Most everything you need to know about the car buying process is in the part 1 of this series, but I’m writing up a part 2 because there are a couple things that might be important to you that I may not have mentioned in the first guide. If you haven’t read part 1 then check it out here: How to buy a new car unofficial guide
So what did I leave out? Well, one possibly very important thing that I left out is the way that you pay for your car. Are you going to get financing or do you plan to pay for it outright? During the email process of your search I left that information out because the person was ready to pay for the car in full if they needed. If, however, they were able to get the same great deal with 0% financing then we would go for that too.
Unfortunately, when you get a big discount up front you’re usually required to pay in full. This might not be possible for some of you. If that’s the case then you should let them know that you will be financing. The financing doesn’t have to come thru the dealership. So you can shop around looking for the best terms before you head to the dealership.
Most recently though, Toyota was advertising a 0% financing for 60 months deal. When we tried to get the 0% financing along with the $7,000 cash discount off msrp the dealerships wouldn’t do it. To get the 0% financing they had to take away a large portion of the cash discount. It was enough where it didn’t make sense to get the financing if you could afford to pay cash in full. So you’re going to have to choose between the 0% or the cash discount.
Taking the cash discount or going with the 0% financing
Making the decision on the cash discount was pretty easy this go around because of what was going on in the whole picture. The money that was going to be used to buy the car was previously invested in the stock market up until right before we bought the car. We sold stocks that we were planning to sell anyway to get the cash needed for the car. We’ve been in a bull market for a long time now and it made sense to take some money off the table. That money was going to be moved to alternate investments that would give us a smaller return but would be safer.
The reason why I bring this up is because it could be that you were planning to buy the car during a time that was similar to early 2009 when the markets were being hammered. If it would have been like that then I would have instead suggested that they invest the $27K somewhere else and take advantage of the 0% financing. In that situation I would feel more confident in taking the risk on returns with investments over the sure thing with a cash discount.
However, the markets are at all time highs, and they’ve been running the bull for more years than your average bull cycle. To me this meant that it would be much harder to get ahead of that upfront cash discount. So it didn’t make sense not to go ahead and take it.
That being said, if you know that you have to get financing for the car then don’t leave that information out when you’re sending your emails for prices so that you don’t get shocked when you find out the deal you just got can’t be had without paying in full. That could be a lot of time wasted and could really suck.
Can I afford this car?
People have different opinions on how much car they can afford. It’s really up to you to decide what you think is best. However, I think that if you can’t pay for the car in full with some money that you have saved then you really shouldn’t be buying that car. Buy a good used car instead that you can afford. Even though you have the money in the bank though you shouldn’t just cough up the dough without exploring all your options first.
Buying a good used car might not be something you want to hear because you really want that new car, but it’s something you need to strongly consider if you can’t afford to pay for the new car outright. It doesn’t make any financial sense to spend all your savings on a vehicle. To spend it all on something that is losing value everyday. That doesn’t make sense. You need to be wise with how you save and spend your money. If you’ve been saving then hopefully you won’t have this problem. You’ll be able to buy the new car outright or finance it depending on what’s best for your situation.
Don’t waste your money on a POS used car either though. Buying a good used car is a whole other article for another time. I didn’t get it right with my first car. I was in college and I found this old Audi clunker for sale for $600 on craigslist. I’m sure that old man was so happy when he sold it to me. It took me home and then to Hardees that night, but that was about it. It was unreliable and a friend of a friend ended up taking it from me. ( although I’m not sure who took it or where they took it, and I was never compensated for it) Oh well, you live and you learn I guess.