Submitted by Jen Jones on Tue, 06/09/2009 - 4:08pm
As a result of General Motors and Chrysler filing bankruptcy, thousands of dealerships across the country will be shutting the garage doors and deflating their obnoxious balloon animals and banners. But first, many of them will be liquidating cars at prices that, even for a car dealer, can be considered "Out of this World!"
So if you are on your way out of bankruptcy and the time has come to for a new ride, will you be able to get a car from a dealer? Of course. Let's discuss it.
Keep in mind that dealers are now in the business of financing cars, not selling them. The industry has done a great job over the years in convincing consumers that affording a car is all about the monthly payment. However, you're a smarter consumer than you once were, so you need to focus on price, not monthly payment.
The financing structure of car sales can be quite vexing. The key thing to remember is that while you may be able to afford $300/month for a car, there is a big difference between paying that much for two years and paying it for five or six years. If you let the dealer know what you can afford per month, their aim will be to get you in a higher priced car that can simply be financed at $300/month over a longer period. You need to remember that more expensive cars are also much more expensive to maintain, insure and repair.
Determine the top number you can afford to pay for a car, new or used, and start $1,000 lower. This cushion will provide you some nice negotiating room and help pay for the fees that get tacked on to the cost of buying a car.
A down payment helps immensely. It gives you more bargaining room and "buys down" your interest rate because you will be financing less money. If you don't have at least $1,000 to put down, wait. Make whatever minor repairs may be needed on your current car or use mass transit for a short time.
Reliable, well-conditioned used cars are easy to find today. They are also lasting substantially longer. Older generations often retired cars after 100,000 miles. Today, 200,000 is not at all uncommon. Thus, don't get caught up in the idea of a "new" car. After only a little bit of searching, you should be able to find a vehicle to match your needs and price range within the $7,000 to $10,000 dollar range.
The Internet has made car buying a nationwide exercise. While it's not wise to buy without a test drive and mechanical check-up, you can use the price of a car in at least another county as leverage against the price of a local car. Basically, your net of comparison vehicles can be cast much wider. Also, write down what you want in a car ahead of time and bring it into the dealership. This checklist will help you stay honest with yourself and once again demonstrate to the dealer that you are serious about your self-imposed buying rules.
The best part of this whole process is the fact that you will be creating another great benchmark in the establishment of your new credit history. Car payments are a very common occurrence on a credit reports because they are typically a set amount for a number of years. Therefore, they are easily tracked and when paid on time over a number of years, your report will look better every month.
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