Thursday, January 7, 2016

When It's Time to Get a Newer Vehicle


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I hate car shopping. I know the rules and the swordplay if you will. Heck, I even tried to be a car salesman for a short period of time, I stunk at it but I tried. Just too honest I guess. But there does come a time when you just have to bite the bullet and go shopping. That time finally came for me. I had been driving a '96 Caravan that I paid cash for. It has done well for me, but it was on it's last legs and finally had to retire. It had been lovingly named the terrorist van by my children. (At least I think it was a loving nickname.) I would have been fine driving it another 10 years, but the final straw came when the sliding door fell off- no I am not kidding. So we had to start the adventure of finding me another means of travel. The prospects of this literally made me sick to my stomach. I realized that this process could help someone else, so here goes.


When I purchase a vehicle I keep them till they die. This has been the case for most of my adult life. My first vehicle as an adult was an 88 Ford Ranger. When it died, and I really do mean died. It had 221,000 miles on it, and it caught fire going down the road. That was a long time ago. I am not one of the people that trades cars every couple of years and I don't suggest you do this either.

Dealer vs Private Seller

 

If you are needing a newer vehicle, one of the first questions you will need to answer is are you going to answer is are you going to go with a private seller or a dealer? Both options have benefits and challenges.

Private Seller

 

When dealing with a private seller the transaction will be a lot more personal. Many times you can get a better deal for the vehicle. You will be able to talk to the owner and get a feel for how maintenance was performed.  You will have to be a fairly good judge of character, there are as many private sellers that will try to take advantage of you as there are bad car salespeople. It is best to have cash on hand when dealing with a private seller, but there is a way to finance a car you have purchased from an individual. You will have to go to your bank, credit union, or finance company (the highest interest rate and should be avoided if at all possible) and obtain a loan prior to purchase. We will talk more about pre-approval a little later.

Cash is king here. Many times you will be able to negotiate a better price if you have the ability to pay in cash instead of having to give them a check. Just keep this in mind. 

Dealer

 

Working with a dealer has benefits and drawbacks as well. When working with a dealer it is important to have a salesperson that you feel comfortable with. In the past I have walked out of a dealership because I didn't like the salesperson. I have also just flat out asked for someone different. It is critically important to know your budget. You must realize that a sales person is paid by commission. There are many out there that will do everything they can to get you to purchase as high a priced vehicle as possible.

A dealership will have a wide variety of options and they can assist you in obtaining financing.  I prefer not to use the dealerships financing options. It just seems to take longer and adds stress to an already stressful situation, though I will admit that sometimes the dealership will be able to get you a better interest rate than some of the other options. Plus if something goes wrong with the new vehicle there is some place we can go back to and be assured that any work needed will be able to be done. Depending on whether or not the vehicle has any warranty, we may or may not have to pay for any repairs.


Financing and Your Budget

 


Dave Ramsey, the major of" Get out of debt" guru says that you should never use financing to get a car. While I agree with Dave on most things this is one where I deviate. If done correctly financing is a viable option for many. Why do I say that? An automobile is what I consider a durable good. If taken care of, a vehicle should be able to last at least 20 years. The Old Van did just that and it went through the ringer before I had it. It is true that I could be in an accident tomorrow and the vehicle be destroyed, but if you use that logic your house isn't a durable good either because it could be destroyed by fire or storm. Most of us must have transportation. Unless you live in an urban area, public transportation is just not an option. So how do I shop smart for a vehicle?

Get Pre-Approved Financing


Most would agree that the financing part of the buying process is one of the most stressful parts. By doing this before you ever look at a single vehicle you have not only taken some of the stress away, you have greatly increased your bargaining power with the dealership or individual.

There are several institutions that will issue auto loans and most will give you a pre-approval letter. This will tell you your maximum price and any requirements by the loaning institution. Common requirements are how old the vehicle can be and the maximum number of miles a car can have to be considered. For example a pre-approval letter may state that a vehicle cannot be more than 10 years old and must have less than 120,000 miles. Oh and you have a budget between say $6,000 and $20,000.
Pre-approval means you can get that much money. It doesn't mean you HAVE to spend that much. This gives you options and you don't have to sit in that little room while the salesperson has to go ''talk to their manager".  This pre-approved loan will still have to be tied or linked to the vehicle you choose, but it still streamlines the process.

How much you borrow of course is a major determining factor in what your payment will be. Less debt is always better. We want to be working toward not having any debt at all, but transportation is a necessity especially for folks that live in rural areas. You will also have to take into consideration the insurance that the vehicle will require. Even if you buy a $4000 vehicle, if you have financed that vehicle you will have to obtain full coverage for that vehicle, at least till its paid off. 

Want vs NEED !

This one is the one that gets most of us in trouble. My wife and I have been talking about how we really need a truck for the past couple of years. I have treated the old van as much like a truck as I could. Bags of mulch, bales of straw, compost, short pieces of lumber,  you name it. If it would fit, it has been hauled in the old van. There are limitations and things we really need a truck for.
Now, I want a super duper maxi crew cab, 4 wheel drive with heated leather seats, 40 ton wench, heavy duty towing package, and a Get Back Jack hat rack. But I really don't need most of those things. What are the things I actually need? A standard cab, 2 wheel drive standard tow package, and really that's about all. Though the "Get Back Jack Hat Rack" would be nice.
Making an honest list of needs will help you stay grounded. Who knows? You may be able to get a couple of your wants too. (If you have plenty of money, get what you want. This is really for the people that are trying to live as frugally as possible.) What is the difference between needs and wants? In the case of a new truck anywhere from 10 to 30 thousand dollars. Just out of curiosity I did look at one of the new super duper trucks. At $63000 plus, no thank you. That is almost as much as we paid for our house.

My Needs

Dependable
Truck
Decent fuel economy
Affordable
Air conditioning
You can see my actual needs are very few. My wants however can get out of hand.

My Wants

 

Crew cab
4 Wheel Drive
V 8
Towing package
Bluetooth
CD player
MP3 compatible
Oh and don't forget that hat rack
Well you get the idea. Every want adds to the total price. So I have to balance my needs, wants, and budget. This doesn't have to be that difficult. Needs are needs and just like we talked about selecting a homestead, your needs should be considered deal breakers. If the vehicle doesn't have those things just walk away.

In the south air conditioning is a must have, especially if you are paying good money for a new or new to you vehicle. In other places air conditioning may be a want or even a would be nice to have.



Start Shopping

 We are just now to the point where we can start shopping in earnest. We can look around before this point, but doing too much may have us set our sights on a vehicle that is too pricey. Resources to help us find the right vehicle are many. Auto Trader, Craigslist, newspapers, and dealer's websites are all available outlets of information.

New vs Used


Is there ever a time when buying a brand new car is a good idea financially? My answer is no and most financial advisers agree with me. I have only seen one situation where it looked like a new vehicle was a better deal than a used one. The dealer was having one of those 0% interest for 60 months things. In that instance the payment for the new vehicle was a little cheaper than the payment for the used, but the term was for a year longer, so even then there were offsetting facts.

A new car loses anywhere from 20% and up of its value the minute you drive it off the lot. It is a much better idea to purchase used and let someone else absorb the loss. You spend less, get a good vehicle, and can pay off the debt quicker. Debt is not your friend.

The Search


So, with financing approved and knowing the type of vehicle I wanted and needed, we were on a mission to find the right vehicle. I already stated that just because you are approved for a certain amount doesn't mean that you have to spend that much. We decided that we would like to spend as close to half of the amount we were approved for as possible. What you borrow, you have to pay back. The lower the loan the less you have to pay, simple as that. 

Be aware that some financing options will only allow you to shop with certain dealers. The search began. Thankfully, most dealers keep their websites up to date on their used inventory. I cannot tell you how many sites we looked at, most didn't have any in the price range I was willing to pay. I found five or six sites that had vehicles that were under consideration. Then started the process of evaluation process based on the information that was provided on the website. Make, model, features, mileage,  and  Carfax. A Carfax is handy because you can see any accidents that the vehicle had been in and to some degree the maintenance that the vehicle received. It will not show maintenance provided by the owner or local mechanic.

We settled on a dealership that had 3 possible vehicles. All three were trucks, two were standard cab and one was extended. I called the dealership and spoke with a man named Don. I like Don, I told him which vehicles I was looking at and set a time to go talk to him. We arrived at the dealership and Don showed us the vehicles. One of the ones we were considering was already sold.

Don was courteous and not pushy in the least. He answered all the questions we had. It was a nice transaction.

In Review


  • Get Pre-Approval if at all possible
  • List wants and needs. Be honest with yourself, the "hat rack" is not a need no matter how much I want it.
  • Be realistic about price, don't try to spend every dollar you have qualified for
  • Shop as many locations as possible before you ever leave home
  • If a salesperson is too pushy ask for another or simply go somewhere else
  • Pick your vehicle and don't look back
  • Pay it off as quickly as possible
  • Own it for a very long time.
This will help you live a more frugal and sustainable life.
Bringing Rural Back

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