car #2: how to buy a new car

February 8, 2010

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Well we did it. I hemmed and hawed about it, but we really do need a second car. We may not need 2 cars every day, but our schedules are only getting busier, and the inconvenience, time, and money spent driving out of my way every day over the winter was just too much.

My husband researched the car he wanted based on fuel economy, price, and value. With a key factors being:

resale value
cost to own
cost to insure: contact your insurance company, USAA rocks for this.

Why is value so important? It can save you THOUSANDS of dollars over the life of a car. I’m going to say something controversial in the personal finance world: buy new.

While a $5,000 beater seems like a steal, it is because it will only last you a few years, and could cost you a ton in repairs. With used cars there is no guarantee that you will have a “clean” car, even with CarFax, or other reports. Unless you happen to have a grandmom selling a car, or know someone who does, it’s much better to buy new (assuming you have good credit).

A lot of bloggers, and frugal people will argue that driving a new car off the lot means we spent $3K or more on depreciation. While that is true for SOME cars, it is not true for all cars. If a car holds its’ value well buying a 2 or 3 year old model may save you next to nothing. Factor in good interest rates (again, if you have good credit), and you they are about even. In some cases you may even get a 0% loan, and then it is definitely cheaper to go new.

We decided on Friday to buy a car, Monday morning hubby drove his car off the lot with 4 miles on the odometer. We could have had it Saturday, but we ran into an issue, which I’ll tell you about later this week.

We bought a Honda Fit. It’s rated well in everything important to us, and has enough room for several kids. It’s fuel efficient, will hold its’ value, and my son will be driving it in less than 4 years. (I wrote that but I’m pretending it’s not true)

If you’re in the market for a car, here are the steps I’ve used twice with great success.

How to buy a new car without getting ripped off:

These are the steps we took to buy our car, and I highly recommend you follow them too if you are purchasing a car (new or used).

Figure out how much you want to pay for a car. Are you going to save up to pay for it in cash? Are you going to finance it?
Research, research, research to find the model car that best suits you and your lifestyle, and your possible future. (you may be single now, but think ahead to a time when you might need a 4 seater)
Once you’ve narrowed it down to 1-3 models, take them out for a test drive. (do NOT get sucked in here, people)
Check out what people are paying online for the car in your area. This will give you an idea of what the price actually sells for versus what a salesman might tell you it’s selling for.
Get pre-approved. I can not stress this enough. Don’t go shopping without your own financing. Yes, the dealer will try to beat it, and might, but go with your own money in hand. (whether it’s cash or a check from a bank)
Look up dealers, and start emailing them. Ask for their drive off the lot pricing. I can’t emphasis that enough. You want to know what the car, fees, taxes, and registration add up to. Also, don’t be afraid to look outside your local area. Would you drive 200 miles to save $3,000? You betcha.
Once you have your lowest price go to the dealer. Do NOT go in there thinking you will leave with a car. Be willing to walk away, have a cup of coffee, make a phone call, or play on twitter.
If you are selling your current car, do NOT mention it to the salesperson. Negotiate that after your sale, or better yet sell it privately. You will get a ton more for it. Yes it’s a hassle, but it can pay off.
Make sure you read everything you are signing. EVERY word.
Do NOT buy extras on the lot. Our car came without floormats. We saved $100 by not having the dealer install them.
Drive off laughing. Seriously, if you followed all that, you probably got a pretty sweet deal.

Here’s an excellent video I found via Lifehacker that outlines most of these steps, but in a way more amusing way.

Alright, bracing for it. Tell me what you think. Do you buy used? Do you buy new and run it into the ground? Do you think I’m crazy for buying new?

Kelly

About Kelly

Kelly Whalen is the founder of The Centsible Life, a blog where motherhood and money meet. Her goal is to help readers live well on less. Kelly is a mom to 4, and loves that she can stay at home with her kids, and still pursue her passions for writing, personal finance, and social media. You can often find her on twitter and Facebook talking money and motherhood.

Tagged as: auto, car, consumer, Shopping

Pingback: 12 Personal Finance Bloggers Answer – New or Used Car?
http://www.pffirewall.com Jesse

My wife and I have been saving for a car for the past year at least, and have a good amount saved but I couldn't make the decision between new or certified pre-owned or junker. We need a bigger car because of the kids so that brings the price of new to about 20k and we don't have that much saved up. Our current car was purchased brand new, 3 miles on her, and I haven't regretted it so I really was leaning towards new. I especially want reliable because the car is for the wife and I don't want her breaking down in the snow with the kids.

I'm glad to see another in the pf community hitting all the points and making an informed decision that fits them best. Thanks for all teh tips.
http://www.pffirewall.com/ Jesse

My wife and I have been saving for a car for the past year at least, and have a good amount saved but I couldn't make the decision between new or certified pre-owned or junker. We need a bigger car because of the kids so that brings the price of new to about 20k and we don't have that much saved up. Our current car was purchased brand new, 3 miles on her, and I haven't regretted it so I really was leaning towards new. I especially want reliable because the car is for the wife and I don't want her breaking down in the snow with the kids.

I'm glad to see another in the pf community hitting all the points and making an informed decision that fits them best. Thanks for all teh tips.
http://www.openlybalanced.com Jess @OpenlyBalanced

Best. Car. Ever. I also bought a Fit new, after saying for years that I would never buy a new car because of the depreciation issues. But I discovered what you did – you don't really save money buying a used Fit!

I've had mine for two years now and hope to drive it forever and ever!

(Mine also came without floormats. I was so disappointed, but yep – saved a fortune buying them online.)
http://www.openlybalanced.com/ Jess @OpenlyBalanced

Best. Car. Ever. I also bought a Fit new, after saying for years that I would never buy a new car because of the depreciation issues. But I discovered what you did – you don't really save money buying a used Fit!

I've had mine for two years now and hope to drive it forever and ever!

(Mine also came without floormats. I was so disappointed, but yep – saved a fortune buying them online.)
http://www.fiscalfizzle.com/ Wojciech Kulicki

Congrats on the new addition!

We are getting there–we’ve been trying the one-car thing for a few months, but it has not been working well.

We’re going to spend the money to fix our second car, but it will be time to look for something newer soon.

I have to admit that I REALLY want to buy used this time, and I finally have my wife on board with the idea.

I don’t know how the experience will go vs. a new car purchase, but you’ve got to try everything once, right?
.-= Wojciech Kulicki´s last blog ..Should You Pay Off Your Mortgage or Credit Card? =-.
http://www.fiscalfizzle.com/ Wojciech Kulicki

Congrats on the new addition!

We are getting there–we’ve been trying the one-car thing for a few months, but it has not been working well.

We’re going to spend the money to fix our second car, but it will be time to look for something newer soon.

I have to admit that I REALLY want to buy used this time, and I finally have my wife on board with the idea.

I don’t know how the experience will go vs. a new car purchase, but you’ve got to try everything once, right?
.-= Wojciech Kulicki´s last blog ..Should You Pay Off Your Mortgage or Credit Card? =-.
http://www.observingcasually.com Kosmo @ The Casual Observer

The last car we bought was a program car. It had 9500 miles on it, and was still the current model year (although the new ones came out a few months later).

It’s a lot cheaper to let someone else drive those first 10K miles.

We also didn’t really have an option, since that car (’06 Taurus) was only made for fleet, and couldn’t be purchased new off the lot.
.-= Kosmo @ The Casual Observer´s last blog ..Ask Kosmo =-.
http://www.observingcasually.com/ Kosmo @ The Casual Observer

The last car we bought was a program car. It had 9500 miles on it, and was still the current model year (although the new ones came out a few months later).

It’s a lot cheaper to let someone else drive those first 10K miles.

We also didn’t really have an option, since that car (’06 Taurus) was only made for fleet, and couldn’t be purchased new off the lot.
.-= Kosmo @ The Casual Observer´s last blog ..Ask Kosmo =-.
Stacy Farrell

Hi Kelly,

I will never buy a used car again. With the 3 previous used cars I have owned, They probably lasted me on average a little over a year. About 15 months.

I’m looking for a new car right now. Definitely going to look into the Honda Fit.

Thanks,

Stacy
Stacy Farrell

Hi Kelly,

I will never buy a used car again. With the 3 previous used cars I have owned, They probably lasted me on average a little over a year. About 15 months.

I’m looking for a new car right now. Definitely going to look into the Honda Fit.

Thanks,

Stacy
http://onlineposterprinting.com Michelle | Poster Printing

I think buying new is also ideal. You would be sure it is in good shape and it has a guarantee. And you will be sure no smelly babies have gone through it.
http://onlineposterprinting.com/ Michelle | Poster Printing

I think buying new is also ideal. You would be sure it is in good shape and it has a guarantee. And you will be sure no smelly babies have gone through it.
http://www.four-pillars.ca Mike

I think in general a used car is cheaper than a new car, but then you are looking at more hassle and time with buying the used car and fixing it more often.

My current car was bought new and I seriously doubt that our next car won’t be.
http://www.four-pillars.ca/ Mike

I think in general a used car is cheaper than a new car, but then you are looking at more hassle and time with buying the used car and fixing it more often.

My current car was bought new and I seriously doubt that our next car won’t be.
http://www.uprinting.com Victor | UPrinting

Buying a new one I think is better compared than buying a slightly used/second hand car. You are right that initially we might save a few thousand of dollars, but we must be prepared to spend on a couple of repairs.
http://www.uprinting.com/ Victor | UPrinting

Buying a new one I think is better compared than buying a slightly used/second hand car. You are right that initially we might save a few thousand of dollars, but we must be prepared to spend on a couple of repairs.
http://www.joetaxpayer.com JoeTaxpayer

You didn’t say how much below MSRP you got, but no, I don’t think you made a mistake.
I hear all the talk of buying used, and wonder if it’s worth the risk of never really knowing what if anything is wrong with the car. By buying new, you know the oil’s been changed every X miles, and the car maintained well.

What is crazy is when people need to take a five year loan out to afford that car. That’s another story.
http://www.joetaxpayer.com/ JoeTaxpayer

You didn’t say how much below MSRP you got, but no, I don’t think you made a mistake.
I hear all the talk of buying used, and wonder if it’s worth the risk of never really knowing what if anything is wrong with the car. By buying new, you know the oil’s been changed every X miles, and the car maintained well.

What is crazy is when people need to take a five year loan out to afford that car. That’s another story.
http://wellheeledblog.com WellHeeledBlog

Oh, and if I buy a car I’m probably buying a new Honda. Hondas & Toyotas (well, before this whole recall), tend to hold their values really well, so as you’ve said, it doesn’t really make much of a difference buying a new car or a 1-3 year old car. I plan on driving my next car for 10+ years (current car is 14-years-old!), so the new car premium amortized over a decade wouldn’t be too much.
http://wellheeledblog.com/ WellHeeledBlog

Oh, and if I buy a car I’m probably buying a new Honda. Hondas & Toyotas (well, before this whole recall), tend to hold their values really well, so as you’ve said, it doesn’t really make much of a difference buying a new car or a 1-3 year old car. I plan on driving my next car for 10+ years (current car is 14-years-old!), so the new car premium amortized over a decade wouldn’t be too much.
http://wellheeledblog.com WellHeeledBlog

Honda Fit is a great car! Looking at it in a parking lot though, I’m a little concerned about how small it is. I’m sure it has great safety ratings like most Hondas, but it just looks so tiny even next to regular-sized sedan.
http://wellheeledblog.com/ WellHeeledBlog

Honda Fit is a great car! Looking at it in a parking lot though, I’m a little concerned about how small it is. I’m sure it has great safety ratings like most Hondas, but it just looks so tiny even next to regular-sized sedan.
http://www.stephpea.typepad.com Steph

I agree with everything except the “buy new” part. But then, you knew some of us would.

We buy used – have been Toyota drivers since the late ’80′s. In the past 19 years, we have owned 5 cars (3 that we drove into the ground and our current 2 that we drive). We buy a 2-3 year old Camry almost every time with under 40K miles on it, under 25K if at all possible. So far, we’ve driven all of our cars to 190K+ miles and have no complaints at all about not getting a good buy and excellent value by buying used. As long as you’re buying a car with excellent ratings (usually Toyota or Honda), in my humble opinion, you are much better off buying a very-gently used car.

Nice blog post!
http://www.stephpea.typepad.com/ Steph

I agree with everything except the “buy new” part. But then, you knew some of us would.

We buy used – have been Toyota drivers since the late ’80′s. In the past 19 years, we have owned 5 cars (3 that we drove into the ground and our current 2 that we drive). We buy a 2-3 year old Camry almost every time with under 40K miles on it, under 25K if at all possible. So far, we’ve driven all of our cars to 190K+ miles and have no complaints at all about not getting a good buy and excellent value by buying used. As long as you’re buying a car with excellent ratings (usually Toyota or Honda), in my humble opinion, you are much better off buying a very-gently used car.

Nice blog post!