Purchasing a Car in Atlanta? We have provided this Step-by-Step Guide.
Buying a new or newer vehicle can be daunting, since it’s one of the bigger purchases many people make. If you want to minimize costs, consider these steps.
Do Your Homework
Trade-In or Private Sale:
- Bring your existing car to CarMax or AutoTrader to request a fair trade-in value and check the blue book value for private sale options.
- Checking Kelley Blue Book www.kbb.com or www.Edmunds.com to get an idea ahead of time is smart, but these sources won’t give you an actual trade in value for your car. It’s helpful to have one so you can get the most for your trade-in, or if you decide to make a private sale.
- If your trade-in value is less than what you owe on the car, you may get into a negative equity situation or make an existing underwater situation worse. If you’re underwater, your finance rate will always be higher than it would otherwise be, simply because you owe more than the car is worth.
Dealerships, CarMax and Auto Trader are in the business to make money off your car. That means in many cases it’s better to do a private sale and get the full sale price, and then buy the new car afterwards.
- Start by checking rates nationally at www.bankrate.com.
- Call your local bank or credit union. In many cases you do not have to be an account holder to learn about rates or even get a loan.
In Atlanta, banks like BB&T, Delta Credit Union, and many other regional banks are wonderful to work with.
If you know the vehicle you want to buy, call the dealership before going in and ask them what their financing rates range for your credit score – Do this before you’re in the store with all the pressure!
- Typically, credit scores over 720 can get you the best rates, those between 620 and 619 get okay rates and 500-619 will have you borrowing at subprime (or highest) interest rates.
- For new cars, best rates typically range from 0-5%, moderate rates run 4%-14% and subprime financing rates can be anywhere from 13% to over 20%.
- The rate you get will vary, but if your credit is less than stellar you need to know if you’re facing a 17% rate ahead of time.
- When buying a used car, be prepared to add another 3-10% over new car rates!
- Do not go to multiple banks and online resources and have them each run your credit as doing so will lower your score when you least need it! If you know your score then fill in your own information: “My score is 710. If I am buying a 2014 Volkswagen Jetta, what interest rate would I get?” Most bankers can give you an idea about what they can offer without running your credit and in the process, lowering your credit right before you buy.
TIP: Don’t forget that you can refinance your existing car debt. If you decide to keep your current car but have a high interest rate, see if you can lower your payment.
The longer the term, the higher the rate – regardless of credit score. However, consumers with lower credit scores don’t always qualify for the longest terms with traditional banks (which is what lowers the payment). The bank’s risk is higher with credit-challenged borrowers so they don’t want you paying on a car longer than its viable lifespan (or the consumer’s “attention” span, if they trade out often). As a result, folks with poor credit may need to get a “newer” vehicle to qualify for the term/payment.
Tip: in most cases auto dealerships will give borrowers with compromised credit a better rate on a new car.
Pick a Vehicle
- Review Options: To start getting an idea on what type of vehicle you would like to purchase, you can visit websites that let you view features and see reviews from other people who have owned that same vehicle. Here are some to check out:
- www.truecar.com (car-buying service)
- Auto Insurance: Check with your auto insurance agent to check what the cost will be to insure your potential new vehicle. Who will be driving the car? Children? Costs can vary widely so it’s important that you know ahead of time.
- Gas/Maintenance: Many luxury brands required the most expensive gas, parts, and imported versus domestic car repairs. Understanding these costs ahead of time can save you a lot of headache and money.
Start Test Driving
Test driving a few different makes and models can ensure you will enjoy your car. Your dream car may not be the one you originally thought. What if its bumpy? There are many things that you cannot tell until you ride in a particular make and model.
Tackle Financial Matters
You found your dream car! Now there are three pieces to ensuring you pay a fair amount. Keep in mind there is more wiggle room on a new car price than a used car, as the dealerships already have their set price built in on used vehicles.
Tip: Places like CarMax offer no-haggle pricing, but from my personal experience they make all their money on the financing by not offering the best rates even with the best credit scores. Consider getting your financing in place somewhere else.
- Negotiate the price of the car first:
- If you understand the actual value of the car you want to buy, you can walk away if it’s not fair.
- If you see an advertised price that’s almost too low and that car is nowhere to be seen or at a higher price, then you may be looking at the ol’ bait n switch. Run away.
- The last week of the month is when dealerships are trying to wrap up the sales month; they may be more flexible in giving you a better deal at that time.
- New cars that are still on the lot from the prior year sometimes can be bought at a lower price, especially when the newer models are moving in.
- New cars have more wiggle room. Auto makers want you to buy new so interest rates are lower and price can be negotiated.
- Used cars have less wiggle room as dealerships already have their set costs.
Trade-in value comes next:
- DO NOT let them know that you already have a trade-in value from CarMax or Auto trader until AFTER they tell you what their offer is first.
- If the trade-in value is higher than what you got previously then great; if less, ask them to match what you have or you will take it back to place with higher trade-in value or private sell.
- In many cases they will match the higher trade-in amount, as they want the car for their inventory.
- If you’re in an upside down situation, waiting to sell your car can help offset some of the costs.
Financing is last:
Most people do not realize that this is negotiable – that’s why calling ahead and checking other rates ahead of time will let you know if they’re offering a good rate or not.
- If it’s too high, ask them to match one of the lower rates or you will finance with someone else. Chances are, they will try their best to get you a rate that fits your credit history.
- Do not ever buy a car based on the monthly payment. I have seen many people do this – one person whose credit was over 800 had an 18% rate on a car because they purchased based on monthly payment. The extra interest payments were more than the car itself!
- Look at the number of months that you are financing the car. Fewer months will help with lowering the interest rate.
- If you trade in every three years, do not agree to a 72-month loan. You do not want to become upside down.
Want a new car every two to three years? Leasing may be a better option for you.
In Atlanta, there are many options in buying new or used. Understanding what your trade-in is worth, what kind of vehicle you want, upkeep costs and going interest rates for your credit history is key to spending less. Good luck in finding your perfect vehicle and hope to see you in your new ride! Scarlet Oak Financial Services can be reached at 800.871.1219 or contact us here. Click here to sign up for our weekly newsletter with the latest economic news.