Category: Buying A Car

When a Dealership Contacts Several Banks for my Financing, Does it Hurt my Credit?

3/25/2020

Often, when a person goes to a dealership for a new car, they let the dealer search for financing options. Most of the time, you have several offers to choose from. It is a known fact that inquires on your credit can cause your credit rating to drop, but does this type of inquiry have any impact?

Timing is Important

The most often used credit scoring systems allow people to shop for the best loan for their vehicle purchase without lowering their credit score. This is done by considering all inquiries for a car loan done within a certain time frame as one inquiry,

Be aware that the time frames may be different. To be safe, you should keep your inquires within a 14 day period. Within this time frame, your inquires should be counted as one or perhaps excluded completely by some scoring systems.

When a dealership sends your application to several lenders, those banks will check your credit score and compete for your business. Every lender that checks your credit will appear as a separate inquiry, but because these will happen in such a short amount of time, it should only count as one. So, you shouldn’t need to worry about dealerships sending your application to many lenders. These inquiries should not hurt your credit score, unless you shop outside of a short time frame.

Before you Shop for a Car

When you think you may be ready for a new car, you need to get a copy of your credit report and make sure there are no errors on it that may prevent you from getting a good deal on a car loan.
Besides checking it for errors, your report will also explain what is in your report that is affecting your score. If you have poor credit, this information will help you improve your score before you try to get a loan and will increase your chances for approval and a better interest rate on your loan.

You may also want to consider getting pre-approved before shopping for a vehicle. This will give you a rough estimate on how much you can spend on a vehicle before you get your heart set on one.

How Depreciation Affects your Car’s Value

1/27/2020

A popular belief is that as soon as you drive your new car off the sales lot, it loses value. This is a true statement, as cars usually lose about 20% of their value within the first year and up to 60% within five years. The rate that the vehicle loses value is called depreciation.

What Affects the Rate of Depreciation?

Depreciation is the monetary toll that several factors take on the value of your car. Some of the factors are how old the vehicle is and how many miles are on it. The rate varies between makes and models of cars, as some hold value regardless of mileage and age.

The effect mileage has on your car depends a lot on what car you are driving. A fancy sports car with 15,000 miles on it in a year would be considered a high amount of mileage because that isn’t a car that most people drive often.
However, a mini-van with the same mileage would be considered an average amount of miles. A car with more miles than is average for its type will have a higher rate of depreciation.

Another way the make and model of your car affects depreciation is that cars in higher demand when they are new often hold their value longer than other cars. Also, cars in states with warmer weather are often in better shape than cars from cold weather states due to salt damage.

If your car is one that people consider to be more reliable, it will usually keep its value longer, too.

How to Slow the Rate of Depreciation

While many of the factors that determine the rate of depreciation on your car are out of your control, there are a few things you can do to lower that rate.

Try to limit the mileage you put on your car.
Keep up with the routine maintenance recommended by the manufacturer.
Keep your vehicle clean – inside and out – and wax it regularly.
Accidents will lower the value of your car.

When you are purchasing a vehicle, it does little good to try to guess what type of car will hold its value. Purchase the car that suits your needs and desires and don’t try to purchase one that will depreciate slowly.

Are Car Maintenance Plans Worth the Cost?

11/29/2019

Buying a new car is an exciting time. When you are sitting at the dealership, the salesman may try to offer you many other products for your vehicle and it is hard to make a quick decision on what you really need. A car maintenance plan is an option that your salesman may try to convince you to purchase.

What is a Maintenance Plan?

If you are offered a vehicle service plan, ask for specifics about what that plan is. Many dealers use that term for both extended warranties and car maintenance plans.

A car maintenance plan covers services that the vehicle’s manufacturer recommends be completed to keep the car running in optimum condition. These things could be oil changes, filter replacements, and tire rotations. Dealerships have learned that offering maintenance plans can be a very profitable revenue stream for their business.

These plans are prepaid and can be very valuable to have, but you need to carefully consider what is covered and what you would pay out of pocket compared to the cost of the plan. Always read all of the fine print details, and if you don’t understand the contract, consider having an attorney explain it to you.

The Positives of Purchasing a Plan

Dealerships rely on their service departments for a large part of their income. By selling car maintenance plans, they are guaranteed that their department stays busy. These plans are prepaid and often offer discounts on the services you will need. Remember, though, that what sounds too good to be true often is, and you still need time to think about whether you actually need the maintenance plan. Do not let a sales person talk you into something that may not fit your needs.

For example, the average cost of an oil change in South Carolina is around $30. Assuming you change your oil as recommended, or about every three months, that is $120 a year. Tire rotations are about $40, and it needs done once a year. Filter costs vary, but you may plan on about $100 for filters a year. If this is your plan of maintenance, you will be paying about $260 a year in car maintenance. (You also need to check your car’s owner’s manual for recommended maintenance.) If you can get a car maintenance plan for less, it may be worth it.

The Negatives of Purchasing a Plan

Before you purchase a plan, carefully read your owner’s manual. These can often be found online if the dealership doesn’t have one. See what maintenance the manufacturer recommends. Some dealers still use outdated information to try to convince customers to purchase the plans.

An example of this would be that new vehicles require very little maintenance. Many cars will go for more than 5,000 miles (instead of 3,000) between oil changes. This reduces your out of pocket expenses. Many manufacturers now state that your vehicle will only need significant servicing every 30,000 miles. If you don’t drive much, a car maintenance plan is probably not a good option for you.

Also, once you purchase the plan, you will have no options about who services your car. Unless you decide to pay out of pocket, you will have to take your car to the dealership for services. If you aren’t happy with their service, you have no options. Another thing to consider is that the things that do wear out quickly, such as wipers and brake pads, are not usually covered by maintenance plans.

The dealership may also sell the plan according to their schedule of maintenance and not what is recommended by the manufacturer. If you drive often in extreme heat or cold, oil changes may be recommended more often, but your dealership may not take these conditions into account, and you will have to pay for the oil changes yourself.

The Final Cost

If you decide to purchase the car maintenance plan, be sure to pay for it in full and do not add it to the total of your car or you will be paying interest on the plan, just like the purchase price of the car. To make the best informed decision, make sure to find out exactly what is covered and compare prices of those services to the total cost of the plan.

Steps to take when buying a car from a private seller

10/21/2019

When buying a car from a private seller, you have few guarantees or warranties to fall back on. Here are some steps that you can take to reduce your chances of being cheated by an individual looking to ditch a defective car.

1. Set Your Car Budget Before You Start Shopping
The best way to avoid getting drawn into spending more money for a vehicle is to decide how much you are able to spend and have this number clear in your mind. Only look for those cars within your budget and don’t be talked into spending more.

2. Select Your Target Vehicle Model
Check Kelley Blue Book to see what model years and mileage you can expect from a car that will fit within your budget. Use Consumer Reports to see reliability ratings and check the Insurance Institute for Highway Safety to review crash safety ratings for the make, model, and year for the car you are going to see.

3. Test Drive Your Target Model
It is important to feel how the car you are going to buy handles. Are there any mysterious noises when you drive the car? Check how the car handles in city traffic and on the highway.

4. Get the car inspected by a mechanic
For about $50, you can have a mechanic at a car shop do a used vehicle inspection. This is useful to help you avoid buying a car with major problems. It is also useful to have the inspection results when negotiating the price.

5. Negotiate the Best Price
After gathering information about the car from your test drive and car inspection, show the seller book prices or a list of repairs that are needed. Sellers are more likely to accept the lower price if they think it is rational and that other buyers would likely come to the same conclusion.

Following these steps will help you make a good deal with the private seller, but there are no guarantees. It is important to find out as much as you can about the car before you purchase, and doing this will lessen the likelihood that a seller will take advantage of you.

Tips for buying a car after a hurricane

10/8/2019

After a natural disaster, such as a hurricane, one of the first items people want to replace is their damaged car. They need transportation to take care of all of the other details associated with the after affects of the hurricane. And usually, a car is the easiest to replace. However, after a hurricane, you need to be very careful about the car you purchase.

Ask when the car was put up for sale. If the car was for sale before the hurricane, you still need to check for flood damage, but it means the seller had already intended to sell it and not just selling it because the car was flooded and repaired. If the car was only listed as for sale after the storm, and the seller is very motivated (is willing to lower the price and not try to negotiate with you), be wary of it. It is very possible that it was flooded during the hurricane and the owner is trying to sell it before any damage becomes obvious, such as electrical problems and rust.
Ask if the car was flooded during the hurricane. Sellers must tell you about any damage that they are aware of, but you need to look for signs the car was flooded, too.

Ask to see the title. If the car has a flood brand on the title, it means it has been underwater. It does not mean the vehicle has been repaired. Beware of this. Also understand that unscrupulous people may dry out a car and send it to another area with a new title.
Ask for the car’s history report. If the dealer doesn’t offer it to you, ask. Check the date to be sure it is current and look where the car has been registered. If the dealer refuses to show you the report, walk away.
Smell the car. The inside of flooded cars can be cleaned, but it is really hard to get rid of the musty smell. If the car smells strongly of air freshener, walk away as the seller may be trying to cover it up.
Look for rust and dirt in unusual areas. Check areas under the hood where a quick washing may not have removed evidence of flooding.
Check the flooring to see if it is new. New flooring in an older car is a sign that it was recently replaced – perhaps to disguise flood damage.
Look at the headlights. It is hard to get water out of partially sealed areas, like lights. Fogging on the lights is another indication of flood damage.
Be careful about underpriced cars. If it looks too good to be true, it probably is.

3. Ask for a full inspection by your mechanic. Once the car passes your initial inspection, bring a mechanic you trust to check out the car. They will know how to find flood damage.After a major disaster, it is truly a seller’s market as thousands of people may need to replace their cars with a limited supply. It is understandable that you may be in a hurry to replace your car, but go slow. Think about your options and be sure to thoroughly check the car you are considering. If you rush this decision, it may be one you come to regret later.

What to Watch out for When Purchasing a Car over the Internet

9/17/2019

It is becoming very common for people to turn to the internet for a car purchase. If you are considering it, be careful and follow these tips to get the best deal.

Do your Research

Before you begin your search for your car, do plenty of research about the type of car you want. Discover what the car usually sells for and any problems other people have had with the car, including any recalls.

Beware of Low Prices

Cars posted for sale with ridiculously low prices that are well below market value should send up a red flag. Sellers tend to always have a reason for such prices. They are being deployed or someone is sick or has died, and they need the money right away. On the other hand, the seller may want to get rid of the car because he wrecked it or the car has had lots of mechanical problems.

The pictures that are posted may be stock photos and not that of the actual car. Always, always be careful when the price is too low. Remember, if it seems too good to be true, it probably is.

Research the Seller’s Information

If you are buying from an individual, you can search for that person on the internet, too. You can also check dealer ratings. Research delivery options. Another big red flag is someone who refuses to communicate with you in person.

Make sure you see a Title

Ask the seller to send you a photo of the title and a photo of the VIN plate on the dash. When you look at the pictures, make sure the person who is selling the vehicle is the person on the title and that the title’s VIN matches the one on the dash.

Obtain an Outside Inspection

If you are unable to view the car yourself, have a reliable inspection done by someone other than the seller or dealer. Ask for photos of any damage that the inspector may see and for a check of the odometer reading to make sure the seller has given you an accurate number. If the seller won’t allow an inspection, walk away.

Ask for a History Report

Dealers will have access to histories of their vehicles if it has been serviced. Ask for copies of maintenance records to prove that the car has been regularly serviced such as oil change. If the seller refuses to give you a copy of any of these records or gives you excuses why they can’t be produced, don’t buy the car.

Why you should never take a newly-purchased car home if the financing isn't complete

5/22/2019

You wouldn't drive a car that's not fully insured, and you wouldn't operate a vehicle without a driver's license. So why do people take home new cars before the financing is finished when they don’t truly know how much that shiny new car will cost them in the long-run? The scary thing is, even if you prepare yourself, you can still get fooled because a car dealership can may tell you a car is financed – even if it’s really not.

After dropping thousands on a new car, you'll want to hop in and get on the road immediately, which makes sense. Few can resist the temptation of the new car smell. Car dealerships know that, and they can use it to charge you a lot more money than you thought you were going to pay for that car. This tactic is called yo-yo financing, and although it's not legal, 27% of people reported being victims of these scams. One Miami auto fraud lawyer even claims that 30% of his law practice deals with these cases.

What usually happens is a dealership and buyer agree to a sales price. The buyer leaves thinking the deal is final. Days or even weeks later, the dealership contacts the buyer to let them know the car has not been financed with the original loan options. They have, however, found another finance option with a new rate that's much less favorable. If a buyer refuses to cooperate, the dealership may threaten legal action. At that point, most buyers will start to feel the pressure and agree to the dealership's demands, which usually means a loan contract at a higher rate or a higher down payment than the one they initially discussed. Meanwhile, the dealership can might still sell the buyer's trade-in vehicle (or just say they did, since the buyer can’t be sure). They may even try to keep the down payment to get the buyer to agree to their terms.

This scam is also known as spot delivery. After agreeing to purchase the car, your dealership might tell you the financing is all set and that the car is yours. That may not be a problem for people with good credit scores, but someone with a lower credit score could get a call days after driving their new car off the lot letting them know the bank would not buy the contract from the Dealer. If the financing institution will not buy the contract, the sale may not close, and the buyer in this situation may have to return the car or pay the balance in full. The Dealer may even try to claim the buyer owes money for the mileage he put on the car.

Is it really worth it to pay thousands more down the road just to get your new car a few days early? Certainly not. Going into a deal, a buyer should know and understand what they're agreeing to – no matter how fine the print. You may even want to get pre-approved for a loan from a local credit union or your bank so you know what the terms of the loan are before you even set foot on a dealership's lot. And if you're desperate for a car, rent one until the paperwork is signed. A couple hundred dollars on a rental can save much more than you think down the road.

Why you should always test drive before you buy

3/11/2019

It might sound like a no-brainer to you: of course you should test drive a car before you buy it. You're likely spending thousands on one so you need to know what you're getting. But the shocking truth is that 11.4% of car buyers don't test drive their car before they drive off the lot. There are several reasons why that's not a good idea.

It might be tempting to skip the part of a car purchase that involves talking to salespeople at the dealership, but it's just not a practical or financially sound decision because you can actually negotiate the price down based on what you learn. When you test drive a car, you can determine whether it's a smooth and comfortable ride. If you have a long commute, you don't want to spend a month's pay on a car only to find out that the driver's seat is extremely uncomfortable, your head hits the roof, and the windows don't block out any traffic sounds.

More importantly, test driving a car gives you the opportunity to make sure it runs smoothly. Does it accelerate and brake easily? Is the steering wheel easy to turn, or do you have to spin it around ten times just to make a slight right, which might be impractical if you need to do a lot of parallel street parking or three point turns in your neighborhood.

Even beyond these basics, which may not feel important to every driver, it's important to make sure every component of the car works correctly. Test driving a vehicle gives you the opportunity to check out the headlights, windshield wipers, radio, seat warmers, and any other feature that might be prone to malfunction. Once you've checked all of these things, the knowledge you gain will give you the upper hand when it comes to negotiating with salespeople.

Are car dealership special events really special?

3/4/2019

Every few months your local dealership probably hits you with wall-to-wall advertising about their latest holiday sales promotion. These ads are all over the TV, radio, billboards, and newspapers and pressure you into a purchase decision by making it seem like the offer is too good to last. The reality is that these deals are no better than a dealership's typical prices on any other day for the most part.

In fact, a lot of dealerships use these holiday opportunities to hire marketing specialists who then help the dealer increase their profit. You might see advertising language that emphasizes financing options or add-ons like prepaid maintenance. Don't buy into the temptation because this is where dealerships make most of their money, and it's an easy way to get a consumer to pay more than they're willing to by making them feel like they're getting a great deal. For example, a dealership may offer something like "pre-delivery inspection," and they can make it seem like it's mandatory, but you can always opt out of paying these bogus charges.

So what should you keep in mind when buying a car?

Forget sales and financing offers. Always consider how much money is being added in interest and other fees when it comes to monthly payments.
Don't even look at monthly payments – always add up the long-term cost of the car and focus on that number as daunting as it may be. And if that number feels high, remember that monthly payments are designed to make a car seem cheaper than it really us.
And when you figure out what you can afford each month, do not forget to calculate your insurance and taxes you will have to pay, especially if your purchase is a newer model vehicle.

To get a good deal on a car, a consumer needs to create their own list without a dealership's input. They should focus on cars known to be reliable, safe, and strong in road tests. It also helps to shop specifically for cars that carry high owner satisfaction rates and ones that don't depreciate quickly.

Am I allowed to take the Retail Installment Sales Contract home with me before signing it, especially if I don't understand everything in it?

9/19/2018

Yes, you are allowed and, of course, you should never sign any contract you do not fully understand. The Truth-in-Lending Act and its regulations require a creditor to make the required disclosures “clearly and conspicuously in writing, in a form that the consumer may keep”.

Those disclosures include the Annual Percentage Rate, the amount financed (the amount of the credit being extended or money being loaned), the finance charge (how much interest you are paying back), the total of the payments, and the total amount paid (payments plus down payment).

Taking the contract home before you sign it is a great idea. This allows you step back, away from the pressure of the salesman and his boss, and examine whether the deal is good for you, such as whether you can afford the payments. Second, you can determine what other costs may be incurred like property taxes (not the same as sales tax) and higher insurance expenses. You may decide the monthly expense is too high. Third, you can shop the interest rate to see if you can get a better deal. Fourth, if there are any terms you don’t understand, you can find someone to explain them to you.

The Retail Installment Sales Contract is going to state there is no “cooling off” period so take your time. There really isn’t a rush to buy a car.

<<Previous

When a Dealership Contacts Several Banks for my Financing, Does it Hurt my Credit?

How Depreciation Affects your Car’s Value

What Affects the Rate of Depreciation?

How to Slow the Rate of Depreciation

Are Car Maintenance Plans Worth the Cost?

What is a Maintenance Plan?

The Positives of Purchasing a Plan

The Negatives of Purchasing a Plan

The Final Cost

Steps to take when buying a car from a private seller

Tips for buying a car after a hurricane

What to Watch out for When Purchasing a Car over the Internet

Why you should never take a newly-purchased car home if the financing isn't complete

Why you should always test drive before you buy

Are car dealership special events really special?

So what should you keep in mind when buying a car?

Am I allowed to take the Retail Installment Sales Contract home with me before signing it, especially if I don't understand everything in it?

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What Affects the Rate of Depreciation?​

How to Slow the Rate of Depreciation

What is a Maintenance Plan?

The Positives of Purchasing a Plan

The Negatives of Purchasing a Plan

The Final Cost

So what should you keep in mind when buying a car?

Top Read Posts

follow our blog!

Archives

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What Affects the Rate of Depreciation?