In this personal finance workbook, we’ll be addressing the biggest purchase you are likely to make in your lifetime aside from your home: A new car.
LEARNING OBJECTIVES:
Prioritize your wants. Keep one thing in mind: A car isn’t an investment. Unless the car you want is an antique, fully restored, mint-condition classic of some sort, each day you own your new car it will lose some of its price. In fact, nothing loses its value in the first year as quickly as a new car.
Research before you start shopping. The goal of this research is to have an open mind about what you want and need and the range of alternatives that are available. In order to push yourself toward being more open, write down three vehicles, other than the one you wrote on page one, that you are going to research. Remember, you’re trying to consider all of your options.
Fit the expense of the vehicle into your budget. Remember that after your home, an automobile is the second-largest buying decision you’ll probably make, including college education for your children. Think about it: college only lasts four or five years, but automobile financing can last a lifetime if you keep trading when the payments are done.
Determine if you are going to lease or buy. Assuming that getting a new car is still on your list of priorities, your next step is to shop around at the places that have what you want. You’ll probably find it available for ownership or lease, and figuring out which option is best for you will depend on a handful of factors.
Negotiate with the dealer. There are four keys to success in negotiating a car purchase or lease:
Never discuss affordable monthly payments with the dealer. If you let the salesperson know what you can afford, he/she may not lower the price as much as possible.
Obtain a firm price for the car before discussing any other aspects of the deal, such as trade-in value, financing, incentives, or service contracts. That price can then be compared between dealers and used as the basis for other negotiation.
Make sure you ask for their best offer for purchase or lease, as incentives for each are different. And when you get your answer, make sure it that if it changes your decision, that your new decision still fits within your financial priorities.
Be willing to walk away from the deal if it isn’t satisfactory.
Make the decision. Major buying decisions should be made at home where you can concentrate on all the aspects of the decision without being under pressure from the salesperson. There you can rationally retrace your steps through the buying process, making sure that your decision is based on facts and logic. And make sure it fits comfortably within your financial plan.
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