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How Not To Buy a Car - Thou Shalt Not

My goal is to have you come out on top, without getting beaten up or losing money. Here is what I learned that salespeople love to see and -- therefore -- what you should absolutely avoid when shopping for a car:

Thou Shalt Not:

Let's take each one and explain why you want to avoid doing it.

Don't show up on the lot with no idea of what you want.
OK, You're sick of your car and you've decided it's time for a new one. You have no idea what you want, but you want NEW. Shiny. With that "new car smell." So you start driving through the local auto mall, to see what strikes your fancy. STOP RIGHT THERE! Sure, it's okay to look, but do it from the street - once you are on the lot, strolling the rows of shiny new cars; you are on the devil's turf. No one can save you now.

Do your shopping beforehand. If you live in a major city, there's probably at least one annual car show where you can kick tires all day without buzzards hovering overhead. You can learn all there is to know about various cars by surfing the Web. Don't forget to ask your favorite mechanic what kind of car he recommends for someone in your situation.

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Don't show up with no idea what you can afford, or what your credit score is.
Most dealerships allow their salespeople to sell both new and used cars. There is less profit on new cars, and a salesperson who spots you and decides you cannot afford a new car, will spin you into a used one. Profit on used cars can be two to three times what it is on a new car. Most used cars are bought at auction for a steal, but the salesperson tells you "This is a creampuff traded in by an elderly couple on a new car -- it's been babied." Truth is, they have no idea how this car has been driven or maintained! If you want a used car, do not buy one from a dealer -- go to a private party and do your homework (including a title check and a thorough mechanic's check) before you buy.

As for your credit score, it determines the entire transaction. Get it online at myFICO.com or order your credit report from ALL 3 reporting agencies. Although this won't tell you your score, you can make sure it doesn't contain any errors. If there is inaccurate information on your credit report, repair it before you apply for a loan.

Go to your bank or credit union and inquire about getting a loan there first. This is by far your best option -- you can ask for either a guaranteed loan or a bank draft for the amount you are willing to spend. You can also negotiate with your bank for lower payments -- they want your business, so let them work for it. If they don't offer you a good deal, go elsewhere -- just not the dealership! And, don't fall for the "0% APR" rates advertised -- you have to have credit better than God to get these APRs.

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Don't use cash for a deposit. If you change your mind, there's a good chance you'll never get it back. And never give more than $250 - if they say, and they will, "I can't go to my manager with this," - walk. They'll either "go to their manager with it," or let you walk - which is highly unlikely.

Stick to your budget. Didn't I already say this? Do not overestimate your willpower - salespeople are better than you at making deals. They may be lovely people at home and with their friends, but they are cutthroat at work, and will stomp on each other for a "qualified" buyer.

Don't show up with a trade-in that you priced from the Kelley Blue Book.
You're happily strolling the lot (didn't I tell you not to do this?) when a salesperson comes along and strikes up a casual conversation. CAUTION: You are now being "qualified." They'll ask you innocent questions, like, "So, do you work in the area? Oh, what do you do? Is your car for work or pleasure?" Honestly, salesmen are trained to do this at every meeting. There is no such thing as an "innocent" question.

At some point will come the in-for-the-kill question: "Do you have a car you'll be trading in?" MAYDAY, MAYDAY!

Ah, but you did your research! You looked up the value of your car in the Kelley Blue Book and that's how much you want for your trade-in. Now you've got them, right? Think again, bucko.

First of all, they've got you where they want you -- telling them that you are interested. Second, the price you got from Kelley Blue Book is not what the dealers go by -- because you probably graded your car in "excellent or even fair" condition, with so many miles, etcetera. Rest assured no dealer will pay you that -- and if they do, you'll pay for it in the price of the car you buy.

The used car manager usually steps in here to go out and "evaluate" your trade in. You'll be told that the interior isn't in good condition, the car has dings or dents that need repairing, the tires are worn out, blah, blah, blah. In other words, they won't be offering you what you think it's worth. Period.

Here's an example from The Kelley Blue Book: Let's say you have a 1998 SUV, with 48,000 miles, loaded with leather, CD, moon roof, all the bells and whistles. You paid $15,000 for it used. Guess what they paid the poor slob who traded it in? Chances are you're not even close. An example follows.

Example: Kelley Blue Book Trade-In Value
Consumer Rated Condition (how you rate your car):Excellent
Kelley Trade-In Value:$8,500
Chance this is what the dealer will give you:0

NEVER think that what Kelley says will apply to you. If Kelley says $8,500, you MIGHT get $4000 - and that is before paying off any loan you still owe on it. They'll tell you they have to prep it, fix it, whatever, when in reality, they're going to ship it to auction -- most likely.

If at all possible, sell your car outright to a private party. Sure, it can be a hassle, but you'll get more for it, and you'll greatly simply the process of buying your next car.

Example: Kelley Blue Book Trade-In Value
Consumer Rated Condition (how you rate your car):Excellent
Kelley Trade-In Value:$8,500
What you can reasonably expect to get from a private party:$10,950

The above example assumes that your car really is in excellent condition and that you are careful about how you sell it, which is outside the scope of this article.

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Don't show up with a page of car prices from the Internet.
You're going to take a pounding if you do this. Let's say you find the car you want and you get wrangled into the salesperson's office to discuss the deal. Smartly, you whip out your internet research, and say, "This is what I'll pay for the car." The salesperson is going to say, "There's no way we can sell the car for that price, and if this is such a great price, why didn't you buy it from them?" Oops.

What people don't recognize, is that while the manufacturer's suggested retail price is lower than the price the dealer is offering, there are numerous factors in running a dealership: advertising, payroll, insurance, etc. I'm not saying you can't find a good deal, but showing Internet printouts will get you tossed out of many dealerships. This is one area that they just may let you walk. You're savvy, and they don't want to deal with you - but you blew your hand by showing it to them.

It's best to do your research, get a budget and loan approved, then go shopping. They are more likely to deal when you already have cash to throw at them. BUT DON'T TELL THEM HOW MUCH you have, unless you want to spend every last penny ... and then some.

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Don't tell the salesperson how much you LOVE a particular car.
Do I really have to say anything here? Telling a salesperson you LOVE this car is like handing them a blank check and asking them to slap you with it. Remember, these people think differently than you or I. This is no casual conversation you're having - they are making mental notes on everything they observe about you - your clothes, where you work, what you do (you told them, remember?) how much you think your trade-in is worth. Now they know you love this car they want to move.

NOTE: On Friday mornings at many dealerships, there are mandatory meetings for salespeople. They are usually pro-sales pep rallies, sprinkled with humiliating stories about how "Bob sure dropped the ball on that sale!" or how "Jane let them walk!" Everyone laughs and demeans that salesperson until next week's meeting when someone else becomes the target. Even worse, your manager rides you relentlessly. It's a salesperson's worst nightmare. If you don't make your numbers you lose your job. These "pep rallies" are chock-full of tips on how to manipulate buyers. I got nauseous at most of these meetings, but made mental notes for future use. You're reading them now, so please use them.

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Don't tell the salesperson you don't care about price, if you can get the payments you want.

Payment buyers are a salesperson's dream. Because many payment buyers have less-than-perfect credit, they can be easily manipulated into a car that is more than they can afford - if only the payment is low enough. Here's the deal: the dealer tells you they can get you into the car for $250 per month, you jump up and down, hug the kids and drive off in it the same day. Oops. Major oops.

A week later, the dealership calls and says they couldn't get you the financing they thought and your payment is now $345 per month. You say, "But I can't afford that!" They reply, "Sorry, you drove it off the lot, you own it."

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Don't agree to "Spot Delivery" (same day purchase).
Don't tell the salesperson you want to buy that day (without having done your homework.)

Contrary to popular belief, there is NOT a 3-day "cooling off" period in most states once you take delivery of the car. In fact, some states require the dealers to post a notice to that effect. This is why I warn buyers against accepting "Spot Delivery." Much as you might want to, don't drive that new car home. Tell them you can't take possession for at least 3 days on your car -- you're going out town, donating a kidney -whatever. If you don't drive it off the lot, and change your mind within 3 days, you might be able to cancel the deal. Do your own due diligence here - as this may not apply to every state.

Read the contract! "Subject to financing" is a loophole many dealers exploit. They'll change your payments by saying you didn't qualify for the interest rate they quoted you. Sure it's unethical, but it happens everyday and most dealers get away with it, most of the time.

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And furthermore ... here are a few final admonitions:

Don't think of your new car as an "investment." Accountants call vehicles "depreciating assets" for a reason: they start losing their value the minute you take possession of them. A vehicle is never an asset, it's always a liability.

Don't think that spending more money gets you a better car (meaning more reliable and more economical to maintain). It's not so. Some of the most expensive cars are also the most expensive to operate. Ask any BMW owner. A mid-priced car -- a Buick, Toyota, Subaru -- is, for most people, the best combination of initial price and operating cost. Boring? Hey, this is not a dinner companion, it's a car.

Next: A Few How TO's

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