Recently, it became obvious that it was time to replace our 2001 Chevy minivan. We had already replaced or repaired the windshield wipers four or five times and they were broken… again. It was also time for the brakes to get some major work, the rust was so bad we were worried about structural things instead of just cosmetics, and to top it all off, the odometer was nearing 250,000 miles. As much as we both hate it, Patti and I agreed that it was time to go car shopping. Our experience made me remember a few simple rules that saved us a lot of money.
1) Decide what you need - Before you start looking at cars, decide what you need first, and then decide what other options you might want, but can live without if necessary. We decided that, we needed seating for at least seven (eight is better) and since we drive our van about 20,000 miles each year, we wanted the best fuel economy possible. Our Chevy Venture got 27 miles per gallon on the highway when it was newer and still was getting a little over 20. We hoped to get a new car with 27 mpg but could live with a little less if necessary.
2) Decide how much you can afford - The time to figure this out is at home and not on the dealer’s lot while you are having an emotional reaction to plush, leather, heated seats or an awesome big block V-8. Pick a number you (and your spouse) can live with and stick to it. Dealers will always try to push you higher than you want to go. Stick to your guns and be prepared to walk away.
3) Do your homework – Before we left the house we went online. If you don’t have an Internet connection at home, go to the library but research what’s out there. You should know what you want, how much that car should cost, and which dealerships have the cars that you are looking for at a price that you can afford (or can haggle down to). In our search we found that only two or three manufacturers make a van that met our requirements and only a few dealers who had them.
4) New cars are for suckers and rich people – Okay, not everyone is going to agree, but for those of us who are trying to make every penny count, new cars just don’t make good sense. A new car loses about $5000 in value the day you drive it off of the lot. Is it worth five grand just so you can say it’s new? Buy a car that’s a year or two old and the price can drop as much as 50 percent. Because our Venture had almost 250,000 miles, buying a car with 50,000 on the odometer was no big deal and well worth the savings.
5) Pay cash – What? Many of you will think that this is impossible, but it isn’t. Dave Ramsey explains this in more detail (I strongly recommend his class – Financial Peace University) but simply put, if you take out a 5 year car loan, you will pay for your car TWICE. Once for the car, and once for the interest on the loan. This is not a good deal. If your loan is almost paid off, don’t buy another car. Instead, keep on making payments… to yourself. Write the same check every month and put it into a savings account. You should be able to make your car last a few years longer. Then, when your car is on its last legs, use the money in savings to pay for the car. You might not reach this goal on your first try, but if you can get halfway there, you’ve saved a bunch of money and can make it all the way the next time. If you haven’t done this, you can’t imagine how good it feels to own a car and owe… nothing.
6) Don’t get emotionally attached – Decide what you want and then go look for it. Don’t hang all your hopes on one deal. If this deal doesn’t work out, another one will. Someone has the car you want and can afford. Keep looking until you find it.
7) Be willing to walk away – I said this before but I cannot overstate this. Car salesmen want you to fall in love with the car you are buying. They will do anything in their power to make you think that this is THE ONE. In the end, we finally found a 2010 Honda Odyssey that was close to our price. The dealer tried to get us to a higher price several times. They encouraged us to drive the car home for a while hoping that we would fall in love with it. Once you fall in love, they gotcha. Once you’re in love you will pay $500 or $1000 more than you planned. We knew how much we could afford to spend and were willing to walk away no matter how much we liked the car. We walked away… twice… and they finally came down to our price.
These are a few of the things that helped us, I hope they help you too.