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Buying A Car Tips And Advice

But many Americans make big mistakes buying cars. Take new car purchases with a trade-in. A third of buyers roll over an average of $5,000 in debt from their last car into their new loan. They're paying for a car they don't drive anymore. Ouch! That is not a winning personal finance strategy.

buying a car tips and advice

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"The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender," says Philip Reed. He's the autos editor at the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site So Reed is going to pull back the curtain on the car-buying game.

So Reed says having that preapproval can be a valuable card to have in your hand in the car-buying game. It can help you negotiate a better rate. "The preapproval will act as a bargaining chip," he says. "If you're preapproved at 4.5%, the dealer says, 'Hey, you know, I can get you 3.5. Would you be interested?' And it's a good idea to take it, but make sure all of the terms, meaning the down payment and the length of the loan, remain the same."

So at the dealership, Reed and Van Alst both say, the first step is to start with the price of the vehicle you are buying. The salesperson at the dealership will often want to know if you're planning to trade in another car and whether you're also looking to get a loan through the dealership. Reed says don't answer those questions! That makes the game too complicated, and you're playing against pros. If you negotiate a really good purchase price on the car, they might jack up the interest rate to make extra money on you that way or lowball you on your trade-in. They can juggle all those factors in their head at once. You don't want to. Keep it simple. One thing at a time.

"Concerning the extended factory warranty, you can always buy it later," says Reed. "So if you're buying a new car, you can buy it in three years from now, just before it goes out of warranty." At that point, if you want the extended warranty, he says, you should call several dealerships and ask for the best price each can offer. That way, he says, you're not rolling the cost into your car loan and paying interest on a service you wouldn't even use for three years because you're still covered by the new car's warranty.

"We're actually living in a golden age of used cars," says Reed. "I mean, the reliability of used cars is remarkable these days." Reed says there is an endless river of cars coming off three-year leases that are in very good shape. And even cars that are older than that, he says, are definitely worth considering. "You know, people are buying good used cars at a hundred-thousand miles and driving them for another hundred-thousand miles," says Reed. "So I'm a big fan of buying a used car as a way to save money."

NPR has a personal finance Facebook group called Your Money and Your Life. And we asked group members about car buying. Many said they were shocked by how much money some other people in the group said they were spending on cars. Patricia and Dean Raeker from Minneapolis wrote, "40 years of owning vehicles and our total transportation purchases don't even add up to the cost of one of the financed ones these folks are talking about."

There are plenty of pros to buying a car online, but caution is needed as well. Anytime you shop online, and especially when making an expensive purchase like a car, you should keep the following tips in mind:

Next to a home, buying a car is one of the most significant purchases most people make during their lifetime. However, choosing the right vehicle for you is just one part of buying a car. Knowing how much you can afford, what type of car you want, and finding a great deal on financing are all crucial parts of acquiring a new set of wheels.

Your credit score helps determine the interest rate you pay on a car loan. Better credit may help get you a more favorable interest rate, which in turn will have an impact on your car-buying budget. You may be able to get your credit score for free through your credit card provider.

How to Leverage the Top Car Buying Service to Save Thousands - Buying a car doesn't have to be Hard. Learn how to leverage the top online new car buying services & save! Top 40 New Car Buying Tips - Follow these tips and avoid costly mistakes.10 Car Buying Mistakes - These mistakes can will drain your wallet.Top 6 Dealer Selling Systems - Being aware of these can provide you with more buying power.

Vehicle auctionsGovernment, private, and online vehicle auctions are becoming increasingly popular. If you are buying at auction, remember that you may need on-the-spot payment, warranties are rare, and you probably will not be able to take the car for inspection before you buy it.Find an auto auction company near you.

Once you have found a car you are considering buying and you have tested it yourself, have a mechanic check the car thoroughly before you sign anything. You will have to pay for this, but it is crucial, as there could still be problems you did not find.

In particular, consumers with less than perfect credit that derive much of their income from tips need to be aware of how this can affect their chances of financing a vehicle somewhere other than a BHPH car lot.

3. Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.

While traditional lenders will rarely ask for proof of income, this isn't the case with most high-risk car lenders. As far as these lenders are concerned, applicants can prove their income with either a W-2 if they are a regular employee or professionally prepared tax returns (often multiple years) if they receive a 1099 or are paid in tips. Without either of these (and sometimes both), applicants have no proof. Even if they can produce banking records that show this is not proof and it will not be accepted as such.

One other thing to keep in mind: at Auto Credit Express our specialty is helping applicants with credit issues find car dealers that can offer them a real opportunity, if they've reported their income correctly, for buying a car with cash tips.

If you find yourself shopping in the $15,000 or under range, I would advise you to try to avoid the dealers altogether if possible. You will find better prices from private parties on Craigslist and the like, and serious sellers will often be more cooperative with inspections. Of course, buying from a private seller usually means having all your funds ready to go.

This story first appeared on Car Bibles. Guest writer Tom McParland runs He takes the hassle out of buying or leasing a car. Got a car buying question? Send it to

As you prepare to buy a car as a college student, you are far less likely to be disappointed if you follow these tips. While this may or may not be your first vehicle purchase, it is still a learning experience that will inform your future car-buying decisions, so do everything in your power to make it a good one.

After tons of research, I finally realized why: The vehicle franchise laws in this country are totally outdated. It's against the law to purchase a new car anywhere other than through a franchised car dealership. That means new cars cannot be sold directly through the manufacturer, or any other entity for that matter. And yes, that includes online car buying services - all of which require you to complete the transaction with a dealer.

The laws go back decades - long before the Internet was around, and they've stayed this way due to heavy lobbying efforts by dealers. The sytem creates exclusive territories for dealers and a strong incentive for high-pressure sales, which results in a terrible car buying experience.

It doesn't look like the laws will change anytime soon. However, the good news is the system has some major holes, and it's possible to take advantage of them. It's not unheard of to save $5,000 or more, plus a lot of time and hassle, simply by following these proven car buying strategies.

  • If possible, you should pay cash to avoid interest payments - but don't let dealers know since they prefer buyers who finance. Those who need a car loan should follow these guidelines: Monthly payments should be no more than 15% of your take-home pay (that's after taxes)

  • Limit car loans to 48 months or less

  • Down payment should be at least 20% of the purchase price

If you can't hit these budget targets, you really need to consider buying a lower-priced car. Try looking at used cars or spend a few months saving up for a larger down payment. It's much better to be safe than sorry when it comes to budgeting for a car.

Being flexible with your vehicle choices allows you to shop for the best deals. Many shoppers have their heart set on one specific model and refuse to even test drive the competition - this is a huge mistake. One of the best pieces of advice I can give you is this: go out and test drive as many competing vehicles as you can. I promise you will be surprised by the results. Cars that you never thought you would like suddenly become attractive once you're behind the wheel, while others you thought were awesome turn out to be ho-hum. 041b061a72


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