote this? A dealer-hater is my guess. Or someone who likes dramatic statements over the tedium of details. The statement “Be wary that whatever the dealership offers for your car, it will likely be much lower than the cars actual value” is rather misleading. One’s vehicle has a spectrum of values. Its retail value and its wholesale value. Those two points represent the average car’s value. As that no two used cars are exactly alike, a car’s actual value is difficult to determine. You can get closer to your top value selling it private party but you incur all the costs of selling it: fixing issues, cleaning, advertising and then dealing with possible buyers (what’s the value of your time?!). Selling it to a dealership get’s you the lower end of the value spectrum but it’s hassle free* and comes with no costs. (*hassle free: depending on the dealership of course). However, one important consideration is that the value of your trade-in reduces the taxable amount of your new vehicle purchase in most states of not all. Meaning if you are buying a $20k car and your trade-in is worth $15k, you will only pay sales tax on $5k. That’s a big benefit to a buyer and quickly closes the gap between the two ends of the value spectrum. The better advice here is to consider your car and it’s realistic condition and its desirability. If there are millions of cars like your in your town, don’t waste your time selling it private party. You won’t have a lot of buyers and those buyers have lots of choices meaning you will get pressure to reduce your price (negating the value of selling it on your own in the first place). If you have a unique car because of it’s condition, model or exceptionally low miles, sell it on your own for a premium your unique vehicle can pull in. Look at KBB and NADA to get *approximates* of your vehicle’s value. Just keep in mind they are using **historical** data in their valuation guides. The value they show you today is from data about 1-3 months old. Meaning it’s not 100% for your car + your region. Use it as a guide, not a promise. But either way, do the math before you decide. Figure out your sales tax saving relative to the additional you’d get selling it private party after you fix, clean and advertise it. Look at that number and see if that amount is worth your time. Might be, might not be.

  • Honest Abe

    Sounds like you work for a dealership. That said, I’m going to assume you’re a criminal and just ignore all the lies you just told.

  • ISDMVB

    ha. Nope. Just a car enthusiast that gets into way to many conversations with friends about the mis-information that people have about major transactions. For most people, a car purchase is the 2nd largest asset purchase they will make in their lives (after a house). Considering your 2nd largest purchase has zero opportunity to appreciate and will only depreciate, it strikes me as prudent to know how to buy smartly and not fall into games perpetuated by rumor, mis-information or dealerships themselves.

  • sam

    My last trade in attempt from the dealer I was buying a new car from was an offer of $2500 for a 98 BMW with low miles, did need some minor work. I took it to another dealer for a straight outright purchase and the guy gave me $5000 without any haggling. A bit of larceny on the first dealers mind? Yeah, everyone is entitled to a profit, I don’t begrudge him that and if he wanted to scalp me fine, but I’ve been around the block a bit so an extra few hours of my time was $2500. Probably could have spent a few weeks working Craigslist for another $1000 but it wasn’t worth it.

  • Tony407

    Not misleading at all. My last vehicle purchase played out just like this. They offered me $10,000 for my trade even thought it was worth $20,000. I had to play some hard ball and finally walked away with $20,000. Had I not done my research ahead of time (or had I been extremely naive) I would have lost out big time. That being said, I thought most of everything else you said to be very informative.

  • Tony524

    Second largest asset… how about the greatest waste of money… a car depreciates faster than Google Chrome book! 90% of people overpay in the finance office and hit with with depreciation once they exit the dealers lot. Second largest asset… what about a 401k, pension or a savings account. By the time you able to afford a new car (at current prices) you better hope your house is the ‘second largest asset’ you have (behind savings). I personally thought the article was filled with softball comments and a pro-dealer tone. The information presented here is general without any real meat… but, there is also auto manufacturer ads/banners throughout the site. Someone should ask why consumers do not have access to manufacturer-to-dealer incentives like we did prior to the ‘auto bailout’?

  • fred kanter

    Thank you GM Insider News. I think the first tip is to see if previous or similar models of the same car have safety related issues that have not been satisfactorily addressed. Think ignition switch. Also get the dealer to sign an agreement that if your car is found to have such a defect in the future, the dealer agrees to purchase the car back at full price including tax.

    The only way to make the factories responsible is to hit them in the pocketbook, remember “Follow the money”

    fred kanter, friend of the truth