Saving for a Car–Sage Advice Part 3

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Op-Ed by Paul Wimsett and AR Bunch

Following on from the information Sage Advice #2

A car is one of the biggest expenses we have at any one time and a source of constant frustration. Sure, home ownership will come with lots of things that need fixing from time to time, but cars are moving things full of moving parts. It’s a whole other level of ability to destroy itself from the moment you buy it.

Good advice starts with this…get a high yield savings account especially for the car and label it, “fix or replace.”

You may decide to trade-in your current car, or sell it for cash, to help with the down payment for the next car, but that’s not adequate. You don’t want to be financially destroyed by unexpected auto breakdown. These things happen at the worst time.

Searching the market to get the right account for this. It might seem over-cautious but owing for a car is one of the ways that debts accumulate over time. No one here is legally qualified to give you financial advice, but we’ve done enough research to know that savings accounts do exist, that give a slightly higher interest rate in exchange for limiting the number of times you can access it per year. That’s what you want.

Putting as much down as you can will reduce your monthly payment, which is turn lets you squirrel away a little bit toward your next down payment. The idea is to turn some of the money you pay in interest on a car loan into money you’re paid interest on when saving toward your next car loan.

Obviously your going to potentially dip into this account for big repairs but that’s not something you can include when doing the math. (Just consider the decision to fix your current car as delaying the purchase of the next car so your adjusting the timetable buy the amount you’re taking out of savings now.) So for the purpose of doing the math work only with saving toward your next purchase.

Doing the math:

A quick word about maintenance; you should try to keep your car at least five years, which shouldn’t be difficult with regular oil changes and tune ups. (Do not take oil changes/tires/gas etc out of your repair fund—those are operating expenses.)

percent-226316_1920Even though your car SHOULD last five years, assume that you’ll need at least the down payment for new one in two years. There is no telling what sort of car you’ll buy in two to five years, or what it’ll cost, so look at the newest model of the same car you own now. What’s the price of a 2020 Honda Civic, for example? $21,650

What’s price will that car be when you buy it 3 to 6 years from now?

Some models depreciate better or worse than others and an individual car might fair worse than others of the same model. Most cars depreciate about 20% in the first year and 15% each year after that so that 90% of the value is gone in 10 years.

At this rate our Civic should sell for about…

2023 $12,514
2024 $10,637
2025 $9,042
2026 $7,686

The fast way to double check the numbers is to compare to KBB.com when the time does role around. But for the sake of pedicting we’re we’ll use these numbers.

Price will have fallen in half by the year 2024 which is why we’re recommending buying a car 3 to 6 years old. Whenever possible put 20% down and take out a 60 month or shorter loan.

$10,637 x 20% = $2,128

To save that in 2 years just divide it by 24 months = $88.65/ month.

Other Car expenses:

Look to budget for car-related expenses, insurance, roadside assistance, taxes & registration and so on. What is the best way to pay these bills? Would it work out cheaper monthly, quarterly or yearly? Obviously the bills come when they come, but be sure to increase the size of your regular savings to account for saving toward those expenses.

Try to limit your expenses, which is easier to say than to do! Experts we know say that household accounts are where money tends to evaporate and your efforts will be in vain if you leave the heat up on vacation, etc.

Secrets to Saving:

The secret to success is automating your savings. This sounds a bit glib, but there are ways your bank can automatically move money to saving each month so you don’t have to think about it.

Know the bank’s rules on overdraft should you have to take one out.

Other sources of Money for a Car:

Some folks have been able to take out a second mortgage, leveraging the equity in their house instead of financing car? The logic behind this, is that borrowing larger amounts of money results in a lower interest rate. On the downside, your house is essentially securing your car.

As we mentioned in part one of sage advice, if you are buying your first car, you’re probably involving “the Bank of Mom and Dad,” but beware of the stress in family loans can put on relationships. Find out how much are they willing to spend and ask if they need something in writing?

Overall Budget Considerations:

Experts say you shouldn’t spend more than 20% of what you take home on your car. You might have to play this one by ear though, for a low paid job 20% might not be a lot.

Keep in mind cars are a handy tool, but a terrible investment. So don’t make sacrifices to have a nice car. A lot of this advice has been boring common sense, more than sage advice, but it’s a good idea to think logically about cars.

First Car Buying–Sage Advice Part 2

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Op-Ed by Paul Wimsett and AR Bunch

As a follow up to the last article, what’s the best standard advice or conventional wisdom around what car to buy, as a first car. Well, if you are a teenager with an unrealistic sense of financial responsibility (which is actually a trend these days), then we do have some advice for you.

If you chose a car that has sold well for a long time you’ll probably find a make & model that hasn’t built a bad reputation and you’ll be able to find parts for it for many years.

You should also think about buying a car that’s already been broken in, and lost the rapid depreciation you get when a new car is now slightly used. So right now you’re looking for model years 2013 to 2016. If you have a good steady job, try to buy them 3 years old and sell them at 6 years old. The best selling car by year were:

Best Seller 2012 & 2013

#1
Ford F-Series
763,402 645,316 18.3%
#2
Chevrolet Silverado
480,414 418,312 14.8%
#3
Toyota Camry
408,484 404,886 0.9%
#4
Honda Accord
366,678 331,872 10.5%
#5
Dodge Ram
355,673 293,363 21.2%
#6
Honda Civic
336,180 317,909 5.7%
#7
Nissan Altima
320,723 302,934 5.9%
#8
Honda CR-V
303,904 281,652 7.9%
#9
Toyota Corolla/Matrix
302,180 290,947 3.9%

Chart by Good Car Bad Car

Best Seller 2014  & 2015

#1
Toyota Camry
429,355 428,606 0.2%
#2
Toyota Corolla
363,332 339,498 7.0%
#3
Honda Accord
355,557 388,374 -8.4%
#4
Honda Civic
335,384 325,981 2.9%
#5
Nissan Altima
333,398 335,644 -0.7%
#6
Ford Fusion
300,170 306,860 -2.2%
#7
Hyundai Elantra
241,706 222,023 8.9%
#8
Chevrolet Cruze
226,602 273,060 -17.0%
#9
Hyundai Sonata
213,303 216,936 -1.7%

Chart by Good Car Bad Car

Best Seller 2016

  1. Ford F-Series: 820,799. +5.2%. Ford.
  2. Chevrolet Silverado: 574,876. -4.3% …
  3. RAM Trucks: 489,418. +8.7%. …
  4. Toyota Camry: 388,616. -9.5%. …
  5. Honda Civic: 366,927. +9.4%. …
  6. Toyota Corolla: 360,483. -0.8%. …
  7. Honda CR-V: 357,335. +3.4%. …
  8. Toyota RAV4: 352,139. +11.6%

So putting it all together the first thing you’ll want to do is decide if you want a truck or a passenger car, but that’s a topic for a different sage advice post. For now lets ignore the trucks. The list really looks more like this…

#1 Toyota Camry

Tie for #2 Toyota Carolla & RAV4, Honda Accord, Honda Civic, Honda CR-V, & Nissan Altima.

There is one other factor, which is expert opinions on what was a good buy at the time. Without taking time to justify this opinion, since it is an “Op-ED” lets include the chronically under-rated, Ford Fusion, Hyundai Sonata & Elantra.

Now that you have a list or potentials, you need to start test-driving. This is where it gets dicey. The best way to test the cars you might want is to go to a car lot determined not to buy. (Literally, come up with some terrible thing you will do to punish yourself if you break down and buy something and tell a friend about it.)

But go where all the cars are and sit in them to figure out what fits you. That way you have narrowed it down to just a couple models and a small age range when you start looking for the right deal to make.

Once you have picked the right model and year you’re ready to establish the right price. This is easier than ever, fortunately, and it doesn’t require knowing a car curmudgeon like us. Any car is a good deal, depending on your needs and abilities. Can you fix minor problems yourself? Is your job one that will let you come in a little late if you get broken down unexpectedly. Really, you want a safe car, but maybe you can skimp on the super safe features a little because you’re a teenager who hasn’t learned that life is a thin flame in a hurricane of wind and rain.

money-1425581_1920Then its just a question of paying the right price for the exact vehicle. What makes it a bad deal is paying what comparable cars are worth when the car before you is not a good representation of that model. There is only one way to know the car you’re buying is priced right, and that’s getting it inspected. You need an expert who works for you, not the car lot, to examine the vehicle.

Its unbelievable how compelling car dealerships make it sound that they have inspected the vehicle and wouldn’t sell it if it weren’t good. Of course they inspected it. Of course they got rid of the junk. They bough it blind at auction! The first thing they did is check to see if they got a steal or got burned. Of course they turned around and re-auctioned the worst of the ones they bought. None of that means the car they kept is priced accurately for the condition its in! It helps a little if they give you a year warranty, but lets be real, they tend to warranty the parts that aren’t likely to go out or that their mechanic can visually inspect. It’s your job to know what you are buying. Don’t skip parts of the process because the dealer makes you feel foolish for asking.

Back to the question at hand, how do you know the right price? A good inspection service will come to the dealership or home of any car publicly listed for sale and inspect the car. It’ll include a test drive. It’ll also include a the use of carfax and other internet investigation which examines the history of the car, with KBB.com to show where that particular car lands compared to other cars of its make and model, that have sold locally, in the recent passed. Its the combination of all the information that can give you the actual value of the car before you–which is powerful information to have when negotiated the price you want to pay.

Look for Next Monday’s Sage advice to learn about cars and savings.

Things to Look for When You Buy a Used Car

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By S. Larson

Buying a new car is both exciting and nerve-wracking. A new car has a lot of draw. However, a pre-owned vehicle is a great investment. Cost is not the only factor you should look at when buying a car. Below are 10 recommended things you should consider when shopping for your next vehicle.

Mechanical Checklist:S Larson_Things1

Mechanical issues can take a pre-owned vehicle from a valuable purchase to a horrible investment. Be sure to inspect your vehicle for the following to ensure you are purchasing a mechanically sound car.

  • Carefully inspect the interior and exterior of the car. Look for any rips, stains or smells that may indicate problems inside the car. Check the exterior for existing damages. Rust can indicate problems down the road. Vehicles that have been in minor accidents are not without value. It is important, however, that any repairs have been professionally done. Custom paint jobs can mask damages. Be wary of them.
  • Take the car for a test drive. It is best to take the car out on local roads as well as highways. A test drive is the clearest indicator of how the car drives and handles. Pay attention to any noises, odd sensations, lights or smells that occur while test-driving the vehicle.
  • Be sure to check for any leaking fluid. Black fluid can indicate an oil leak. Green fluids typically are anti-freeze leaks. Transmission fluids should be pink in color. To check for these, park in a clean area and allow the car to run for 30-seconds. Move the car and do an inspection of the area.
  • Having a mechanic inspect a vehicle may be a costly test, but it can go a long way in preventing you from buying a lemon. This is especially true when you are not buying from a reputable used-car dealer.

 

Research Checklist:

Researching a potential vehicle can help save you a lot of money and keep you informed. Be sure to follow the below to ensure you get the best value from a potential car purchase.

    • Read up on the make and model you are interested in. Consumer reports can help you understand potential problems or defects known to affect that type of car.
    • Compare prices of similar vehicles. Kelley Blue Book and dealership prices are all easily available online. While every used car is different, these sources can provide a reasonable estimate for comparison.
    • Be sure to investigate the VIN. A VIN decoder chart can help avoid scams. A VIN is like a vehicle’s fingerprint. It is unique; the title and record for a specific VIN will only apply to one car. Often, stolen cars are given VINs from legally owned cars. Do your homework and check to be sure that the VIN on your potential new car belongs to it.S Larson_Things3.jpg

 

  • After decoding the VIN, check the vehicle’s history report. This will allow you to review any title problems and previous accidents reported on that car. If buying from a dealership, the history report should be readily available. CARFAX also offers a report that can be purchased online.
  • A certified pre-owned vehicle may be for you. They often come with more quality assurance and offer extended warranties.
  • Do not rush into buying a car. Take your time and do your research. If something does not feel right or seems off, pay attention. Some salespersons will try to push you into a sale. This is your investment! Make sure it is one you are happy with in the end.

Editors notes:

While everything above will help you screen out vehicles that aren’t worth buying, in the end, the only way to know for sure that the vehicle you are buying is safe and priced right is to have it independently inspected. It can be difficult to and expensive to involve a mechanic that specializes in repairs to check out a car pre-purchase.

We strongly recommend finding a local inspection service that specializes in pre-purchase inspections as they will include things like VIN searches, CarFax, etc. and help establish accurate value. Because car buying is such an emotional decision and salesmen play to emotion to make a sale, you need to walk into a negotiation with a paper in hand that says the true value of the car or you’ll overpay.

WHY WE DRIVE WHAT WE DRIVE

By Pam Cowan
with Henry Chavez

Choosing a car is not just about finding one that will reliably get you from point A to point B. It’s also about finding an affordable vehicle that matches both your lifestyle and sense of style. I thought it would be fun to ask random drivers why they drive what they do. This month we’ll talk to Lori.

HC: Your daily driver is a full-sized 1996 Bronco. Would you share why you chose it?

Lori: Well, I sort of did and didn’t. My husband wanted a Bronco.

HC: Oh, so it’s his.

Lori: No. It’s mine. It’s just that he said he wanted one and when I saw Betty, that’s what I named her…when I saw her, sitting in a lot on my way to work, I thought she was just what he was looking for. It was Friday, so after work, I went in and asked to take her home for the weekend, so my husband could try her out. They said sure but they’d need his social security number. I called him and asked for it. I didn’t want to tell him why, since I wanted it to be a surprise, but he wouldn’t tell me over the phone. I was so mad.

HC: But you could understand his concerns?

Lori: [eyeroll] No. Not at that moment, I couldn’t. It was frustrating. I was trying to do him a favor and it was getting late, the place was closing. I’d already arranged to leave my car there for the weekend and had parked it on a back lot. I just felt like I wasn’t going to leave without that car.

HC: What did you do?

Lori: I bought it.

HC: You bought it?

Lori: Yes. I took it for a drive around the block and I loved it. I loved sitting up high and how solid it felt and yet how easy it was to park or turn because it was fairly short but wide-bodied and stable. I’ve always loved trucks but had been driving a car to save on gas. It felt right and I knew my husband would love it as much as I did. I decided to buy it then and there.

HC: So, you took it home that night.

Lori: I did. I even took the string of seashells that were hanging in my car and hung them from the rearview. I was going to tell my husband I’d bought it for me, get him good and jealous and then tell him it was actually his.

HC: I’m still confused. I thought you said it wasn’t his.

Lori: It’s not. You see, he did like it and he even drove it a couple days but one night he said that hanging those seashells in the Bronco was sort of like a dog marking its territory.

HC: Romantic.

Lori: [both laughing] You see what I have to put up with? But he was right, and when he asked if I’d rather keep it for myself I told him I did. I’ve been driving her for the past 12 years.

HC: Sounds like he really understood how much you liked Betty.

Lori: He did, and he still does. Just last week someone came to work on our furnace and told my husband that was a nice Bronco in the driveway. My husband told him it was his wife’s and he’d probably have to bury her in it.

HC: Sounds like a good way to end this interview. Thanks.

Pam_Why We Buy_Bronco

Photo similar to “Bronco Betty” thanks to Wikimedia commons.

The Ford Bronco is a Multi-Purpose Vehicle (MPV, predating the term SUV) manufactured and marketed by Ford from 1966 to 1996. Ford officially announced that the Bronco will be reintroduced in 2020.

Employing Veterans

The Kicker planned a quick update last memorial day, just to give a nod to the courageous men and women who serve us in uniform. We spoke recently with Duane Moore of Tire Kickers. Duane spearheads Tire Kickers plans to hire 20,000 veterans. The Kicker has previously talked about the plan to hire 18,000 veterans in this post.

For the plan to work two things need to happen. First Tire Kickers would need to go nation-wide. Tire Kickers is in the process of expanding it’s operation in Washington, Oregon, Idaho, Iowa, Illinois, California and Virginia. The need for ride share vehicle inspections has spurred a ton of growth for Tire Kickers. Duane anticipates the rate of growth to increase.

The second thing that would allow the plan to execute quickly, is for state and federal government to mandate car inspection when used cars are sold. Right now many dealerships voluntarily inspect the vehicles they intend to sell, which helps them not be personally responsible for the sale of unsafe vehicles. Where it falls short is when failing cars are resold at auction where less reputable dealer does sell the car. The other issue with allowing dealers to perform there own inspections is the inherent conflict of interest for any inspection employed by a dealer. It simply is not the final responsibility of a seller to verify the condition of a vehicle. It’s the buyers right and responsibility.

If all fifty states were to enact laws that required buyers to have a vehicle independently inspected, then lenders would begin to absorb that cost in the vehicle financing, and unsafe cars would be screened out of the market. From a consumer standpoint, car buyers would enjoy the benefit of full disclosure. Problems with a vehicle would come out, pre-purchase and the cost and responsibility of repair could be negotiated during purchase.

The awesome side effect of these laws would be that companies like Tire Kickers could employ returning veterans at a living wage, by the thousands. It’s time for America to do all that can be done to improve things for returning veterans. Or, as President Obama wrote to Duane, “As a country, we have the best-led, best-trained, and best-equipped military in the world. We must devote just as much energy and passion to making sure we have the best-cared for, best-treated, and best-respected veterans in the world. We all benefit from their efforts to build a stronger America and a brighter future for our kids–our commitment to them must match their service and sacrifice.”

President Obama completed his email with, “There’s more to do, and we’re going to have to work even harder. As Commander in Chief, I will keep striving to ensure we serve our veterans and their families as well as they served us.”

At The Kicker, we’ll be holding you to that, Mr. President.

You can learn more about current developments in Veteran Affairs at www.whitehouse.gov/Veterans, www,JoinForces.gov, and www.VA.gov, or by calling 1-800-827-1000.

A Car Buying Odyssey: part 5

From the editor’s desk of the Kicker

What Car buying can be like—the better way.

At the Kicker, we’re still reeling from the car shopping experience of K and her husband. They are an intelligent, likeable couple who did their best to buy a reliable car at a fair price, and reading over our own posts about their experience we can’t help but get emotional. Why was that process so difficult and stressful?

We invited K and her husband back to sit down with our staff for a follow up interview. We were amazed by their reflections on their experience and we know you’ll agree.

Editor: Obviously you’d needed car with more room for a car seat for quite some time, so what motivated you to buy a car write right now?

Hus: We took a simple trip to the beach for the weekend. We decided to drive K’s car for the fuel economy but when we loaded it with enough bags for the three of us and then installed the baby seat, there wasn’t enough room for the two of us to sit. I had to drive and I hated every mile all the way out and back. We take trips to Northern California a couple times a year and always end up barrowing a car and…it’s all just a big pain. We realized we needed to pull the trigger on a larger vehicle.

Editor: So would it be fair to say that you were emotional right out of the gate?

K: Yes, very much. That’s the first and only car I ever bought new, and we recently changed to a larger car seat. That was a factor also. But mainly that trip made it clear we needed a change.

Editor: So you’re first move was to go to your bank?

K: Pretty much. That’s where I went first and he went to a dealership to sit in cars.

Husband: I can screen out most cars just by sitting in them. I’m only tall from the waste up and I know most cars won’t fit me. Plus I hate the way car seats creep in tighter and tighter. If I have to ride in the passenger seat that’s a big deal for me.

Editor: So that’s why you didn’t start online?

K: Right, I wasn’t interested in searching online at all, even though; ironically I hate the idea of dealing with car salesmen.

Editor: Do you feel that your anxiety about interacting with dealership personal has gone up, down or about the same as a result of this experience?

K: It’s about the same. I mean I really like the woman we bought from, and none of the other salesmen really did anything I can point to, but I’d say that it was a rough, pressure filled experience. I don’t feel any better.

Husband: I’d say mine has gone up and down.

Editor: Okay? Follow up on that.

Husband: Well. I mean I’m burned from just having worked so hard to get the car we did, but I feel like now that it’s all over I kind of know what I should have done. It’s sort of a shame that we aren’t in the market for another car because I would do it way differently.

K: Are you kidding me. I’m glad it’s been more than a decade since I bought a car and I hope it’s another decade before I buy another. Unless I can buy a new 2015 Acura RDX. I’d do that if we suddenly had the money.

(Everyone laughed)

Editor: I can certainly understand that. But that’s an interesting point. Really that’s at the heart of the issue. Right? I mean I’ll wager that most people who go to buy a car are completely new to it and by the time they buy their next car they will have forgotten everything they learned.

K: Or it will have changed, I mean, when I bought my Honda they didn’t have “Internet prices” or craigslist and such.

Editor: Its interesting, K, that you should mention the 2015 RDX because the car finder service found you more than one of those.

K: Shut up! Seriously, I already wish we had paid more attention to those.

Husband: Yeah I really blew that. All of a sudden I was getting emails about cars from craigslist and I thought it was spam or something I’d set during my searches. So I deleted quite a few of them before I realized what it was. Then I thought people only posted private sales on Craigslist.

Editor: Actually most dealers have business accounts that allow them to advertise most of their inventory there.

Husband: Well I know that now. I ended up chatting with someone from the car finder and the reason they send directly from craigslist is to screen out spam and ads that almost everyone else uses. But I actually found out they’d sent me a car that was the same make and model as we ended up buying only it only with half the mileage and almost the same price. I mean, I think we did okay, but I missed a potential deal.

K: Well I hadn’t heard about that particular fact. (Looking at her husband)

Husband: Really? I feel like I must have mentioned it.

Editor: So you mentioned having learned from this experience, is that your biggest take away? “Use a car finder…”

Husband: Actually no. I mean that’s one of the big lessons, sure, but my main one would be do all your research before you go to the car lot. Figure it all out in advance. I hardly looked up anything. I mean I wish I’d googled, “how to negotiate,” I mean, SOMETHING. Anything.

K: Mine would be, “stick to the plan.” We agreed that we wouldn’t buy a used car without an independent inspection and we did. We got it in for an inspection the next day, and I think if it failed we’d have found a way out of the contract.

Editor: It’s pretty rare to get out of an as is contract, you might have had a rough time of that.

Husband: Oh, I’d have called the lender and showed them the car inspection. I bet if they refuse to pay for the car the dealership would take their car back.

Editor: Sometimes a hail marry works…

K: I can be pretty convincing when I need to be. But the reason I should have stuck to the plan is because I barely slept that whole night. I could wait to find out if we’d bought a lemon or over paid or something.

Editor: Not to mention that you can use the report to justify a lower price. If you feel the condition doesn’t warrant the full price you’d have documentation to back it up.

K: On that topic, you’re a car person, uh, the reason we bought that car without a prior inspection is because they told us the price wasn’t good unless we did the deal that night. They made it seem like it was their financing or something. Was that just a ploy to make us buy right then, or is possibly true?

Editor: Hmm. Well it’s possible. However, I’d be more inclined to believe they were motivated like that if it was the end of the month, especially the last quarter of the year. That’s when there’s a big push to move inventory and earn out their dealer cash.

Husband: So you figure it was a tactic?

Editor: We talk to a lot of dealerships and I’ll tell you what we’ve found. Many are more honest than you’d think they are, but the system leans in their favor and they know it. They could be a part of the solution, but a lot of people make a lot of money running like it is. Just think of the experience level difference in this case. The average American buys a car every five years, they move multiple cars a day. Nine out of ten people who leave a car lot aren’t coming back. There is 90% chance if they don’t sell you something right then you’ll buy from someone else. They know that and they train specifically to overcome your objections. There’s going to be a lot of pressure to get you in a car—period.

Husband: So that’s why they all advertise that they have acres and acres of cars. So it seems likely that your dream car is there someplace.

K: But in the end they will fit you in a car whether it’s right for you or not.

Editor: Well some will, some won’t. That parts not some great conspiracy. Psychologically if they get close to right car for you, you’ll defend your decision to buy to avoid feelings of failure.

Husband: Ouch!

Editor: I’m not trying to say that’s what happened here. It’s very possible that the process of searching for a car refined and changed what you were looking for. However, you did start out looking for a cross-over and buy a sedan.

K: In shopping though we didn’t find a cross-over with fuel economy that was easy to get in and out of. Well, we found one. I’m not 100% sure why we didn’t just wait until one of those came along used for the right price.

Editor: Or you could have tried a dealership in Portland.

Husband: Well that was a function of our limited time to look. I don’t want to waste time fighting rush hour traffic just to find out the car they had online sold that morning or something.

Editor: So then why not send an inspector? I noticed you always brought the cars to your inspector, but the service you use will travel to any car in 75 miles.

K: I think we went about the search wrong from the beginning.

Husband: It’s starting to look like it.

Editor: Well that’s why we at the Kicker were sort of disappointed in your experience. We had in mind that we could chronical a car shopping experience that went so well, it would encourage others to shop with confidence. We hear a lot of horror stories which we’ve discounted as probably the exception. We followed your experience, which wasn’t horrible, I mean you folks found and bought a great car for a fair price in less than ten days. It’s certainly not aweful.

K: No.

Husband: I just feel like it could have been easier. Walk into any other retail place and say, “My bank says I can spend $20,000 with you today,” and they’re going to treat you like a king. That’s not how I’d describe any of the car lots we visited.

Editor: (chuckling) Right. I hear you. The experience should be entirely different. So what is the take away here?

Husband: Let’s brainstorm how someone should go about buying a car.

K: It doesn’t exist. You’d have to change the entire industry. You’d need a dealer with an enormous selection that you could look though online…

Editor: There is one of those. Advertises a lot. I won’t mention the name but it rhymes with Starmax…

K: They don’t allow prepurchase inspections.

Editor: Really?

Husband: No that’s one thing I’ll say about the local dealerships. Some hadn’t heard of it, but none of them said, no.

Editor: Yeah, in our experience when someone is willing to shell out the money for inspection they are pretty serious about buying. Inspectors we’ve spoken with have told us that an inspection nearly always leads to a sale.

Husband: That’s surprising.

Editor: It really just reduces the grey area about the value of the car. Dealers are ready to haggle a little over price, so if a buyer says, “give it a break job and new tires and I’ll buy it,” that’s pretty easy concession.

K: Back to the idea of what could someone do differently, I’d like to say that we did do somethings right. I think we were right to start at the bank. Otherwise I’d have had to take their word on what loan I’d qualify for. I mean in our negotiation the car price moved less than the interest rate.

Husband: Yeah I think I was so focused on choosing the right type of car that I went to the dealership too early in the process. Knowing now, how hard it is to get away from a lot, I wish there was a way to go there at the end of the process.

K: But we learned a lot by doing it.

Editor: One of the things I’d like to see is more competition between dealerships and private party sales. I’m really disappointed that your bank limited you to a dealership car. With third party inspection, a lender should feel comfortable making a loan on any car.

K: Well and they told me the reason was that they need that inspection packet from the dealership that shows that the car is worth buying.

Husband: That’s ridiculous. The reason we insisted on our own inspectors was because they (the dealership) do that inspection for themselves. They have to screen out the cars they take in to see if they can make money on the vehicle, but then they turn around and act like they’ve done me this favor. Look at all the cars we didn’t try to sell you. Big whoop. I don’t care about those cars I care about this one. The tires passed your inspection. Okay, can you tell me the criteria by which you determined that? No, you can’t.

Editor: That’s true. Well, we’ve taken up enough of your time. I think we can safely say that there’s a lot that goes into having the optimum car shopping experience. I don’t know that anyone does it “right,” so I certainly don’t want you two to feel like you messed up. Just, in talking it over with our writers we thought, there’s got to be a better way.

K: I still say that the ideal way doesn’t exist. I mean, really. Let’s talk about it. I want to be able to go to one place one the internet and do it all. I’d put in my financials and while the lenders are competing for who’s going to give me the best terms I enter my current car in and they start determining if I should trade it in or sell it private party. Then I schedule an inspection and if my “trade in” passes then the site helps me sell it, while I figure out what I want to replace it with. I should be able to scan the inventory of every dealer and private sale in a 50 mile radius or something. Then I could have it inspected. I mean I shouldn’t have to set foot on the lot until I’m going to buy the car.

Husband: I still think I’s need to go sit in cars in order to narrow down what I want.

K: Well you are better at telling them, “I’m not going to buy, I’m leaving.”

Husband: Well I thought so, but they got me. All they had to do was say, we’ll give you what you want if you buy tonight and they next thing you know we’re buying a car without even an inspection. I’m just glad it turned out okay. It could have gone very wrong.

Editor: So you’d actually recommend starting with getting your current car inspected to establish the value?

K: Yes.

Husband: Absolutely. Then the bank, and to be fair we did a lot of shopping for the car but we didn’t personally look around for the best interest rate. We just went through our usual bank.

Editor So step two is the bank. Then what?

K: Then you need to narrow it down to what car is really going to work for you, and then shop around online for the right deal. We were more willing to compromise on what car we wanted than on our total price.

Husband: Actually, step 0.5, before any of that is to go shopping when you aren’t desperate for a car and the dealers are motivated to sell. Like you said, the end of the month when you’re not desperate.

K: Definitely send the inspector around to whatever car is a serious contender. And another thing we did well was negotiate a bulk rate with our inspection service. We ultimately got a discount on all the inspections after the first one. That really helped.

Editor: Well, I think that’s some pretty good advice. I just hope people take it seriously.

A Car Buying Odyssey: part 4

Recap:

K and her husband needed to buy a new car that fit their young family. After 6 long days, 5 dealerships, 7 car lots and two close calls they finally bought a car from a dealership. The negotiations look long into the night and couple felt they one every major point they wanted. The car had higher mileage than desired and no navigation or backup camera, but met all the other criteria they were looking for. They got the interest rate they wanted, the price they wanted, the trade in for their vehicle they wanted, and the monthly payment they needed. However, they felt that they’d compromised by agreeing to buy under the pressure of time constraint and because they didn’t have time to get it inspected.

Because they were taking a big gamble they couple is now awaiting the result of their inspection.

Part 1 link

Part 2 link

Part 3 link

Part 4 link

The fallout:

The next morning, K’s husband flexed his schedule to allow him to take the car for inspection. He enjoyed the drive over, but sat nervously in the inspector’s office while they went through the car from top to bottom.

The inspector noted evidence that the car had been a fender bender of some kind. The repairs made it difficult to spot which made it not a real concern. There was condensation in the mirror lights indicating the seals had dried out. There wasn’t any way to know how if that was an easy fix or not, but that wasn’t a really big deal to the couple. The engine, interior, and performance testing came back with very good scores.

The vehicle history made no mention of an accident, but the inspector indicated that accidents go unreported often. The only prior owner of the car had been a rental company which is why the car had such high mileage. The inspector echoed what K and her husband had been told by several people in the auto industry, that rental agencies maintain their fleets well and that shouldn’t really detract from the overall value of the car.

The inspector did find a one inch cut in the sidewall of a tire, which may or may not be a safety concern. Because the depth of the gouge was uncertain that impacted the value estimate by the cost of one tire. However, the car checked out great and received a “Very Good” rating.

Final analysis:

When K received the news via text from her husband she was visibly relieved. They value range on the car was somewhere between $17,600 and $18,300. Since the couple had negotiated the price to $17,999 and gotten the trade-in value and financing they wanted, they felt like they’d received a fair deal.

Taken as a whole they rated their experience as an A for results, and an F for experience. In short, they were exhausted and stressed. Getting a Sedan was a second choice since it didn’t have the amount of cargo space and baby seat room they hoped for, but it did have great fuel economy. All and all the couple felt they’d learned a lot about what to do next time, but they still wanted a better way to car shop.

From the staff here at the Kicker, we agree. We took on following this couple’s car shopping experience with the stated goal of taking the mystery and worry out of car shopping. Instead we found validation for the typical car shopper’s anxiety. Especially if you compare car shopping to house shopping.

If you’re thinking about buying a car soon, here’s some tips (inspired by ABCnews.go.com) to help you succeed.

  1. Never, ever, buy a used car without an inspection. Most private party sellers don’t really know if there’s something going mechanically wrong with their car and car dealerships inspect cars upon intake to determine if they want to sell the car at their lot or wholesale it at an auction. The vehicle history is often out of date. You need the current condition verified by someone who works for you.
  2. Calculate what you can afford to spend on a car including payment, insurance, gas and maintenance. It should be less than 20% of your total monthly spending.
  3. The age old debate between buying new and used is harder to call than in the past. After cash for clunkers, used cars have been running high and auto makers have reduced cost to compete for the increased need. Used cars still give more bang for your buck, but new cars have better warranty and can have lower interest.
  4. Don’t start at the dealership, research the cars you might want online. Pay attention to reviews, as well as features, and use MSRP as the price until you’ve settled on the car you want.
  5. Take the monthly amount you can spend and subtract 5%, then multiply by 60 or 72 to figure out what you can afford. When you’ve narrowed down the list use a site like Edmonds.com to establish the maintenance cost of that type of vehicle, and factor that in. You can also get more accurate numbers by figuring miles you already drive a week and calling your insurance agent for a quote.
  6. com offers calculators to help you figure interest. Shop around for the best interest rate so that you have something to compare a dealership off against. A dealership will consider your trade-in value or down payment, the interest rate on their financing and the final price of the car fluidly, so you can reduce the number of variables you’re dealing with at the time of purchase by arranging for your own financing in advance. Credit unions most often beat banks when financing cars.
  7. Use an interest rate vs rebate calculator to help you decide which option is best in your situation. A Trick to be on guard for is a dealership that offers a great interest rate (if approved) only to come back with a higher interest rate claiming you didn’t qualify for the lower rate.
  8. The prices to have in hand when shopping are Invoice price and MSRP on new cars, and wholesale price and dealer’s asking price on used vehicles. Begin negotiation by establishing the price for the vehicle you want before any discounts or rebates are applied. The dealer needs to make money, but both parties should be able to agree on the fair price for that car in that condition.
  9. Ask the dealer if you are eligible for military, student, or credit union membership discounts. KBB.com or Edmonds may have information about Dealer incentives manufacturers are offering dealers on the new car you’ve selected you can ask the dealer to split that incentive with you. Another place dealerships make money is selling you a service contract. The minimum markup on a service contract is $1,000 dollars and some dealerships don’t know that they can force that number lower. Refuse to pay the full price for a service contract. You don’t need to pay interest on $1,500 of pure profit for the dealer.
  10. Be very wary of “Internet” prices when researching. These are loss leader prices that dealerships use to get you onto the lot. The price in the window will be a couple thousand dollars more. If you found the car advertised for less—that’s the price of the car.
  11. Car dealerships will start talking about your trade in right away, especially if you drive it into the lot. After establishing the price of the new car, and all rebates, you can talk about your trade in. Do your research in advance and know what your car is worth. Don’t settle for a wholesale price on your trade in, KBB and Edmonds will help you establish your trade-ins value. You should also consider having your current car inspected to verify the current condition. It may be better to private sale your car and use cash for a down payment.
  12. Say no to any extras your dealership offers. You can research them online, apart from the pressure of car buying, and then go back later. Most dealerships are happy to let you buy things afterward.
  13. Plan on keeping your car for at least 5 years. K and her husband lugged their baby seat with them to all six days of shopping because it needed to fit into the back seat of any car they considered. They also installed it several times, as some cars are difficult to install.

However, the Kicker would like to challenge the automotive industry, which hasn’t really revolutionized car shopping since Henry Ford used the assembly line to make car affordable. We challenge you to come up with a better experience for your customers. We’re not talking about friendlier sales people, or letting customers take cars home for a day. We’re talking about something radical, like paperwork that can be finished in 15 minutes or complete customization even on used cars. Who knows what you could come up with if you really thought about customer experience instead of pushing sales. That’s our challenge to the automotive industry. We can do better.

A Car Buying Odyssey: part 4

Recap of the search so far:

K and her husband need to replace her small car with one that fits a car seat. For more information on their criteria please visit previous articles in this series (link). Having visited 4 car lots on 4 separate occasions (some of them multiple times) the couple decided to widen their search to mid-sized sedans and do more online searches. However, they learn that their pre-qualified bank loan won’t allow private sales.

Day 6:

Thus, Monday began Day 5 of shopping. K spent her first break checking the net for cars, and text her husband links. Her husband took the day off work, and dutifully chased down leads. He even checked on cars by auto makers that he had owned before and decided never to own again.

That day, he added two more dealerships they hadn’t been to before and test drove three more cars. What he didn’t do was check private party sellers found for him by the car finding service. Many of those deals were, at face value, better than what the dealerships were offering.

The evening of day 6, the couple sat down over dinner to talk over their options. K’s husband had found one car that interested him, but the dealership only had new models which weren’t in the budget. The couple decided to revisit the dealership they felt most comfortable with and locate a used sedan that met the highest number of their criteria. They simply couldn’t afford the time to keep looking.

Since they didn’t have childcare at the moment, they looked online for the car they wanted to check out and then went to test drive it one at a time after the baby went to bed. The found a car that had nearly everything they wanted accept navigation on the dealerships website and texted their favorite sales lady to verify that it was still in inventory. When their daughter went to bed, K’s husband drove his car over to test drive the vehicle.

The plan was to test drive to their home, a few blocks away, and then switch so that K could drive back and then return in her husband’s car. If they both liked the car then her husband would arrange to have it inspected the next morning. Of course, battle plans never survive first contact…and neither do car shopping plans.

When things went sideways…again:

The sales lady was ready with “the numbers” when K’s husband arrived. They were willing to offer 3.99% interest through their financing and give $4,500 trade in for K’s car, but the amount was higher than listed on the internet. Furthermore, the dealership could only offer this deal tonight.

By the time K’s husband got to the dealership it was 7:30 pm. The dealership closed at 8 pm and that’s when the couple liked to go to bed. K’s husband pointed out that the price was different and that they were serious about using their own financing. The sales manager agreed to lower the price to match the internet, but when they quoted the payment the numbers didn’t seem right. So he agreed to drive the car home and let K test drive it before they rejected it. The sales lady, the sales manager, and the finance manager agreed to stay open late.

When K’s husband presented the deal to her she felt like they were putting a gun to her head. She pointed out that they’d agreed not to buy a used car without an inspection. She didn’t like being told that she only got the price advertised online if she agreed to use their financing at a higher rate and if they agreed to the deal tonight.

The couple decided that K’s husband would return the car and explain that they resented being pressured by the time constraint and not being allowed to use their own financing. When he returned the car, he added that the car was definitely worth the online price of $18,000 but not the full price the dealership wanted. The sales lady tried to explain that they had agreed to lower the price but K’s husband said that was conditional on using dealership financing and the only way they would agree to buy the car was if they got the internet price and were able to use their own financing.

The sales lady and the finance manager both insisted that the couple’s bank couldn’t give them the fixed rate 3% on 72 month loan (2.25% on a 60 month loan) that the couple had prequalified for. The dealership’s position was that banks only offered such rates for the first two years and then raised the rate to 8% or 9%. Tired and upset, K’s husband stormed out.

Round three:

While K’s husband drove home, the sales lady texted K to apologize for upsetting them. She stated that she and her coworkers had felt that they had finally succeeded in meeting all the criteria the couple established. They’d beat the 3% financing number, agreed to the trade-in value, and lowered the price to match the advertised price.

When K’d husband returned home the couple talked it over. K’s husband felt like the monthly payment quoted to him didn’t match all those concessions. When K pushed back about the monthly payment the sales lady said they’d decided to lower the price which would lower the payment but hadn’t had a chance to tell her husband that before he stormed out.

The couple talked and prayed about it. They were exhausted and didn’t want to make any snap decisions, but they were now sensing that the dealership wanted to sell them this car even more than they wanted to buy it. They decided to negotiate hard over text before making any final decision, but that they would be willing to buy that night if their demands were met.

By 9:15 pm, the dealership agreed to 1.99% financing, internet price, and gave the couple the amount they asked for their trade-in. K got dressed again and went out to sign paperwork. The couple had mixed emotions despite having achieved their demands. They weren’t comfortable with having made a rushed, pressured decision, especially since they hadn’t been able to get the car inspected. They’d pushed, and at one point had the sales manager agree to fix anything their inspector found wrong with the car—in writing—but when K showed up to sign paperwork they back peddled and restricted their liability to motor and transmission.

By 11 pm a weary K returned, exhausted and unsure, but with a new vehicle. The couple went to bed knowing that the following day they’d take the car for inspection and find out if they’d just made an $18,000 mistake. Stay tuned for part 5 and the exciting conclusion to “the car buying odyssey.”

A Car Buying Odyssey: part 3

Recap so far:

K and her husband needed a car that accommodated their child safety seat and stroller better. They don’t want to take on two car payments so they need to replace just K’s vehicle, a small “paid off” Honda, with something roomier that both of them are comfortable driving. K wants leather interior and navigation, her husband wants a sun roof and good fuel economy.

Thus far the couple has spent 3 days shopping hit 3 dealerships, 4 car lots, and eliminated all but one SUV, which turned out to have extensive corrosion throughout the car.

Shopping Day 4:

Returning to the sales lady they liked the most, K and her husband expanded their search to include larger sedans and wagons. After test driving several cars, they found a Subaru with low mileage that drove nicely but at a price over what they wanted to spend. K’s husband suggested that if they were going to go a few thousand over budget they should reconsider getting a new car.

The dealership had a wider selection of new cars, and the idea of getting a bumper to bumper warranty attracted the couple. The dealership also believed they could beat Ks’ bank’s interest rate (3%). So the couple quickly settled on a new car they loved that fit their needs. And that’s when things went sideways again.

The couple settled in for the long negotiation, with possible changing negotiators and high pressure. That didn’t happen. They were actually able to work with the same sales person all the way through. She did have to run the deal past a superior, which is where things went wrong.

K had already noticed that when she located a car online they listed an “internet price.” The MSRP appeared on the car window, several thousand dollars more, but there was a sale price that more closely matched the internet price. The explanation for the reduced price was manufacturer incentives that changed periodically. This seemed reasonable to the couple, but they were shocked when the paperwork came back…
* based on the MSRP
* reflecting only some of the incentives
* gave a small amount for her trade in
* showed a $5,000 additional cash down payment
* and had a much higher interest rate quoted (5.99%)

The couple had stated that they knew what their trade in was worth and if the dealership couldn’t offer that, they’d sell the car themselves and provide a $5,000 down payment. The dealership’s explanation was that you either got the lower price or the low interest rate. The dealership improved their initial value of the trade in, but the couple was out of time and rather than make a rushed decision or prolonged negotiation they walked away from the deal.

Exhausted and frustrated, the busy couple went home to talk over their options. They found several new and used vehicles of the same make and model they’d loved, with a better price and at that same dealership. They simply ran out of time and energy before they really explored their options once they widened their search to include larger sedans.

Day 5:

K’s anxiety over the purchase process had returned though. Her husband didn’t share her concern and felt they should state their conditions and if they dealership could meet them then they’d buy—if not they’d walk away again.

The couple revisited the first dealership and located a cross over version of the car the “under water” car. It was larger, nicer and both of them fit behind the wheel. However, K’s husband saw the fuel economy (15 city, 20 highway) and ruled it out. One of the big limiting factors of their new car was that it needed to be a daily driver for K.

K’s husband began searching online and also enlisted the services of a “free car finder.” The online search yielded some great possibilities but it turned out that K’s bank would only loan on a car through a dealership. In the Kicker’s opinion the bank simply needed to require a third party inspection to verify the current value of the vehicle, but…

The Next Step:

Being open to sedans provided a whole new set of options and being restricted to dealerships required the couple to come up with some improved way to search for cars. They decided K would search for cars online but at dealerships on her breaks from work and her husband would take long lunches to visit cars she found and screen them out.

Recap of cars tested and rejected by the couple:

(The couple ruled out all truck and small cars because they didn’t feel they fit their needs.)

(K’s husband ruled out all GMC because he used to own stock in the company.)

(K’s husband ruled out all minivans because he refuses to drive one.)

(K ruled out any red car, because she hates the color.)

 Ford

Escape – K’s Husband didn’t fit

Edge – K didn’t fit

Transit Connect – Too expensive

Flex – too expensive

Explorer – too expensive

 Hyundai

Tucson – K’s Husband didn’t fit

Santa Fe – K’s Husband didn’t fit

 Mitsubishi

Outlander – K didn’t fit

Outlander sport – K’s Husband didn’t fit

 Nissan

Xterra – terrible fuel economy

Armada – terrible fuel economy

Murano – all around okay, but a little too expensive, not great fuel economy, not really comfortable to drive

Maxima – too expensive but would have to find the right used one

Altima – too expensive but would have to find the right used one

Subaru

Forester – too expensive but would love to find the right used one

 Acura

MDX – Terrible fuel economy

RDX – expensive but would love to find the right used one

 Toyota

Rav4 – all around okay, but a little too expensive, not great fuel economy, not really comfortable to drive

Venza – Sat in but didn’t test drive, may have worked but would have to find the right used one

* all results are the opinions of two ordinary car buyers and reflect only their experience