Car purchases are the second largest purchases for most people. other than a house. As such, this is a big opportunity for a business to take advantage of us or get us to overspend. It deserves a more detailed blog post than I can write today, but I will comment on a few things while a bigger more detailed post is in the works.
Payments - like the cell phone, we overspend on cars by focusing on the monthly payments. There are at least two transactions in a car purchase, really, for most people. Part 1 is the purchase price negotiation. Part 2 is the financing negotiation and closing the deal.
Car dealers are great at getting us to jump to Part 2, and this enables them to make us overspend on both the car and the financing. My suggestion is that you enter the dealership telling them you plan to pay by cashier's check, and begin negotiating the price. Costco and insurance companies like USAA offer car-buying services that may make this practice much easier. I usually buy used, but the one time I did buy new I found the USAA service to be excellent and the best price I got by far on a new Subaru. Focus first on price. You should almost always go for the base or mid-level trim. The car company makes lots of money off leather seats and alloy wheels! When you go to sell, you won't recoup more than a small fraction of these expenses.
Once you have the best purchase-price deal, tell the dealership you plan to shop around for the best financing and ask them what they can do. Once you get your answer, walk out even if it is a good deal. Go home and call your bank or credit union - look online for rates.
Suppose the dealer has the best rates so you go back to finalize things. If so, they will next take you to who I call the "ripoff dude". He will try to sell you an extended warranty, some sort of spray for underneath the car he says makes it not rust, and an alarm. Say a firm no to all of it and whatever else he has. The ripoff dude on my Subaru purchase resorted to guilt tripping me - saying they needed to make some money and I needed to help out! Dealers do not make nearly as much off new vehicles but they have replaced this revenue stream with financing and rip off dude's array of unnecessaries. If you want the extended warranty, you can get it later and you may be able to buy it online from another dealership of the same car that discounts them over the Internet.
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