Friday, April 3, 2015

Buying new or used car.

Do some research first

Don't be 'Barefoot Pilgrim' 

That’s  slang term for an unsophisticated buyer. A barefoot pilgrim is someone who has taken on more risk than necessary or entered into the purchase carelessly, without doing the proper research

Have been buying new and late model used cars for nearly half a century.  First thing you need to do is research the car. I started using the ConsumerReports Auto Buying Guide in the 1990s. if you go online, you can even get a price for the car of your dreams.

You can buy a month subscription to ConsumerReports Online for about $7. Once you drill down to the engines and features of the car, you will get a cost coupon you can take to the dealer,

Of interest, if you have USAA insurance, you can log in to your account and use the USAA Auto Buying service. There is no cost and once you have identified, the engine, drive type and options you will be able to print out a coupon you can take to a dealer. The ConsumerReports and USAA bottom line prices are identical!

Suggest you talk to two or three dealers. If a dealer refuses to talk price on the phone, email  or by fax, find another dealer. Tell the dealer if you are a ConsumerReports/USAA member or use another auto buying service like Costco.

Can you beat the online ConsumerReports or USAA prices?

The short answer is yes. The different auto manufacturers have promotions and my car was purchased in a promotion month.

Be aware that auto dealers receive hold backs. A the end of each year, the dealers get 10s of thousands of dollars back from the auto manufactures, depending on their annual volume.

Finance considerations

Have suggested in the past that large banks be avoided,  Credit unions and smaller local community banks are a better option for an auto loan.

If you want to expedite the purchase of the car, go to your credit union and get pre-authorized. The bank will pull your credit and and if everything is satisfactory, issue you a draft somewhat over the amount of the purchase.  Essentially,the bank is issuing you a line of credit.

Once you are finished with the dealer sales person, you will be turned over to finance. When you present the draft, the finance officer will generate a purchase order that will be faxed to the bank.

You can now drive away with the car.

Watch out for dealer financing

Years ago I wanted to purchase a Mercury Cougar for my spouse. The dealer was offering 0 per cent financing and asked if I would finance the car through their corporation. I told them I would call my credit union and compare loan costs. Whoever had the better deal would get the finance the loan. As I recall, the credit union had a 4 per cent interest rate. Even with the higher interest rate, the monthly car payments were less through the credit union.

How can that be?

Dealers may tell you they are not making money on the deal and will want you to finance through them so they can get a finder's fee of $500 from your credit union or bank. My credit union offers no auto dealers finder's fee, so such a comment was bogus.

Dealers can also add charges for documentary stamps (doc stamps) which may add $20 to the monthly cost of the loan. The finance officer explained the credit union had computed the loan payment incorrectly. Actually,he was trying to hide the monthly cost of the doc stamps.

The credit union does not require doc stamps Of course, why would you want to finance doc stamps? When you purchase a home, this a one time charge.

The auto dealer may also try to sell you a warranty. Now think about that for a minute. Most new cars have a full 36 month or 36,000 mile warranty, whatever comes first. Why would you need another warranty on a new car?

A used car is a different story. Most banks or credit unions will offer used car warranties as part of the monthly finance charge.

The credit union advised us to buy an additional warranty one month before the new car warranty expired. This made more sense to my spouse and I.

Some auto dealers will also try to pad the finance charges with loan insurance. That might sound like a good idea, but essentially you are buying insurance for the dealer, If you were to default on the loan, the dealer  get the loan insurance payout. The dealer should be paying for this insurance, not the auto buyer.

However, he credit union offered life insurance for the auto. If either my wife or I died during the term of the loan, the auto would be paid off. You may be able to get this insurance up to the age of 72.

Recommend auto buyers get pre-qualified at a bank or credit union. The dealer has a different view of finance charges than the bank. From the writer's perspective, the banks approach to the auto warranty, doc stamps and auto insurance is more beneficial to the buyer,.

Likewise, after the dealer has accepted your offer for the car, do you really want to set in the finance office for another two hours getting additional sales spiels.

The draft from the credit union or bank will save time and you should be able to drive away in your new vehicle in another 15 minutes after giving finance the bank draft.

An automobile is the second most expensive purchase you will make in your life. Do some research before your purchase a vehicle. It can save you thousands.


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Unknown said...

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Stan said...

I am so thankful that everything worked out for you. Doing your research ahead of time usually pays well at car dealerships. I might also mention that many people use free online sources to help them do the research. Comparing loan coasts between different financing options is always wise as long as you are comparing similar items.

VinAudit said...

Avoid buying a lemon. Check a vehicle service history report which can you help you reveal title problems, ownership history, service records and previous accidents.