First Time Car Buyers- Help?

[MrsDuck]

Hi friends!

DH and I are in the market for a new car. We're looking for a compact car with good ratings under or as close to $20k as possible. We will need a car loan.

I've heard that going through Costco can be beneficial as is getting a car loan through a credit union. Any truth to these?

Any recommendations or tips on the financial end of car buying? I'm admittedly anxious about purchasing a new car solely because of the car dealers and having not so great financing shoved at us.

Thanks!

 

[HubbDave]

Credit unions can be good. Do you have a good relationship with one? Check them to see what you can get. Not sure about Costco.

Our last 3 new cars have been bought with dealer financing: 0%, 0.9%, 0.9% for 60 months

I would recommend the Mazda 3 with Skyactiv or Subaru Impreza. Good reviews with CR

 

[HM]

Look at the Chevy Cruz. It's a great little car and you can get it under your price range. We bought one two years ago using a loan from the dealer that was under 4%.

Just go in knowing what you want and having done your research on pricing and loans available beforehand. Stick to your plan and walk out if the dealer is not agreeing. We've experienced getting a call a few days later letting us know that they could meet our expectations (in that case it was too late, we'd bought elsewhere and we let them know that they lost the sale).

 

[jeffp66]

The Chevy Cruze is a great small car with more content than most small cars. I just bought a Cruze Eco and on my first highway trip I averaged over 40mpg! I also sell them. If you belong to a credit union there is preferred pricing for members, with your price being printed on the invoice. The main thing is knowing what you can get for a rate at your credit union ahead of time, and if the dealers financing can beat that go with them. But you don't have to finance with the cu to get the cu discount. You just have to show proof of membership.

 

[MrsDuck]

We don't have a relationship with a CU yet but were planning on going this weekend to open a savings account. I've heard great things about the Mazdas and the Chevy Cruz!

Thanks for the replies. If there is any other tips, please send them my way!

 

[sophie832]

I think it is important to go in with pre-approval for a loan from a CU (or other bank, etc.). My mom and I both had to buy cars in the past two years, and both times we ended up going with dealer financing, but she ended up with a much better interest rate, and I really think it's because they were trying to steal the financing away from her CU.

 

[mcraige]

Do your research (kbb.com) to get an idea of what a fair price is.

I've never had to be pre-approved from the CU. I just told the finance guy what the CU rate was (and let him look it up on the web), but said I would go with dealer financing if they could beat the interest rate. Every time I got a better rate (if only 0.1% better).

Also... beware of things like extended warranty. That's where the finance guys make most of their commission. You can add a factory extended warranty at any time up to the time the basic factory warranty expires. That gives you time do decide if you will keep the car and therefore make sense to get an extended warranty.

As soon as you leave the dealership, find somewhere to purchase a road hazard warranty on the tires. I know this tip, but fail to follow it. DW has ruined 2 tires on her car. No road hazard, so the replacement cost was out of pocket.

 

[lovemygoofy]

We don't have a relationship with a CU yet but were planning on going this weekend to open a savings account. I've heard great things about the Mazdas and the Chevy Cruz!

Thanks for the replies. If there is any other tips, please send them my way!

Talk to a credit union and see what kind of financing you can get. If you are interested in an extended warranty, ask the CU what kind of extended warranty program they offer.

When talking finance officer, be prepared to stay firm and decline all kinds of things like leather/fabric protection or special state of the art floor mats.

If you are going to put money down, I wouldn't even talk about that until you get to the bottom line you are willing to work towards. Work towards a total bottom line and not a monthly price. I pretty much lay my cards on the table right away and tell them I want the car at this price and can you get to it or not? I don't spend hours playing around as I don't have the patience.

Do your research regarding price and models and deals. Don't be afraid to say that someone down the street is offering a better price. Ask around if someone has a car dealer they trust.

 

[MET270]

Look at buying a current model year Preowned vehicle. You can often find one with very low miles that someone else has already taken the initial hit of depreciation. The Preowned Certified vehicles have a better warranty than buying brand new as well.

 

[dakcp2001]

1. Get pre-approved for your own financing. I did this through capitalone.com. Then you only would use the dealers if they can do BETTER, not match that rate.

2. Negotiate total complete price of the car including all taxes and fees, do not get into monthly payments. Do not discuss monthly payments, do not discuss price without all taxes and fees included.

3. Know the kelly blue book and MSRP and what people are currently paying for the car before you get there.

4. If they don't have the exact color and features you want, make them get it or match the price. Don't fall for the test drive in the loaded vehicle ploy.

5. Know your trade in value. If you have a carmax near you, go there and offer to sell to them and get the written offer. Also autotrader.com I think gives you a definate trade in value.

 

[tvguy]

Pretty much this, with a few notes.

1. Get pre-approved for your own financing. I did this through capitalone.com. Then you only would use the dealers if they can do BETTER, not match that rate. Exactly. My last car loan I ended up, at the dealer's suggestion, paying $25 to join a different credit union, that got me a lower interest rate than my bank, or credit union were offering.

2. Negotiate total complete price of the car including all taxes and fees, do not get into monthly payments. Do not discuss monthly payments, do not discuss price without all taxes and fees included. Yes

3. Know the kelly blue book and MSRP and what people are currently paying for the car before you get there.
Get the wholesale price from Consumer Reports. They will also know about any incentives that may be out there for the buyer, and more importantly, for the dealer. Car makers run all kind of promotions with dealers, things like the dealer getting $250 every time they sell a Camry in April

4. If they don't have the exact color and features you want, make them get it or match the price. Don't fall for the test drive in the loaded vehicle ploy.

5. Know your trade in value. If you have a carmax near you, go there and offer to sell to them and get the written offer. Also autotrader.com I think gives you a definate trade in value.Carmax prices tend to be $2,000 than anyone else around here, so not sure that is a good source

 

[bound4wdw]

I have tried the Costco option once before, and it definitely wasn't a great deal, but good for those who just want to go somewhere and get a car. I research the hell out of all dealers before I commit.
Like a previous poster said, stay focused on price, never talk about a monthly payment till you agree on a final selling price. Tell the dealer you have financing, find out what the lowest rate you can get and then let the dealer try to beat it. Even after all is done recheck the math as you look over the contract. I've had a dealer say, "the computer messed up the math" when they were trying to get a few hundred extra dollars out of me.
Use your gut, if the seem nice and sincere, they probably are, if the have a clever, time tested response to everything you say, be weary!

 

[rock_doctor]

How new does it have to be? Our credit union has a deal with some of the major car rental companies and a couple times a year you can go in and buy rental cars that have been taken out of service. They are low mileage and always well maintained. Since you are getting it though the CU you get a deal and get a good loan. Most of the times they are only a year or so old. Give yours a call and see when their next sale is. Good luck. Remember you do not have to buy from your local dealer. You can call around and talk to the dealers internet sales person and strike up a deal right on the phone. Check the dealers website for what cars they have on their lots.

 

[mm1971]

Look at buying a current model year Preowned vehicle. You can often find one with very low miles that someone else has already taken the initial hit of depreciation. The Preowned Certified vehicles have a better warranty than buying brand new as well.

This. Or even a car that is a year or two old. I have bought new before, two have been used certified and the value is better. I bought a 2006 Lexus in 2008 and a 2008 Odysee in 2010 and have been very happy with both purchases. Low mileage and saved a ton of $$. The big depreciation hit had already taken place and we have had no service issues at all.

Good luck with your process. I'm not sure what the best choice is, but have heard great things about the Honda models for compacts.

 

[damiel]

I work for a credit union and from my professional opinion I suggest going to a credit union and getting pre aproved. Ask about gap insurance. If you are buying used a credit union can get you the best rate. If you are buying new the dealership may have better rates. Gap insurance is much less from the credit union.
A very common practice is for the dealership to find financing for you, this is a big mistake. Dealerships tack on an extra percent or two.

 

[Hofmanns4]

We always check our bank rates first and nowadays, the dealers can't beat it. We recently got 1.89 thru BofA.

We also shop the dealerships for the vehicle we want. We do not buy on the spot, this is just to narrow down the vehicle and options.

Then, we search the dealers in the area websites and find 3-4 vehicles at different dealerships that meet our criteria. I send Internet quote requests to each dealership. Then, the fun begins. I get them all to keep lowering the price and eventually, you get to the point they they wont go any lower and you can pick the one with the best deal. This saved us $10,000 off the MSRP on our Expedition.

This is all over the phone and when we get to the right deal, we take our letter from the bank into the dealership and are out of there in about 45 min.

This is just what we do to get a good deal and not have the pressure of the on the spot deal.

 

[daughtersrus]

Also... beware of things like extended warranty. That's where the finance guys make most of their commission. You can add a factory extended warranty at any time up to the time the basic factory warranty expires. That gives you time do decide if you will keep the car and therefore make sense to get an extended warranty.

It's true that you can buy it at any point but the cost will go up. DH has been a mechanic at a Lincoln dealer for 29 years. He always recommends purchasing the extended warranty (from the manufacturer, not an off brand) if you plan on keeping the car longer than the factory warranty. Be careful if they try and sell you an after-market warranty. It can be difficult to find a shop willing to take the warranty. If they do, many require that they come out and inspect the problem before they will approve the repair.

DD just bought a 2013 Ford Focus. We didn't have to negotiate on the price because DH qualifies for a "D" plan since he works at another dealership. DD did purchase a Ford Premium Care warranty for $50 over dealer cost. At $125/hour labor and the cost of parts, one major repair and the warranty is paid. Even with DH being a mechanic and getting free labor, with the cost of parts (a module going out for example) she didn't hesitate buying it.


I agree with others that said to look at credit unions for financing. You have to run the numbers but even with 0% at the dealer, it may be cheaper to go with a low interest rate at a CU and get the higher rebate from the dealer.

 

[taaren]

1. Get pre-approved for your own financing. I did this through capitalone.com. Then you only would use the dealers if they can do BETTER, not match that rate.

2. Negotiate total complete price of the car including all taxes and fees, do not get into monthly payments. Do not discuss monthly payments, do not discuss price without all taxes and fees included.

3. Know the kelly blue book and MSRP and what people are currently paying for the car before you get there.

4. If they don't have the exact color and features you want, make them get it or match the price. Don't fall for the test drive in the loaded vehicle ploy.

5. Know your trade in value. If you have a carmax near you, go there and offer to sell to them and get the written offer. Also autotrader.com I think gives you a definate trade in value.

This is all great advice, and exactly what I did when I bought my new car a few months ago (except the loan stuff, was fortunate to buy my new car outright and have gotten cash for selling my previous car before I moved across an ocean).

I contacted the Costco dealers first, had been considering a Prius 2 or an Accord LX. The Honda dealer through Costco quoted me a decent price, about $800 over invoice, then I went over to the Costco Toyota dealer in my area. The Costco price on the Prius was pretty close to invoice + destination fee + taxes (I'd pre calculated all this before going in). I decided to see if I could get a better deal on the Accord so I went to a dealership in the next town over and they beat the Costco Honda dealer's price and got pretty close to invoice + dest fee + taxes.

The dealerships make a good amount just for moving a car off the lot from the manufacturer, so they can and will go down to near invoice if they need the sale as long as you're willing to walk away and go to the next dealership. (This does not work in areas where they are the only dealership in a large geographic area, but otherwise you should be fine.)

So the Costco price varies, and its usually a good deal but not necessarily the best deal you'll be able to make.

 

[DLgal]

Here are my recommendations.

1. Buy a car that has an excellent repair reputation. I.E. Honda, Toyota, or similar, and you won't even have to worry about extended warranties. I've only ever owned Hondas and Acuras. We have never purchased an extended warranty, and have never had any major repairs on any of our cars, ever. Our current cars are 7 years old and 4 years old, respectively. My 7 year old car is 4 years out of warranty, and I've not spent a dime on anything but scheduled maintenance (and new tires).

2. Use Edmunds.com to find what others in your area are paying for the car you are considering. Also, use their "real cost to own" tool, which takes into account insurance, gas, etc. over a 5 year period of time.

3. Get financing before you step foot in a dealership. On my last car purchase, I walked in with a blank check from my bank at 1.9% financing. The dealer beat it with 0.9% financing, so I went with the dealer. But, only go with the dealer financing if they can BEAT your other offer! The APR you are offered is ALL about your credit, so know what you "should" be able to obatin.

4. Don't impulse buy. Do your research, narrow it WAY down (down to make, model, color, extras). Then, find a dealer in your area that has THE car you want, and then go from there. Most dealers can get whatever car you want, but you might get a great deal if you are flexible on the color, at least.

5. Buy at the end of the month. Dealers usually have to turnover the cars in their lot as fast as possible, and as time goes on, they get desperate if they still have cars that have been sitting too long.

6. Do not add on a THING at the dealership. Not one little thing. No warranty, no "clear coat", no "scotch guard", etc. NOTHING. Take the car as is.

7. Insist that the car come equipped with floor mats, and don't settle for paying even one penny for them! I've negotiated in floor mats on every car I've purchased simply by telling the salesperson that they WILL be included in the price, and I will NOT pay for them. I've gotten cargo trays, wheel locks, and mud flaps as bonuses. If they balk, walk out the door. I find that dealerships that charge for floor mats are the ones who will do their best to weasel every last penny out of you, because they assume you are a sucker.


My recommendation for a compact car under $20k is a Honda Fit. AMAZING little car! Great gas mileage (close to 45mpg hwy), cheap to fill up ($30 per fill up), excellent cargo space with numerous ways to fold up/down seats. Nice, comfy ride. We have the Sport version and got if for around $19500. Ours is 4 years old, has almost 75K miles on it, and going strong with not even one issue!