5/13/13 11:14 AM – The Very Best Way to Buy a Car or Truck

Nothing other than homes and remodeling them puts people in more debt than buying a replacement vehicle the wrong way. I cringe when clients tell me they have two car payments. The idea is to be debt-free guys. That’s where the freedom is.

When you buy more vehicle than you should, pay too much for it, and pay interest on top of that, you are wasting an awful lot of money. On the other hand, when you save to buy something, you pay less than the purchase price because you have made money on what you have saved, assuming it was invested well.

People tell me they can’t afford to save. Well, they are paying interest in place of earning interest and making payments in place of setting money aside for savings. You always pay more when you finance something. It is one of the lessons modern America needs to relearn from their grandparents.

I always counsel people to buy vehicles at least a year old rather than a brand spanking new one and lose $1,000s when they drive it off the lot. For the life of me, I can’t understand buying brand new vehicles. The price of that new car smell is several thousands of dollars.

The normal excuse is that with the new car they get low interest rates and a long time to spread out the cost, giving them lower payments. That is the same reasoning people use to buy too much home and pay 40% more for for their home by making payments for twice as long.

My response is: I don’t like longer term debt since I want people to be debt-free, and as for low rates, you can probably get 3% from the credit union on a used-car loan.

Most used vehicles by individuals are being sold on Craigslist these days. You can search by city, which will include neighboring towns, or search by region using Ad Huntr, though listings on the latter site tend to be at least a few days old and you can sometimes miss the best deals.

Dealers usually list trucks on Cars.com. You can specify what you want by using the list on the left side of the page after you put in the gross parameters on the original page. Set the distance from your home zip code as wide as you feel comfortable with.

A few years ago I bought my car from a dealer in Rhode Island and bought a one-way ticket there and drove the vehicle home. It was October, they had an early fall, and they were having trouble selling a convertible in Rhode Island. That meant I got a terrific price.

Now that my car has 220,000 miles on it, I am getting ready to sell it and go through the process again. BTW, I got a cashier’s check made out to the seller from the credit union for the financing before I left. The term was short and I borrowed quite a bit less than the full purchase price.

If you do that, ask for detailed pictures and have the dealer email a copy of the Carfax report that will show any accidents/major repairs or title problems. I personally wouldn’t buy a car with a salvage title, meaning it was totaled at one point, though I have done that before and it turned out OK. Cars with salvage titles usually sell for 10-15% less and dealers normally don’t sell them.

I much prefer buying from individuals because I can usually negotiate a lower price and I choose sellers that can show me service records, or better yet, a little book in which they have recorded oil changes with the mileage and dates. My wife’s SUV we bought from a guy that even recorded car washes in his little book. That’s a guy that took great care of his car before he sold it to us. Rarely will you ever find someone under 40 that takes that level of care for their vehicle, unless it is a single woman that manages her money well.

On Cars.com, I usually specify that dealer ratings must be at least 4 stars. I call them on listings I like to make sure they are not adding any dealer fees or dealer prep fees. The higher rated dealers rarely do.

To determine the price you should pay, first go to Kelly Blue Book and then get an idea from the listings you see on the websites mentioned above to see what sellers are typically asking.

If all that sounds like a lot of work, well, it does take some time but you are talking about your largest purchase other than your home. It’s worth the time because the savings are large.