This weekend I went with my daughter to help her shop for a (new to her) used car. Her old car is a 2006, so it was definitely time to start looking for a replacement. I thought it would be helpful to share some of the things we taught her while going through the process.

1. Do Your Research First

When the subject of a new car was first brought up I recognized it as a teachable moment. The first thing I had her do was to determine her budget. By knowing what she could afford to spend, she was able to then narrow down the list of prospects. The next step was to research the vehicles in her price range. She needed to determine which had the highest reliability and safety ratings. This took time, and it’s really important to know all this information before you go to a dealership. Otherwise, she’d run the risk of falling in love with something and walking away with a five to six-year commitment to something she couldn’t afford. Doing the research took a couple of months before we were ready to go to the dealership.

2. Use Your Connections

One of the hardest things to do when buying a vehicle is to walk out of the dealership without feeling like you got screwed. Since most of us don’t buy cars very frequently, it’s also difficult to find someone trustworthy to work with. The next bit of homework I gave my daughter was to talk with her friends and coworkers. Do any of them know someone or have recommendations? As it turned out, one of her coworker’s father worked at a local dealership.

This was the best-case scenario, but even just getting a referral from someone can be a major help. Not only does it help you build trust with your sales rep, but it can also help when negotiating the purchase. Many dealerships tend to reward repeat customers and referrals.

3. Test Everything

Finally, we arrived at the point of test driving some vehicles. She had set up the appointment ahead of time and confirmed our schedules were free to accompany her. Before we drove the first vehicle, we did a full walk-around and noted any defects. I showed her how to inspect the tires, brakes, and look for signs of rust or major accident damage. Additionaly we listened to the engine run for several minutes. This last step is important because you can negotiate to fix any discrepancies when working out the details if you decide to purchase.

Once on the road, we had her really push the acceleration and braking to feel for any vibrations. This was hard for her to do since normally she treats other people’s things with respect. We also tested all the electronics such as A/C, heating, power windows and seats, stereo, etc. The only real issue we found was with some staining on one of the seats on the car we ended up purchasing. The dealership agreed to thoroughly clean the interior.

4. If Paying Cash, Don’t Bring It Up During Negotiations

You may have heard advice from your parents to tell the sales rep that you’re paying cash to get a price break. But nowadays, that doesn’t get you a discount like it did in the past. A lot of dealerships actually have their own financing division or deals with preferred institutions that bring in substantial income. In these situations paying cash can actually be a negative. If you are financing a loan, be sure to shop around rates before getting to this point.

As we knew she was planning to finance, we should have done this before getting to the dealership. Luckily, we were able to do some quick Googling during the test drives to get a feel for the going rates. We almost forgot to check on insurance prices too, but this didn’t turn out to be much of a problem. Newer cars tend to have more safety features which in turn lowers rates. But it is always better if you check this before going to the dealership as well.

5. Closing the Deal

If you’ve done your research, and found a sales rep that you feel comfortable working with, this part of the process becomes much easier and feels less sleazy. We countered their first proposal with a reasonable number, within 10% of the initial ask, to show we were serious about making a deal. My reasoning was that there were similar cars in the area for less and we felt our trade-in should be valued higher due to other comparables. The dealership countered slightly above our ask, which actually ended up better than we expected the final numbers to be. We probably could have haggled for a couple of hundred dollars more, but we felt like it was a very fair offer. Ultimately that’s what I’m looking for when I make a large purchase.

Final Thoughts

In the end, the biggest asset we took with us to the dealership when shopping for a vehicle was the research we did beforehand. It allowed us to narrow down our search parameters so we didn’t spend hours test driving and it gave us the ammunition to negotiate a better purchase price and financing rate. We walked out of the dealership feeling like both sides got a fair deal, and our daughter ended up with an affordable used car that she is excited to own.

Want More?

  • How I’m Becoming a (Financial) Dragon: 3 Easy Steps
    How I’m becoming a (financial) dragon, AKA investing for retirement. I Look beyond traditional methods of saving like 401ks and IRAs.
  • Trading Platform Reviews
    Trading stocks in 2020 is the easiest it’s ever been. Trading platforms Robinhood, TD Ameritrade and Webull all allow for quick deposits and fast trades, and we’re going to review them here today.
  • Tips to Improve (or Start) your Budget
    Creating and maintaining a budget for your personal finances is an important step toward improving your financial health.
  • 5 Tips for Buying a Used Car
    Sharing some of the tips I taught my daughter while helping her shop for a new (to her) vehicle.
  • Tax Returns: Good or Bad?
    Is it better to to receive a refund or should tax withholdings be optimized?