canstockphoto7138978A car purchase is one of the most expensive things to pay for next to buying a home. It is unfortunate that many people make it more expensive than it have to be. Between paying high interest rates on car loans and spending too much money at the car dealership, many people aren’t aware that they could save thousands of dollars over the life of their car. Here are a few tips for you to save money on your next car purchase.



Buy a Used Car

Purchasing a used car will save you thousands of dollars. Even if you purchase a brand new car, it will depreciate as much as 20% as soon as you drive it off the car lot. Let’s say that you pay $40,000 for a car. It will be worth $32,000 simply because you own it. That’s an $8,000 loss just for driving it off the lot. Some cars will depreciate at that rate  for the next couple of years. On the other hand, if you buy a used car that’s only two or three years old, then you’re saving yourself thousands of dollars on the price of the car. There is a chance that the car is still under warranty and is in excellent shape.


Buy From a Private Owner

You should consider buying privately. Car dealerships mark up their prices, which is how they make money. It is not unusual for used cars to be marked up as much as 30 percent. When you do your math, a car that’s worth $10,000 through a private owner may be as much as $13,000 or even higher through a car dealer. It is not uncommon to find a used car at a dealership that increase their prices as much as 50%. Another advantage to buying from a private seller is that the  car mileage is lower in many cases.


Buying from a private seller can also have some risk. You can reduce your risk by making sure that you get a car fax, by having it inspected by a mechanic and by taking someone along with you when you test drive the car. Make sure you have a buyers/sellers agreement signed. Never pay for the car in cash. Always purchase with a certified check or a money order. Remember to always trust your instincts.


Do Your Research

If you’re committed to purchasing a new car from a dealership, then you should do your research beforehand. Find out the value of the car by visiting Kelley Blue Book or Edmunds. Make sure that you have a good credit rating going into the purchase. You could find yourself paying a higher car loan interest rate if you are not careful.


Taking the time to find out how much a car is worth will give you room to negotiate. If you have a trade-in or the ability to make a larger down payment, you’ll have even more room to negotiate. Car dealers don’t only make their money by selling the car, they also sell your car loan to other lenders. Having a good credit score will give you an advantage.


Many people are uncomfortable with negotiating and dealerships know this. If you fall into this category, here is some advice. Make a list of cars you are interested in purchasing that’s slightly above your price range. Write down the amount that you are willing to pay each month on a car loan. However, if you are paying for the entire amount of the car, write down how much you will have to spend.


Put the car that you would most like to own or choose the one that’s slightly above your price range at the top of the list. Then write the next expensive under that until the least expensive car is at the bottom of the list. Now take a trip to the dealership of the most expensive car. (Presumably you’ve made this decision after taking test drives and are certain that you are interested in this car.)


You have the knowledge of exactly how much you are willing to spend when they start the negotiating process. If you can get the car for less than the budgeted amount, then congratulations! This tactic works best if you are armed with knowledge. Most people struggle with negotiation simply because they are not prepared and don’t go into it with a solid idea of what they want to get out it.

If the first dealership won’t negotiate, always be willing to walk away. You have your list of cars. If  the first one doesn’t work out, go to the next dealership until you find the best deal. Treat each negotiation as a learning experience. All of the methods above will get you on your way to save money on your next car purchase.

Tagged with:

Filed under: BudgetingMoneyPersonal Finance

Like this post? Subscribe to my RSS feed and get loads more!