My First Used-Car Purchase
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One-you have "moderately bad credit". What exactly does that mean? Do you know your FICO score? What is "bad" about your credit? A couple of 30 day late pays? A bankruptcy? If I were buying a car and planned on financing it, I'd have some sort of approval arranged way before I went to the dealer. Otherwise, its Saturday, you want to take your car home, and you have to take what the dealer offers if you want to close the deal. That puts you in a horribly weak position.
So-go to myfico.com or wherever (Fool Credit Center); get a copy of all three of your credit reports (Transunion, Equifax and Experian) along with your scores. This will cost about $30 ASSUMING you have to pay for it. Some states require that you be given one free copy of your credit report per year. If you have been turned down for credit, you are automatically eligible for a free copy of a report from any/all bureaus that provided information on which the turndown was based. You need to know exactly where you stand.
Anyway-once you know what the credit bureaus are saying about you, make sure everything is correct-typically credit bureaus are a couple months behind, so don't focus your exact loan balances or whatever. Make sure the report is basically accurate, because that is what determined what kind of financing you're going to qualify for. If there are major errors-collections that aren't yours, whatever, get them corrected immediately. You can dispute errors online.
Once you have that, go to your own bank/credit union whatever. Tell them what you're doing and that you want an idea of what they will offer you in terms of financing options. You might also want to check with www.peoplefirst.com as well. They offer to send out "blank checks" that allow you to shop like a cash buyer. Their rates are decent.
When you have all this done, you can compare what you have found with what the dealership will offer you, and take the deal that works best for you.
Ok-now buying the car.
Negotiations should never be based on the asking price. That is irrelevant. The dealership can ask for anything they want. Dealerships all have different policies about pricing and markup-some car dealerships put a firm price on all their cars, like Saturn. Some dealerships mark their cars up thousands of dollars above their "bottom dollar." You need to go to a bookstore and spend $5 so you can have a copy of a current NADA Guide in your hand when you go shopping.
Rule one-negotiate in good faith. Don't talk numbers about a car you don't want. It's a waste of everyone's time. That's why you window-shopped on Friday and made offers on Saturday in the first place.
Once you have picked out a car you like, on Friday and would like to own, come back on Saturday and begin negotiations. Tell the salesman you are considering two or three cars, but this one is your first choice. Start your offer at NADA trade value, after adjusting for equipment and miles. Say "I will buy this car right now, for xxx, and put down $1000 today as a refundable partial payment, until we can get the car inspected by my own mechanic and get the financing details worked out. And then sit back and see what the salesman says. Be prepared for a little back and forth. Be calm-this is business, and nothing else. Maybe he'll take your offer. Probably not, though.
Possible responses-sorry, nice talking to you, declines to make a counter offer. Time to leave, at least for now. If you really, really like the car, maybe you'll pay asking price, especially if it is somewhere close to your first offer. But if asking price is three thousand dollars higher than your offer, and the salesman wont counter, the only way to find out if there is any wiggle room at all is to leave. Maybe he'll call Monday, maybe not. Lots of cars out there. Go to the next store
Second possible response-small movement. If he moves $200, you move $200. Depending on how far apart you start, and how much you like the car, be prepared to spend a bit of time on this process. If you cant get to within $1000 of your first offer, leave. Smile, be nice, ask him to call you on Monday if he decides he wants your money.
Third possible response-large movement-comes down $2500 right away. Maybe you're real close-come up the same $200 at a time, and see what he says.
You might spend your whole Saturday in this process, which is fine. Get all dealership offers in writing, don't get in a hurry, don't deal with people you wouldn't want in your living room. If you don't get together with anyone on Saturday, you'll have two or three or four "best offers" on cars you like to evaluate on Sunday. Make sure you get bottom line totals with each dealership proposal-taxes, fees, everything.
Sunday you decide the most you'll pay for each car, and when the salesman calls you with his "last best offer" you can give him your "last best offer." see if any of them move. Based on where you are Monday afternoon, take the best deal you've found and buy a car.
Now, once you've got the car picked out and the figures agreed upon, arrange for the inspection. In most cases this will be just like buying a home, at the buyer's expense. You might ask the dealer to pay/split the cost, but I wouldn't expect that to get you very far. Asking is free though.
You will want the shop to test the starting system (battery, alternator and starter) pull at least two of the wheels and check the brakes, inspect the underside of the car-shocks, exhaust, etc, check the coolant for level of protection, check all the fluid levels, check for evidence of frame damage, and confirm proper operation of all features and accessories-stereo, air conditioning, heat, power equipment, transmission shifting, etc. If you're buying a late model car from a reputable dealer, this should pass no problem. Whether you need a compression check on a relatively new car, I don't know. It wouldn't hurt. A thorough inspection should cost between one and two hours labor-so if the shop's labor rate is $65/hr budget between $65 and $130. Make any agreement to purchase subject to satisfactory inspection.
Then take whatever financing-the dealership's, or what you find on your own-works best for you.
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