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Costly Mistakes to Consider When Buying Your Next Car

May 4th, 2016 No Comments

It seems like every few days I’m struck with an article on my feed that proclaims that it is the end all be all “car buyers hack” or way to find “the secrets car dealerships don’t want you to know.” True some of this advice can be useful, while others are just pure bologna. So who do you trust ?kkkkyy

I’m going to go over some of the most common things I’ve come across that aren’t necessarily true and then outline why I don’t think they are based in reality necessarily. But rest assured we are going to experience a big change in car buying in the not so distant future. 

First up is the notion that you should never buy new. This one gets put out there a lot and I’m not really sure who or why it was started. It seems like the worlds most successful used car dealer put it forth and it got wind and never stopped. The concept revolves around the notion that cars depreciate as soon as they drive off the lot, and therefore a used car will be cheaper than a new car. doi right. the face of the matter is that the potential savings you will experience depend upon the car and the market. There is no one size fits all maxim to buying cars.

Its true that lightly used luxury cars that are only one maybe two years old will save you thousands of dollars because of their depreciation curve is much steeper. That said many mainstream brands have a reputation for their reliability and may not offer the value you are wanting or expecting. The brand is aware of the expectation and will price their cars accordingly to maximize profits and discourage people from waiting 2 years.

blondswagNew cars also have a greater potential for discounts, especially if the manufacturer is putting in additional incentives to sweeten the pot. Another form of incentive can come in the form of government incentives such as with electric or hybrids that meed an EPA standard or fuel economy. So when it comes to buying it might not necessarily be the case that you should wait, and the new car of your dreams might be the car of your pocket book as well.

Another matter of fact maxim that exists when buying is that you should always take the rebate instead of the low interest rate. This is one that is usually true, but is not necessarily always true. It is sometimes the case that you are likely to find what manufactures call a “special financing option” which boils down to you forgoing the cash and take a lower interest rate. Those who say take the cash no matter what, are just lazy and should take the hour or so it will take to run the numbers.

For example consider if the price of a new car is $27,500 after taxes and fews with a $500 customer cash rebate at 3% APR. if you then choose the zero percent route you could have had a fiance of $28,000.

Therefore, the monthly payment on the $27,500 at 3% would be $494 a month for 60 months. Whereas if you don’t take it the interest rate is free, the payment are about $467. and that is a difference of $27. Multiply that by the 60 months the payment is expected to take and you see that you are going to benefit from crunching the numbers.

 

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