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Purchasing a New (To Me) Car

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Car PurchaseAs part of Scott’s change in jobs at the beginning of 2017 we needed to make a car purchase.  Scott has had a company vehicle since 2009.  A new car as well as the increase in insurance had not been part of our budget.  Setting aside money every month for a replacement car for me was.

For the record I don’t buy new cars.  I have a tendency to run the car until it doesn’t work anymore the math doesn’t work out for me.  If I want to spend $300 a month on a car if I were to buy a new car for $35,000 I would have to drive that car for almost 10 years to make it worth my money.  If I were to buy a 4-year old car for $15,000 I would only have to drive it for a little over 4 years to make it worth my money. Which is the difference between , making the car 8 years old vs 10.  So much deprecation happens within the first few years of the car you can save some money buying used.  I would rather someone else pay for the deprecation vs me.

My current car is a 2005 Hyundai Elantra which I bought used in 2009.  This was the third car I ever bought and I bought it outright with cash.  This is a 12-year old car it still works thankfully.  We will likely drive it until it doesn’t work or does make sense to repair.

We had been setting money aside to replace that car so when we were ready to for a car purchase.  Since I hadn’t purchased a car since 2009 I wasn’t aware of how the market had changed. Let me share some of my findings with you.

Rules of Car Shopping:

  1. The internet rules everything. They will advertise their best price online to bring people in.  We did a lot of research online for not only the best price but the stats on the cars that we were looking at.  Also if you can buy outside of the large city centers you might be able to save big money. We found that cars located west and southwest of Toronto (St Catherine’s and Welland) had significantly better pricing.  It’s a drive but worth noting if you want to really stretch your dollar.
  2. Most of the Car Proof information is available online.  Before you would have to go in to discuss this but now so you can see if the car has been in any accidents before you test drive it.  A word of caution however.  A car that is accident free and a car with a clean Car Proof record are not the same thing.  Sometimes people do not claim their accident through insurance and get it fixed on the side for fear of car insurance rates going up.  This is common in Ontario where rates are the highest in all of Canada. (This is just my pessimistic approach to the Car Proof and doesn’t apply to everywhere).
  1. In most places there is no haggling on price. This was one of my favourite parts of car shopping.  I like negotiating.  The first place we went to I was able to knock the price down by $2500 but every other place we went into we hit a road block.  Since they are already putting their best price online for used cars the margins are pretty slim so there isn’t wiggle room.  Part of this is because most of these used cars are coming back as trade-ins. If people are buying a new car and trading in their vehicle some dealerships with offer them more for the trade-in just to close the deal.  They are stuck with the trade-in and have to list at a certain price to make any money off of it.  However that’s not my problem at all.  If you did a deal that was a mistake I’m not paying more to you (the dealer) because you need to make your money back.  If you have a fixed budget look for cars that are that budget or less.  Don’t look for cars that are more expensive thinking you can take the price down for sure.  Only 1 out of 10 places we went to was willing to negotiate price.
  1. The final sell is about protecting your “investment” and this is where they make money.  (A car is not an investment btw).  According to this article from the Globe& Mail most car dealerships don’t make the much profit on the car.  They make somewhere around 2.25% which is low.  Where they do make the money is on the financing and the aftercare like warranties, especially for used cars.  Before you buy do your research you really have to weigh the pros and cons about doing that.  If you know that is where they make money there might not be a lot of value for you.  We decided against a car warranty because we didn’t see the value.

Some things haven’t changed:

  1. It’s still a man’s world. Every time we went out we went out together.  After we test drove the car we would sit down at their desk and talk price.  Since I like negotiations I was in charge of talking price. Most of them didn’t like that and would look to Scott when they felt I was being difficult.  I’m stone cold when I talk about pricing with people.  No smiles.  This works since my resting face is quite mean looking but I’m looking out for my bank account.
  1. They are still getting you to try to close the deal on the same day. We were in a rush to get a car, but we didn’t share that.  I was taken aback by how many sales people were trying to close the sale on the same day.  Since I work in sales I understand they were trying to get rid of objections.  I would not recommend making a purchase that large that quickly.  Don’t break because there are “other people interested” or it’s exactly what you want.  You can’t return this like a shirt that doesn’t fit.  Buying a car at first sight is risky and can either work out or not work out.  Make sure you know what you are buying as well as where you are buying from.  Don’t fall for the sales tricks like “what can we do to make you buy the car today?”  They are looking for a way to stop you from saying no.  Stay firm, walk out with information on the best price they can give you and think about the big decision for at least a night, or better yet longer, to know it is what you want.  In another post I’ll talk about a crazy sales tactic that was used to try to sway me.

Final Note about financing cars:

So we paid for the car in cash and I know a lot of people would say get a car loan and invest the money. That’s super complicated to me and just adding another bill to my monthly expenses.  Our budget is really tight now and throwing in a car payment and investing the money with the associated risk is not worth it to me right now or ever.  Also car payments suck so if there is a change in life, income or job you are still stuck with the payment vs my net worth went down by the cost of the car.  I also want to remind that car loans or even lines of credit are not cheap form of credit these days.  The bank can increase the interest rate on a line at any time without warning since those types of credit products are callable.

We also noticed that in many dealerships they can give you an estimate of your monthly amount however what they are not sharing is the interest rate or the length of the loan.  It might be worth it to figure out how much you can afford ahead of time via a loan through another institution instead of getting a loan through the dealership itself.  Then you will know how much your total bill will be instead of committing to a monthly payment and then having to pay that for longer than you will actually have the car.

We spent a total of three weeks looking for a car and it was a very draining time for us.  I don’t enjoy shopping but I do enjoy the car and got a good price for the year, make and kms on it.  I hope to keep it around for some time and now we are saving up again to replace the 2005 Hyundai Elantra.

When was the last time you bought a car?  Did you run into any of the things that I ran into?

Sarah

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