Used Car Buying Manual. Part I

After many weeks of pounding the pavement, kicking tires, and test driving sedans with no real intention of buying them, I bought a used car. This may seem like a simple process; driving a car seems like a simple process also, but we have many individuals in society that already find that to be too strenuous a task.

Here are some of the short cuts and ideas that I have gathered over the years, and particularly from this season of shopping, about buying a new or used car.

1) You are not making an emotional decision.

Buying a car has nothing to do with what you want or what you like. It is a search for the things that you will and won't settle with having or not having. No car is your dream car. If you find a car that you believe is your dream car I suggest you never ride in another car again where you will most certainly find one if not ten options you wished your dream car had.

You are making a rational decision. I want this type of car with these types of features. For example: My wife was looking for an gray Honda Accord Sedan with an automatic transmission, 4 cylinder engine, alloy wheels, power windows, power locks, splash guards, trunk liner, all weather floor mats, cloth interior, leather trim, cruise control, power seats, moon roof, cd player, etc... All of these things were her wants in a car and I agreed that I liked them all as well.

Ironically enough, the car that we both liked the most wasn't the one we ended up driving home. Yes it had every feature we wanted and then some. I really liked the blue interior map light to see what ever hand held distraction contraption you are playing with as you maneuver your 3,500 Lb. metal coffin down the highway in the midst of rush hour traffic. She really liked the moon roof, leather wrapped steering wheel, and door trim package. Together we decided, or more I decided I wasn't going to buy it. It wasn't the right deal, even if it was the right car. Too many miles, too much dealer mark up. It just wasn't it.

2) Buying a car isn't about what you can afford.

That's right. Buying a car for most people is the biggest financial decision they will make before they decide to buy a house or turn in a willing lottery ticket. We can all afford more than we need. I am sure the finance collar at the dealership will tell you that you can afford 25% of your monthly income in a car payment. You can afford to 100% finance at 14.9% APY and that You need to set you budget based on these criteria.

A. How much am I willing to sacrifice to have this car?
B. How much more/less with this car cost me than the one I have now?
C. Do I really want to become a slave to my car?

My choices came down to this... Jeep Wrangler. EPA estimated 13 MPG. Trip to work 15 miles. Trip to lunch and back to work 4 miles. Trip home from work 15 miles. Trip to see family of friends at night 25 miles round trip. Estimated 50-60 miles driven per day. So lets average 4 gallons of gas at $2.60 a gallon. $10.40/day. $312.00 per month in gas.

So if i buy a new car, that gets twice the gas mileage (Honda Accord EPA 26) I have $156 towards a car payment without spending an extra penny during the course of the month. So in answering my own questions

A. yes I am willing to sacrifice my love for Jeeps, 4x4s and my manliness to have a reliable easy to maintain car.
B. After the cost of maintenance, and insurance I am ahead in the long run by buying a newer Accord than driving an older Wrangler.
C. I am not slave to my car because in a sense, it is paying me to drive it.  So I am not its slave in the sense of working all week to pay for it over what I was already paying to drive my last car.

3) Buying a car is about making 3 separate deals with the car sales man.

Deal 1. Does he have the car that you want and what is the price you can both agree on for the car?

This is the biggest part of the car buying process but everyone generally gets in muddled in with Deals 2 and 3(which we discuss momentarily). Negotiate the car you want, what you want from the dealership, and what you will give in return. Get all of this in writing. It will protect you in deals 2 and 3. If you decided you want to move forward on the car make sure that you have all the details in line: price, what they owe you and what you owe them.

Deal 2.  Do you want to trade in your vehicle?

This is a second deal not related to the first deal. Most people have this already determined before they walk into a dealership. Thinking to themselves, "What am I going to do with two cars anyways?" You already have the price agreed on for the car you are buying, now you must again sit and talk terms about your trade. If you decide that the money they are going to give you for it is sufficient to save you the time and headache of selling the car yourself, or finding a clever friend or family member to sell the car for you, you sell them your trade here. This will save you from paying taxes on the whole value of the car and should also play into your decision making process about whether or not the trade in price is fair.

Deal 3. Payment Options.

This is that hardest part of a car deal for me. I always want to pay cash for things up front. I hate debt. Until I was 19 the notion of borrowing money from the bank never made sense to me because you had to pay them interest for this money. At the ripe old age of 20 I was enlightened to the fact, "Sometimes your money can make you more money if you have it in the bank, than the money you will save by paying cash."

So I researched this, thought about it and came to this conclusion. I always need to keep enough liquid capital on hand to be able to chase my dreams, but I never need to be too far into debt to be tied to minimum payments.

So put as much down as you feel comfortable not having and finance the rest. But get outside financing before you go to the car dealership because you always want to get the lowest rate possible.

4) You can never do too much research about your purchases ahead of time.