How to Save Money on Your Next Vehicle

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Posted on 08/23/2007

Besides a house, a vehicle is probably the most expensive purchase most people make. It costs tens of thousands of dollars, which is no small thing for most of us. So if you're looking to save money overall, saving money on a vehicle purchase is one of the fastest ways to save a chunk of change. Luckily, there are a number of good things you can do to reduce the cost of your next vehicle.

Buy used. Perhaps one of the best ways to save money. When you buy a new car, you lose money as soon as you drive it off the lot, because a used car is automatically worth thousands less than a new car. Even if it's in the same condition. You can get late-model used vehicles (less than 3 years old) that are in excellent condition, for much less than you can get a new car. Thousands less.

Do your homework. Before you even go to a car lot, surf the web. Read reviews from actual users, and decide on the exact make and model you want to buy. Know what you want before you go to the lot. Look up the car's MSRP (manufacturer's suggested retail price) and compare that to the sticker price. Know the pros and cons of the car. Know what it sells for in your area.

Shop around. Again, before you go to a car lot, call the various lots in your area, and ask them how much they're selling the model you're looking for. Let them know you're calling their competitors, as this could easily lower the price. Find the best price, and then visit that lot, ready to negotiate.

Negotiate. Go to a car lot with the knowledge that you are going to talk to a professional salesman whose sole purpose is to make a sale and get a good commission from you. Your sole purpose is to buy the car at as low a price as possible. You are going to do battle. Everything he does will be to get you to pay more. Don't fall for anything. Insist on a low price, and be willing to walk away -- genuinely so. There are other places you can buy that car. He needs the sale more than you need the car. Make a low offer and stick to your guns.

Take your time. If you need to buy a car right away, and you go to buy it at the last minute, you'll get a horrible deal. Instead, give yourself a month or two to buy a car. You might find a better deal, by negotiating with a dealer, telling them you want to think about it, and getting them to call you with a better offer. Or there might be a sale. Or you might be able to go at the time when the salesmen are desperate to meet a quota (often around the end of a month, or a quarter) and just want to sell at any price. Don't rush it.

Buy on cash. This might sound impossible for many people, but if you can make your current car last longer (see next item), instead of trading in every few years, you can actually pay off your current loan, and then save the money you used to make for payments. If you do this long enough, you'll have a large down payment ... or enough to buy a good used vehicle. And buying on cash saves you thousands in interest -- often just as much as the actual price of the car.

Make your current car last longer. This helps with the above item, buying on cash (or paying a big down payment, reducing the amount you get on credit). It also stretches the money you paid on your current car, saving you even more. By keeping your car well maintained -- regular oil changes, changing fluids and filters when needed, etc. -- you are lengthening the life of your vehicle. Drive it for longer, instead of trading it in because it doesn't look new or perfect.

Get the basic configuration. Many times dealers will try to sell you on extra packages, such as the power package, or a sun roof, or leather seats, or a 6-CD changer, or something like that. If you're looking to save money, skip those things. Insist on it, or they'll keep pushing.

Get a standard. Standard transmission generally costs less than automatic. Saves money on gas, too, if you use it correctly.

Go 4-cylinder. Unless your car is really heavy (see next item), you don't need anything more than 4-cylinder. It saves money and gas.

Buy small. Smaller cars cost less -- a lot less in most cases. Buy as small a car as can comfortably seat you (and your family if you have one). And no larger. This can make a huge difference in the final price you pay.

Don't buy cheap. Getting a good deal is one thing, but it's another thing to buy a cheap car that will break down within a couple of years or crumple when you get into a minor accident. Again, do some research, read some reviews from actual buyers and trusted reviewers, and go for a quality vehicle that doesn't cost a lot.

Don't buy credit life or disability insurance. Dealers will try to push this on you. Do not go for it. It sounds good, but it's insurance that is hugely overpriced, and if you tack it on to your loan, you're not only paying way more than you should, you're paying interest on that.

Don't get extended warranty. These are also way overpriced (you can buy them from outside vendors for much cheaper if you want them), and they usually cover very little, even if the salesman tries to tell you otherwise.

Don't get the extras. Salesmen will also try to throw in other stuff -- rust-proofing, undercoating, who knows what else -- that isn't worth the money. Just say no to everything they try to add on. Seriously. It's never cheaper to get these things from the dealer (and especially to pay interest on them through a loan), even if you decide you need those things (which you don't).

Get low interest. Often the financing through the dealer will be at interest rates way higher than you can get elsewhere. Shop around on the Internet before you buy a car. Often credit unions will give you better deals than regular banks.

Buy a bike. The best way to save money on a car: don't buy it. Use public transportation, carpool, walk, and commute by bike if possible. You'll save tons, not only on the price of the car, but maintenance and gas. And help the environment at the same time.

* Hot deals expire quickly. This deal may no longer be valid.

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