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Buy your next used car for less with 5 great tips

For Mountain American Credit Union BrandView

Published: Monday, Oct. 7 2013 5:55 a.m. MDT

Chances are, if you've ever purchased a used car, there's something you would have done differently if you could do it all over again — and you're not shy about sharing your hard-earned advice with friends and family. In fact, there are so many pearls of wisdom on this issue that we culled together the best advice for those of you about to take the plunge.

Keep things on the down low

By far, the biggest mistake is when buyers say too much too early in the buying process. The writers at autotempest.com put it well: "For now, you don’t want to ask (or say) anything that gives away your intentions, including your budget; whether (and what) you plan to trade in; whether you will be leasing, financing or buying outright; and exactly when you plan to buy. You want to honestly show that you do plan to buy a car and aren’t wasting their time, but you won’t be buying immediately."

Negotiating is about maintaining control of the situation. The more you know compared to what the car dealer knows, the more in control you will be. That is not to say you should be inconsiderate or untruthful; on the contrary, this is when you need to be brutally honest — starting with yourself.

Believe it or not, the very best piece of advice we found along these lines comes from Dr. James Dobson’s book on relationships. In his book "Love Must Be Tough," he writes, "He who needs the other person the least is in control of the relationship." Enough said.

Don't get too emotionally attached

Never underestimate the emotional power of a car. This may seem silly, but once you step onto a car lot, you'll understand. Millions of dollars and some of the finest minds in the world have designed cars and the car-buying experience to hit you where you feel it most: in the heart.

New York Times best-selling author Michael Hyatt gives this advice: "Be a 'don’t-wanter.' Never fall in love with something you are trying to acquire — at least not at first. Be a little aloof. Don’t get emotionally attached. Kick the tires."

Software engineer and regular guy Eric Sink also shared some excellent advice along these lines: "Be prepared to walk away form the deal," he said, adding, "Practice this principle the next time you buy a car."

  1. Start shopping for a car before you really need to.
  2. Before starting the negotiation for any specific vehicle, clearly understand your fallback plan. What will you do if you don't get this car? Buy something else? Take the bus? Ride your bike?
  3. Don't let yourself get emotionally attached to the car until it's yours.
  4. Figure out in advance what you want to pay. If you can't get the deal you want, walk out. You can always come back later.
Know your limits before you go

You have to do your homework. Know exactly what you can afford before you step foot onto a car lot, and be meticulous about budgeting for a car. There are many budgeting tools and loan calculators online. Make sure you know exactly how much you can pay, and don't forget to include insurance and maintenance costs.

According to bankrate.com, "Experts typically recommend not spending more than 20 percent of after-tax household income on all vehicles in the household. So an adult with a take-home pay of $50,000 per year should spend no more than $10,000 per year for car payments, insurance, gas and maintenance."

Once you've determined your budget, commit to keep it. One of the biggest regrets is overspending. If you're afraid you don't have the willpower, set your limit lower to give yourself some wiggle room, or enlist a friend or family member to do the buying for you. Give them your budget and criteria and let them find a handful of cars that meet your needs. Then you can narrow the field down to the one you like best.

Get approved for a loan first

If you're one of the lucky few who has saved up enough money to buy your used car with cash, first off, kudos to you. Second, you can skip this section. For the rest of us, knowing what the bank can give you before you start negotiating with a dealer or individual seller is critical.

Many used car dealers make a significant amount of their profit by financing the cars they sell. While some can get you good financing, for most, they are more interested in a high-interest rate than your own credit union or bank, which are more incentivized to keep your repeat business in more areas than just car loans.

Shop around for you loan. Start with your own bank or credit union and then see what others have to offer. You can always go back to your own bank if you don't find something better. Chances are, if there is any wiggle room, they'll work with you.

Additionally, if you do chose to finance through a dealer, you'll have some ammunition to bargain with. A contributor on ficoforums.com shared his experience: "They offered me 3.8 percent, and with my credit score I was very excited about that (but didn't show excitement to them). But I didn't accept and instead replied, 'I'm still waiting on a few credit unions to give me their rates.' As I waited, none of the remaining CUs could beat this rate. But the original one that approved me for 4.89 percent was calling to follow up, I told them my offer from [the dealership], and they said, 'Let me inform my underwriter and see what we can do to beat that rate.' I didn't know CUs would rate match. They called me back and offered me 3.75 percent but said I could reduce this rate by another .40 percent by starting a relationship and autopay — a rate of 3.35 percent total and at only 650 FICO."

Haggle

This is what used car dealers live for, isn't it? They're highly trained and even born to haggle. But if you follow the four tips given above, you will know exactly what you want and, best of all, can afford.

The good news is, you may even be able to get more than you expected as long as you're committed to staying on budget. According to marketwatch.com and cargurus.com "Just over 50 percent of cars listed for more than 30 days have at least one price drop. Everything is up for grabs to leverage a price reduction, including the odometer reading and the smallest cosmetic defect in the interior."

If you keep a level head, do your research, budget and courageously negotiate, the used car buying experience can be a lot of fun, especially when you know you've found the best car for the best price possible.

This article was paid for and produced by Mountain America Credit Union.

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