The New Rules Of Buying A Car – Beginner’s Guide

By Mark Iafrate - July 18, 2016

If you pay close attention to most car buyers, a typical question you will hear is “what car can I buy that is affordable for me?” In other words, people are basing their purchasing decisions off of financial and monetary reasons.

And of course, in some circumstances that makes perfect sense. But because of this mindset, people tend to shortchange themselves of the car they buy when in actuality, they can attain so much more than your typical “run-off-the-mill” vehicle.

If you’re looking to learn how to really play the game to win, instead of selling yourself short, you need to be familiar with today’s new car marketplace and the rules that govern it. This post is perfect for the beginner who’s looking to buy their first car as well as anyone who has outdated notions on the industry and needs a refresher course.

Whether it be the rules of financing changing (no longer are the rates offered at the bank better than the ones at the dealership), or the tools you think you should use to help you not serving the same purpose as before (Kelly Blue Book, Carfax etc), the automotive market is now a giant game designed to get you to waste your money.

Today, I’m going to educate you on just how this game works on about almost any car, and hopefully change the narrative from “how much can I afford” to “what kind of car would I like to drive.”

If you’re ready, let’s jump right into it.

New Keys to CarThe Basic Rules

Before you can attain the dream of getting just about any car you want, you have to first understand the ever-changing rules of the game, and how the game is being played. Keep in mind that these rules are not set in stone, but malleable and applicable to everyone’s unique situation and car marketplace.

  • Stick to the basic economics. Out of all the factors out there today, supply and demand still controls pricing more than any other factor.
  • The value of every new car depreciates over time, period. It doesn’t matter how exclusive or hard is it to find – you can’t escape the laws of economics. Cars depreciate based on the 3 major value ‘drop-offs’ we cover in our previous blog post, but just for a quick recap, they depreciate:
    1. When the factory warranty runs out.
    2. When they have to get rid of old inventory as soon as next year’s model car is released.
    3. If they have gone through paintwork or been in accidents.
    4. When dealers offer incentives on newer models.
  • The more expensive the car, the more it is impacted by financial markets.
  • In today’s marketplace, almost everyone should be financing their car (even an exotic one), due to the low rates.
  • Sure, a car with many options may be easier to resell, but often that does not equate to more money in your pocket.
  • Unique colors are great but they are certainly not for everyone. White, silver or black are always the safe choices.
  • Sites like Carfax and Kelly Blue Book are limited in capacity.
    1. Carfax cannot be trusted for determining if a car has been crashed or not, but there is a lot of value in understanding how to read a report.
    2. Most dealers use local auction listings that you don’t have access to, so they can win when buying your trade, which renders Kelly Blue Book useless.
  • Dealers mainly cash in from you financing your car directly with them, instead of buying it in cash.
  • Extras like detailing, paint protection, warranties, and more are useless and overpriced at dealer.

HOW TO APPLY THERE RULES BEFORE BUYING A CAR

Car Service HistoryService History

Understand the service history of the car and just how well maintained it was. Look to see if it was dealer-maintained or not. If not, ask for service records but also look at how many times it went in under warranty for repairs.

As a general rule of thumb, if the car has been in the shop 5-10 times for the same problem, there might be a wrinkle that no one bothered to straighten out properly, and it would be best for you to avoid that car and its problems completely.

Warranty

Check to see if there is any warranty left on the car by looking at the “in service date” or the first registered owner date. As we mentioned previously and in other posts, the value and price of a car drops significantly after its warranty expires. Most luxury cars have a good 4 year / 50k mile warranty; therefore, you can form your rough estimates as to how much warranty is left on the car.

Pro-tip: For BMW and Mercedes cars specifically, look if the car was ever certified as it might have an additional year or two left past the initial warranty as a Certified Pre Owned vehicle.

Sales History

Check just how long the dealer had the car for sale by looking at the last “offered for sale date,” as well as how many dealers passed the car on before it ended up where it is currently. Knowing how long the dealer has tried to sell the car or how many times it has been passed on will tell you whether or not they’re having trouble selling the car.

Guy Test Driving a New CAr

You should be cautious of the fact that so many people passed on it previously. This could be a great opportunity if the past dealers were just in a bad financial climate at the time or were just not good marketers, but it could also be a major red flag to not buy the car. Just to be on the safe side, have the car looked at by another dealer or do further research online before pulling out your wallet.

 

Final Notes

Now that you’ve done some basic rough research of the car, it’s time to take the next step and actually go see the car in person. Think big, and don’t just limit yourself to local cars because you might miss excellent deals in areas where certain cars don’t sell well.

Buying cars from other areas may deter some because of extra shipping costs, but often, shipping is an element that can be negotiated easily.

How To Buy a Brand New Car For CheapFurthermore, if you look at the big picture, if shipping costs you $1000 for a car that costs you $55,000, that might still end up saving you money as opposed to a deal that costs you $0 in shipping but $75,000 in price.

Although we’ve laid out each and every principle to help you apply them to most of your buying needs, each and every deal is unique and there is no universal, one-size-fits-all formula in terms of pricing.

Keep in mind that almost every dealer will use lines like “I can’t discount it further” or “my manager has no more room on this car” and will tell you that others have interest in the same car.

These claims should not be taken too seriously as they are mainly sales tactics designed to get you to buy from them right at that very moment. By just taking a quick step back and not getting sucked in to their words, you can learn how to negotiate pricing the more you practice.

As a final note, be sure to look at dealers’ reputation online on Google or eBay because in this business, reputation matters more than anything else. It worth it to spend a little more to buy from a good dealer because they stand behind what they sell and usually won’t resort to any unethical means, which may tarnish their hard-earned reputation.

Like any skill or art, only through constant practice and immersion will you finally get a full grasp of their principles. By constantly training your eyes and mind to recognize when these rules are in play, you will develop the foresight, perspective and knowledge of how to use them to your advantage in any situation.

About the Author - Mark Iafrate

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