The Ultimate Car Buying Guide

May 28, 2021 | Financial Guides, Personal Finance, Saving Money | 2 comments

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The Ultimate Car Buying Guide

One of the most common conversations we have with our coaching clients is about cars, and it’s no wonder. Buying a car is a skill that everyone can benefit from. But unfortunately, most people don’t know how or are not comfortable with it. There is a lot of advice floating around the internet. Some of it good – some of it great. But most of it isn’t coming from a finance perspective. Which is why we’ve put together car buying tips that focus on your financial goals!

Regardless if you are already confident in your car buying skills, looking to hone them in for even better deals. Maybe you’re a first-time car buyer feeling anxious about such a big financial decision. You may even fall somewhere in between. Regardless – this guide is going to help you!

We’ll walk you through tips for buying a car, plus how to negotiate a good deal, and even what to do with your old car. We know you’ll find this guide thorough and helpful! Now here’s why you need it…

Why you need this guide

How much Americans Spend on Cars

“You will spend more money in your lifetime on cars than on your college education, or your first home…

According to the U.S. Bureau of Labor Statistics, in 2019 it costs an average of $9,576/year to own and operate a vehicle. This includes the cost of the car, gas, insurance, maintenance, license, registration fees…everything.

Take that into consideration with the fact that most Americans are spending over $500 per month on car payments. The average American takes out 72-month loans and replaces their car every 6 years! Just in time to jump right into a new car payment.

While there are many variables, you can see why the estimated lifetime expense on vehicles for the average American comes to well over $300,000!

That means you will spend more money in your lifetime on cars than on your college education, or your first home. Considering having a “dependable vehicle” is a necessity for almost every American, knowing how to be a smart car buyer is crucial.

More than just a car payment

In the past few years, a lot has changed when it comes to buying a car. We researched this topic while buying our own car and for the writing of this guide. In doing so we realized there is a lot of missing advice about new services and things to consider. Especially when it comes to getting a good deal. There is also a lot of advice that is outdated and no longer applies – as such it was since omitted here.

Having sifted through endless blogs and extensive first hand research, we’ve boiled it down to the “must-know advice”. The following car buying tips are applicable to the current landscape and actually WORK!

Not only have we collected everything we learned through our experience and extensive research. This advice is all through the lens of our unique advice and perspective as Finance Coaches. Combined, that helped us get more car for our money!

Let’s do this!

Our Top Car Buying Tips

Your Mindset Matters

In early 2020 our only car was hit by a truck while parked right outside of our home.

We didn’t know it at first, but it was totaled and we were about to be car-less.

We got the official word a few days later, the body shop and insurance companies had determined the vehicle a total loss. This was a new one for us. Apparently, it’s when it would be more expensive to fix the car than what it was actually worth.

So rather than put the money into repairing it and returning it to us, we would get a check for the cash value of the car. After that we were on our own to figure out a replacement. Of course, this was not our preference. We hated the idea that something that was repairable, wasn’t being repaired but junked instead. Apparently, it’s just the way these things go…

“We remained optimistic and focused on controlling what we could control…”

As you can imagine, this was a huge inconvenience. Especially considering we had recently quit our Full-Time jobs, started a new business, and were living off our savings.

With only 140,000 miles and running well, we were not planning on replacing this car any time soon. We were looking to get as much out of it as possible and planned to drive it until it just didn’t want to go anymore.

But life happens. Although it was a major inconvenience, we remained optimistic and focused on controlling what we could control. i.e. how we would go about replacing the vehicle and how we would get around in the meantime.

Thankfully, we were centrally located in the city of Chattanooga at the time and had access to the local free shuttle. We could also ride our bikes to nearby grocery stores. We were even lucky enough to borrow a friend’s secondary vehicle if we needed to make a run outside of the central area. Together, this allowed us to take our time and be patient, while we found the right car for us.

Now – you can read all of the car buying tips and advice on the internet and very little will advice you go car- less. We acknowledge that while this worked for us, it won’t work for everyone. The main take away we think everyone can learn from is to exhaust all of your options. Get creative before jumping in to a new large expense. Obviously, all of that was doable for a few reasons

#1 – Awesome friends! (Thanks Cierra and Nick!)

#2 – We are an able-bodied couple who

#3 – We worked from home, and

#4 – Had no kids to take all the places kids go.

But the point is when possible, try to explore all of your options. Find ways to help yourself not to feel rushed so you aren’t strictly reacting to your circumstances, making hasty decisions, and feeling buyer’s remorse.

“Society was telling her that “a grown woman shouldn’t have to borrow a car from her parents.” 

For another example – A client of ours was feeling very pressured to replace her car that suddenly died. At the time she didn’t have money saved for a down payment and knew that a big monthly payment wouldn’t be sustainable for her.  So we talked her through her options.

It turned out her parents had an extra car they barely drove. They had offered to let her borrow it while she saved money for her own car, but she was embarrassed. She was listening to society telling her that “a grown woman shouldn’t have to borrow a car from her parents.” But with some coaching she realized, it’s her life. Accepting the help was the smartest thing to do. It allowed her time to save the money she needed to buy the car that suited her needs and her lifestyle.

The stories of clients could go on forever – but when do you know that it’s time to replace your car?

When is it time to buy a new car?

The most important thing when you’re working toward Financial Freedom and Independence is to master the ability to distinguish a need from a want.

In this scenario, the way to come out on top financially relies on viewing your car through the utility lens.

First and foremost, cars serve the purpose of getting us from A to B safely. Aside from that, it’s about convenience and creature comforts. Which are nice, but not the priority.

Oftentimes, especially if we’re not very knowledgeable about cars, if a car needs repair we freak out. It’s common to catastrophize the situation and find yourself overwhelmed. Which is why it’s important to seek the input of a professional. Having a professional mechanic help you determine if it’s time to plan for a replacement, or if it’s just a matter of a few parts and maintenance.

If this is you and you’re questioning the safety and reliability of your car, research trusted auto mechanics. Get a few professional opinions about how to keep your car safely on the road as well as quotes for the work.

Have a AAA membership? You can save on repairs! Learn more here. 

BUYING USED vs. NEW

Buying a used car is key if you want a good deal and more bang for your buck. Financial professionals and the “Millionaire Next Door” agree.

Don’t believe us? Check out these quick facts:

In 2019, the average cost of a new car came in at $34,000 touting an average monthly payment of $523! Plus a new car loses about 10% of its value as soon as it rolls off of the lot. (Imagine just throwing $3,400 out the window. 😭)

Compare this to a Used car that averages $20,000 a $400 monthly payment and no immediate loss in value.

That’s a difference of $14,000 total or $123/month! Not to mention the cost of all the additional interest. Think of all the other things you could do with that kind of money!

That said, it’s obvious why a used car wins most personal finance gurus’ votes and is gaining in popularity. It’s more affordable and gives you more flexibility within your budget to put your money toward other things.

Be wary of Lemons 🍋

One of the most popular concerns we hear about buying used cars is the fear of buying a lemon.

This is totally valid and it is important to be wary of dishonest deals, but there are many services that can help you feel more comfortable buying a used car.

Take Lemon Laws for instance! These vary by state but usually protect a buyer from a seller that sold you a lemon.

Services like Lemon Squad allow you to schedule a pre-purchase used car inspection by a licensed mechanic. If buying a car private sale, having a mechanic look it over is an absolute must. Lemon Squad makes it easy to easily connect with a mechanic who will do exactly what you need.

Although we didn’t end up needing this service, we think it’s worth it that when taking into consideration the peace of mind and inconvenience it can save you. The quote was very reasonable and would have been well worth the money.

Do your Research

Ratings & Reviews for dealers have revolutionized the car buying world for consumers. The transparency and sharing of customer experiences make it easy for future customers to know whether a used car lot is worthy of your trust or to be avoided entirely. If a dealer has a habit of selling lemons – you will know!

Buying a car private sale?

Make sure you do your homework on how much the car is actually worth by using services like Kelly Blue Book or Edmunds. Cross-reference both to compare the price the seller is asking for, versus what the car is actually worth to ensure a fair deal. Doing this after you hear from Lemon Squad and do a thorough inspection of the car yourself will help you get the most accurate pricing information.

Pros and Cons of Online Car Buying

Car retailers like Carvana and Carmax have changed the used car buying game. They make it easy to get a great deal, without the worry. Just know that although buying from these big retailers can land you a good deal. You will also pay for the convenience. With companies like these, you will not be able to negotiate for a lower price like you can at smaller dealers. (More on car buying/negotiating tips later)

Consider the cars Mileage

With proper maintenance and upkeep, a car lasts for approximately 200,000 miles and the average American puts about 12,000 – 15,000 miles on a car each year.

Do some quick math based on how many miles are on the vehicle now, how well it was taken care of, and how much you drive. This can give you an idea of how much “life” or road time a car has left.

Personally, with this in mind, we decided that a car with 100,000 miles or less was worth considering. This was fewer miles than the car we were replacing. Plus it would likely last us for many years if it had been properly serviced, was well taken care of and the price was reasonable.

🚗 Fun fact: the average age of a car on the road is 11 years.

Check the CarFax 🦊

Take your time and review the CarFax. Look for routine maintenance, large repairs, reported accidents – especially if the damage was serious, recalls, and associated repairs. If you’re unsure of what you are looking for on the CarFax have a friend or your Lemon Squad professional take a look over it with you!

Putting it all Together

Many people buy a new car every 3 to 5 years. That means it is easier than ever to buy a relatively new car with low mileage that will last you a long time – for a fraction of the price.

Remember, not only is having reliable, comfortable transportation a high priority, it is equally important to keep within your budget. Don’t sacrifice continued progress toward your other financial goals.

CHOOSING THE BEST CAR FOR YOU

At this point in the process, you understand how purchasing a used vehicle is a great financial decision. Now it’s time to figure out what the best make and model is for you and your lifestyle.

But sometimes deciding the make and model of your next car can be the hardest part!

To help you avoid buyer’s remorse and ensure you are happy with your purchase for years to come, here is our advice for how to choose the car that is right for you!

Do Your Research to find the best Make/Model/Year for you

If you are like us, then you know buyer’s remorse is 100% real and the more expensive an item is, the higher the stakes.

We find comfort in making a purchase confidently, especially if we are talking years of staring at my decisions in the driveway. That is why we’re such big fans of doing our research.

Most of us know the name Consumer Reports but did you know it is an excellent source for researching your next vehicle? It is unbiased and will give you information from owner satisfaction to overall reliability right down to the year of each make and model.

We got this tip from our old mechanic and are very thankful he shared his knowledge! Although a membership is necessary, it is a small investment that can keep you from making an even bigger financial mistake.

Make a list of Needs vs. Wants

What features of a car are non-negotiable and what could you live without?

More often than not, features are more important than a specific make or model. For instance – we wanted our car to be AWD. I needed it to be automatic because I cannot be bothered to learn to drive stick-shift.

These choices are personal. Only you know what is important for your lifestyle. Make a list of what you really need before going to the car lot. This will help you focus on the essentials and not get emotionally carried away with “extras” or even more useless “status”.

Be realistic and practical

Stay grounded in your decision to buy one car or another by thinking about the overall need and purpose of owning it.

 For instance, is it for everyday driving or for hauling large loads on a worksite? Or are you more of a weekend warrior who needs bars for a good roof box and a hitch for the bike rack?

While we thought we had made our decision on the right car for us, when we test drove a few we learned an important detail – the seats didn’t easily come out or fold down flat. For us, that was a deal-breaker so we went back to researching.

Know these details for yourself – it makes it easier to go through the next step.

Be OK with compromise

Don’t get hung up on color, model, or small details. Really think about the features that add value to your life and if they are worth the extra money. Are the cup holders really that important? Or are they something you are willing to forgo for the sake of the things that matter more to the big picture.

Rent the car you want to buy

This is the absolute best advice we found!

Rent a car of the make/model you are thinking of buying for a day or two before heading to a car lot for a test drive. This gives you time to make sure it is what you want without the pressure or hype of a salesperson. Take a day trip somewhere, drive around town, run a few errands, and get on a windy highway.

Renting does cost money but you get the opportunity to know if the vehicle really fits your lifestyle.

We rented a Rav4 and although we loved it at first, we realized after taking it out for a few days that we really didn’t want to own one.

SHOPPING AND NEGOTIATING

So you’ve decided on the car that is right for you and you are so close to making the purchase, you can taste it!

But not too quick – your patience will soon pay off, but not before a couple more tips to getting the most bang for your buck.

Focus on the “Out the Door” Price 👀

While the monthly payment is important, equally important is that you focus on the “out the door” price.

Most people in sales will help you find the monthly price you’re comfortable paying. But low monthly payments does not mean it’s affordable. A lower monthly payment simply means the length of the loan was stretched out. Unfortunately making the total purchase price of the car more expensive. Because, interest.

So you need to know your “all in” budget and if you’re not to the point of paying for your car’s in cash yet, at least have a plan to pay off the loan as quickly as possible.

Know what you can afford 💵

In addition to the “out the door price” that you negotiate with the seller, think about upkeep. All vehicles need general maintenance, but that maintenance is more expensive for some makes than others.

A great tool for understanding the associated cost of your vehicle is Edmonds. The online tool breaks down the total price of owning the car, from yearly upkeep to average gas consumption, meaning you can make an educated decision!

Setting your Budget

Setting your Out the Door Budget will depend on a few things –

  • How much you have for a down payment

  • If you have a trade-in (see trade-in advice below)

  • How quickly you can pay off the car loan and

  • What your other financial goals are

The most important thing is not to get a car that eats up your monthly cash flow making it difficult or even impossible to consistently save money, invest or reach your financial goals.

While you want to focus on the out the door price, you need to know all of your numbers. That includes how much you can put towards payments each month. Check out our Complete Guide to Making a Budget to run your numbers.

Ask for more 🤑

In most cases, buying a car involves a negotiation.

Although negotiating a price these days isn’t what it used to be, online price shopping tools like CarGurus help you see just how good or bad a deal you’re getting. You can use this information to negotiate the price and should always try to score some extras.

Simply remember that “You won’t know unless you ask”.

Try to get the price lowered, even if just a couple hundred dollars.

Ask for free maintenance like an oil change here and there

See whatever freebies they can throw in to sweeten the deal. What’s the worst thing that will happen?

Get comfortable with the word “No” 🙅‍♀️

Similar to the advice above (“You won’t know if you don’t ask”) you need to get OK  with both hearing and saying “no”.

When walking onto a car lot, you should be fully prepared to leave the way you came.  (i.e. without a new ride.)

  • Don’t like the way they do business?

  • Not willing to lower the price to fit your budget?

That’s OK.

Respectfully see yourself out the door and continue your search.

The BALLER move  💰💰

If all else fails and you still cannot find the car you want, for the price you can afford – ensure that what you are looking for is realistic.

If your ask isn’t unreasonable, send an email to your local car dealership letting them know what you are looking to purchase.

Include the make, model, and year, your target price, and any features you need. In your message, request that they help you find what you are looking to buy and to give you a call if they find something that fits the bill.

Feel free to copy and paste this template and fill in your personal details:

Hello [sales person or managers name],

I appreciated the time you spent with us to discuss your inventory the other day. We truly enjoyed chatting with you and learning about the features and differences between models. I am now in search of a vehicle that suits my particular needs and is within my ideal price range. I am quite patient and willing to wait for the right car.

Ideal vehicle: [year/make/model]

Mileage: < 

Exterior: [desired features/color]

Interior: [desired features/color]

Other details: [AWD, cup holders, backup camera]

Price: [an “out the door” price range that suits your budget]

Please let us know if this is something you can help us with. We look forward to hearing from you. My number is xxx-xxx-xxxx.

Best regards,

 [your name]

Remember, “the squeaky wheel gets the grease” so check back regularly so they keep you in mind. Be patient. Even if you need to borrow or rent a car for a little while longer – this could save you thousands!

This is the exact method we used to purchase our newest vehicle. We let the dealers do all the work for us. About 1 month later we drove off the lot with a vehicle with less miles and lower price than we would have otherwise.

WHAT TO DO WITH YOUR OLD CAR

Now that you’ve successfully purchased your new (to you) car, what can you do with your previous ride? A lot of car buying tips and advice overlook this side of the transaction. But what you decide to do with your old car matters when you’re on a budget and/or a time crunch.

Regardless of your approach, you’ll want to research the value of your car using KellyBlueBook and or Edmunds. This will help you ensure you’re asking a fair price if selling privately or getting a fair offer if trading in.

Private Sale

Selling your old car in a private sale is oftentimes the most financially lucrative option for what to do with your older car. But assuming you drove it into the ground, it might not be by much.

Here are some other things to consider if you are thinking of selling your car through a private sale

HOW?

You’ll need to make sure you know how to do this the right way. Unfortunately, it’s not as simple as handing over the keys, but it’s not rocket science either. You’ll need a copy of your car’s title, or pink slip, and to talk to a state’s Department of Motor Vehicles to find out what else is required.

COMFORT LEVEL

Putting a sign in the windshield or a post on Craigslist and Facebook Marketplace isn’t for everyone.

Know thyself.

TIMELINE

Finding a buyer and closing the sale takes time and effort. That’s not to say it isn’t worth it, but it is something that needs to be considered.

Trade-In

Choosing to trade your car in is hands down the easiest option. Plus it can help you put more down for your replacement vehicle.

Again, knowing the value of your trade-in is helpful, but a trade-in will get less than in a private sale. This is because the dealer needs to be able to make a profit when they sell the vehicle..

Sell to mechanic or trade school

Got a real clunker that isn’t worth much? Talk to your local mechanics. Often they can afford to repair the car for a fraction of the price doing the work themselves, on their own time. Dylan sold a truck this way.

Can’t find a mechanic as a taker? Try a trade school! They are often looking for cars to be used to teach classes and have students practice their new skills.

Donate

When you donate your used car to charity, the car is often sold and the money raised is used to fund their mission.

It is worth noting that donating your car won’t have a monetary impact on you personally. Unless you itemize your taxes and deductions add up to more than your standard deduction. You will also need to have donated to a qualifying charity that will inform you of the sale price of the car etc.

If this option is of interest to you, do your research and talk to your tax professional about if this is a good option for you!


What Next?

So there you have it, all of our car buying tips, advice and resources. Hopefully you have learned something new and feel empowered and more knowledgeable as a car buyer. Take this information and use it to land a car you not only LOVE, but suits your needs and budget.

We followed these tips in our own car buying journey and found the perfect car. We were able to find exactly what we wanted, but it wasn’t easy. A highly reviewed make/model/year, with high end features, low miles and in excellent condition!

Did you enjoy this car buying guide? Share this with your friends! Because as you now know, even if they aren’t shopping for a car right now, we’re all going to spend a LOT of money on cars in our lifetime!

2 Comments

  1. Bryan

    This is great information‼️ What did you buy?

    Reply
    • Dylan Pollock

      Glad you enjoyed it!

      We bought a 2014 Subaru Outback in excellent condition 🚙

      Reply

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