Now
don't think that the invoice
price is as low as you can go. Just like when you're
house buying, it
pays to know what kind of market you're in. If the
car dealer is dying
to get rid of a backlog of cars, he's going to be more
willing to negotiate
with you. And realize that the dealer may be getting
a deal from the
manufacturer for selling you the car. This is known
as a "holdback"
in dealer lingo. A car salesman isn't going to volunteer
the info, but
it's worth asking. And at Edmunds.com,
you can often find info on which manufacturers
are offering incentives straight to the dealer. If
you find out your
car has a $1,000 holdback, use it in your negotiation
with the dealer.
Here's your pitch: "Look, I know you get a $1,000
holdback, so
I'd be willing to pay $500 below invoice and we can split the holdback."
When negotiating, do not make financing part of the deal. Your first job is to nail down the price. Only then should you talk financing.
For those of you living in states that do not levy a state income tax or in one where it's very low, your car purchase may in fact trigger a nice tax break. How? In a new law that went into effect this year, you can choose to deduct from your federal tax return either your state income tax or your state sales tax.
I also want to encourage you to shop for your car beyond your immediate city or region; it couldn't be easier when you're cyber-shopping. You may find that the best deal could be hundreds of miles away at a dealership in another state. Even after you pay the shipping charge, you can still come out way ahead. For instance, a convertible that's all the rage in Los Angeles might not be such a hot item in Minneapolis. Like any other consumer item, it's all about supply and demand.
Finance 101
The best way to buy a car is to pay cash upfront for the whole enchilada. But I realize that's not gonna fly when you are young and broke. So our next task is to make sure you get the best financing deal.
You have two basic options: You can lease (rent), or you can buy the car with an auto loan. (See "Think Twice About Leasing a Car" for why leasing is such a lousy option.)
If you don't have the cash to buy the car outright, a straightforward car loan is your best financing option. And to land a great interest rate on the deal, you need to have a strong FICO score. I've talked about this before, but let's have a quick refresher course.
Just about every financial move you make is tracked by credit bureaus. Based on your timeliness in paying your bills, how much debt you are dealing with, and a maze of other factors, you are given a FICO credit score -- essentially a rating telling potential lenders how safe (or dangerous) it would likely be to lend you money.
The higher your FICO score, the better "risk" you are in a lender's eye. With a great FICO score of 720 or higher, you may be able to land a zero-interest loan. Remember, however, a FICO score is only one part of the formula that determines if you qualify for a loan or not. Your debt, income, employment status, etc., all go into the final lending decision.
When negotiating, do not make financing part of the deal. Your first job is to nail down the price. Only then should you talk financing.
For those of you living in states that do not levy a state income tax or in one where it's very low, your car purchase may in fact trigger a nice tax break. How? In a new law that went into effect this year, you can choose to deduct from your federal tax return either your state income tax or your state sales tax.
I also want to encourage you to shop for your car beyond your immediate city or region; it couldn't be easier when you're cyber-shopping. You may find that the best deal could be hundreds of miles away at a dealership in another state. Even after you pay the shipping charge, you can still come out way ahead. For instance, a convertible that's all the rage in Los Angeles might not be such a hot item in Minneapolis. Like any other consumer item, it's all about supply and demand.
Finance 101
The best way to buy a car is to pay cash upfront for the whole enchilada. But I realize that's not gonna fly when you are young and broke. So our next task is to make sure you get the best financing deal.
You have two basic options: You can lease (rent), or you can buy the car with an auto loan. (See "Think Twice About Leasing a Car" for why leasing is such a lousy option.)
If you don't have the cash to buy the car outright, a straightforward car loan is your best financing option. And to land a great interest rate on the deal, you need to have a strong FICO score. I've talked about this before, but let's have a quick refresher course.
Just about every financial move you make is tracked by credit bureaus. Based on your timeliness in paying your bills, how much debt you are dealing with, and a maze of other factors, you are given a FICO credit score -- essentially a rating telling potential lenders how safe (or dangerous) it would likely be to lend you money.
The higher your FICO score, the better "risk" you are in a lender's eye. With a great FICO score of 720 or higher, you may be able to land a zero-interest loan. Remember, however, a FICO score is only one part of the formula that determines if you qualify for a loan or not. Your debt, income, employment status, etc., all go into the final lending decision.
