Car Buying 101
February 28, 2013 8:50 AM Subscribe
I need a car. I'm poor. I've never bought a car before, and it's been a long time since anyone in my family has bought one. Need guidance. How do you buy a car?
I am so very tired of driving old used cars that break down every couple of months. My current car (1994 buick lesabre) is leaking coolant and has now developed a putputting when accelerating. Not to mention it eats gas like it's candy.
I assume, being poor and all, that I can't afford a new car. I'd have to get a used one. Problem is that I don't know how to buy any kind of car, new or used. I see advice that says I should get preapproved for a auto loan, but where do I even get one of those?
I could, at most, afford a $200 monthly payment. Is it even possible to have a car loan that's sub $200? I see tv advertisements that say I can, but I am skeptical. There's gotta be strings attached.
How do I even know, if I buy a used car, that it's not going to break down on me within a year of buying it?
Complete car newbie here. I don't know what I'm doing. All my prior experience has been "for sale by owner" types. Hope me.
Possible relevant details: I do not live in a place where public transportation is an option. I already car pool for work, but this doesn't work for grocery shopping. Work is a 20 minute commute over pot-hole ridden roads
I am so very tired of driving old used cars that break down every couple of months. My current car (1994 buick lesabre) is leaking coolant and has now developed a putputting when accelerating. Not to mention it eats gas like it's candy.
I assume, being poor and all, that I can't afford a new car. I'd have to get a used one. Problem is that I don't know how to buy any kind of car, new or used. I see advice that says I should get preapproved for a auto loan, but where do I even get one of those?
I could, at most, afford a $200 monthly payment. Is it even possible to have a car loan that's sub $200? I see tv advertisements that say I can, but I am skeptical. There's gotta be strings attached.
How do I even know, if I buy a used car, that it's not going to break down on me within a year of buying it?
Complete car newbie here. I don't know what I'm doing. All my prior experience has been "for sale by owner" types. Hope me.
Possible relevant details: I do not live in a place where public transportation is an option. I already car pool for work, but this doesn't work for grocery shopping. Work is a 20 minute commute over pot-hole ridden roads
As a general principle, I find the $5000-$6000 range to be the sweet spot for used vehicles. Get your loan set up with the bank and start poking around Craigslist or AutoTrader. Personally I'd focus on used Fords, Toyotas, and Hondas. And for the love of God, please don't buy a Jeep.
posted by jabes at 9:09 AM on February 28, 2013 [4 favorites]
posted by jabes at 9:09 AM on February 28, 2013 [4 favorites]
Reputable seller, late model, low miles, clean carfax.
If you are poor and you need advice about this, look at the websites of your local credit union. See how much they talk about financial education and auto loans. (I work for a credit union but not your credit union.)
Credit unions that are also CDFIs (Community Development Financial Institutions) are especially committed to helping struggling working people make the most of their finances (pdf listing CDFIs in your state).
posted by headnsouth at 9:16 AM on February 28, 2013
If you are poor and you need advice about this, look at the websites of your local credit union. See how much they talk about financial education and auto loans. (I work for a credit union but not your credit union.)
Credit unions that are also CDFIs (Community Development Financial Institutions) are especially committed to helping struggling working people make the most of their finances (pdf listing CDFIs in your state).
posted by headnsouth at 9:16 AM on February 28, 2013
I could, at most, afford a $200 monthly payment. Is it even possible to have a car loan that's sub $200? I see tv advertisements that say I can, but I am skeptical. There's gotta be strings attached.
I bought a used 2010 Dodge minivan last year for $10,000, but I put $3,000 down, which got me a 2.9% interest and $135 monthly payment through my credit union. So it can be done, but the more you have for a down payment, the better.
If it's not feasible to get the money together for a down payment I too would recommend fixing your current car. The aforementioned van is for my wife, but I'm still driving a 1989 Ford Taurus with peeling paint, because it only costs me about $300 a year in maintenance.
posted by Doleful Creature at 9:19 AM on February 28, 2013 [1 favorite]
I bought a used 2010 Dodge minivan last year for $10,000, but I put $3,000 down, which got me a 2.9% interest and $135 monthly payment through my credit union. So it can be done, but the more you have for a down payment, the better.
If it's not feasible to get the money together for a down payment I too would recommend fixing your current car. The aforementioned van is for my wife, but I'm still driving a 1989 Ford Taurus with peeling paint, because it only costs me about $300 a year in maintenance.
posted by Doleful Creature at 9:19 AM on February 28, 2013 [1 favorite]
I could, at most, afford a $200 monthly payment. Is it even possible to have a car loan that's sub $200?
Yes. Depending on how good your credit is and how much of a down payment you could make, it is possible to get a decent car for about 200 bucks a month.
There are two parts to shopping for a car : Shopping for the car and shopping for the financing.
To find out about financing, you cant talk to your bank or credit union and see what you can get pre-approved for. They'll also be able to tell you what your monthly payments would be at various rates and durations.
Dealerships can offer financing, and it can be competitive with banks - but talk to a bank or three beforehand so you know what you can get at what rates.
You can lower your payment by extending the term. This is sort of bad, because you will pay more in interest. However, you might find it worth the extra cost.
You might consider a lease. You can get into a new car with a warranty for a lower monthly payment than buying it. The downside is that at the end of the lease term, you won't have any value at all - you're paying X dollars per month to use a car. It's not a terrible deal - my wife loves leasing cars - but, they are not for everyone.
Once you know how much money you can get, go shop for cars in that price range.
Whatever you do, make sure you understand the terms of the deal. Even bring it back here and ask us to help. Time is on your side, so do not feel pressured to buy any car - absolutely take a day or two to think on it.
I love shopping for cars. There are some tricks and stuff, but it's not rocket science. You can do this.
posted by Pogo_Fuzzybutt at 9:20 AM on February 28, 2013 [1 favorite]
Also: I got my loan through a credit union. Unless you're already independently wealthy you should probably be doing all your financial stuff through a credit union and not a bank.
posted by Doleful Creature at 9:21 AM on February 28, 2013 [1 favorite]
posted by Doleful Creature at 9:21 AM on February 28, 2013 [1 favorite]
It really, really depends.
1. Fix on a budget. You may want to talk to your bank or credit union about it. You say you only want to pay $200 per month, but for how long? How much money will you put down?
According to KBB.com, you can get around $1000 for your car as a trade in.
2. Play around with a Auto Loan Calculator. A $10,000 loan for 60 months at 3% interest will be $167.00 per month.
3. Once you have your budget, find out what the best cars are. Husbunny works for an aftermarket, extended warranty company and he says the best cars (according to their massive data) are Honda and Toyota. Cheap to fix, rarely need anything fixed.
4. Research on KBB.com and Edmunds.com the models you're interested in. Narrow it down to a couple of makes and models (for you, I'd recommend a Honda Fit, Honda Civic, Toyota Corolla or Toyota Yaris.)
5. Test drive them. I'd go to a dealer because they'll have a few different ones on the lot to check out. This will narrow it down even further which car you want to own.
6. Now that you know the model, look around different lots to find the one that's the best deal. You can do this via on-line inventory.
7. Once you pick out the car, before you buy it, get the Carfax and take it to a mechanic for a full assessment of anything you need to know about the car (will the wheels fall off, is the transmission shot, etc.)
8. Since you have financing already in place, you'll negotiate two things. What they'll give you for your trade, and what you will pay for the car. Don't be in love with the car. Have a price in your head, and if they try to mess with you, walk away.
Do as much research as you can, and don't be intimidated. If you have a more experienced friend, take that person with your for moral support.
posted by Ruthless Bunny at 9:23 AM on February 28, 2013
1. Fix on a budget. You may want to talk to your bank or credit union about it. You say you only want to pay $200 per month, but for how long? How much money will you put down?
According to KBB.com, you can get around $1000 for your car as a trade in.
2. Play around with a Auto Loan Calculator. A $10,000 loan for 60 months at 3% interest will be $167.00 per month.
3. Once you have your budget, find out what the best cars are. Husbunny works for an aftermarket, extended warranty company and he says the best cars (according to their massive data) are Honda and Toyota. Cheap to fix, rarely need anything fixed.
4. Research on KBB.com and Edmunds.com the models you're interested in. Narrow it down to a couple of makes and models (for you, I'd recommend a Honda Fit, Honda Civic, Toyota Corolla or Toyota Yaris.)
5. Test drive them. I'd go to a dealer because they'll have a few different ones on the lot to check out. This will narrow it down even further which car you want to own.
6. Now that you know the model, look around different lots to find the one that's the best deal. You can do this via on-line inventory.
7. Once you pick out the car, before you buy it, get the Carfax and take it to a mechanic for a full assessment of anything you need to know about the car (will the wheels fall off, is the transmission shot, etc.)
8. Since you have financing already in place, you'll negotiate two things. What they'll give you for your trade, and what you will pay for the car. Don't be in love with the car. Have a price in your head, and if they try to mess with you, walk away.
Do as much research as you can, and don't be intimidated. If you have a more experienced friend, take that person with your for moral support.
posted by Ruthless Bunny at 9:23 AM on February 28, 2013
The best bang for your buck might be a class a two or maybe a book or two and watching some youtube how-to videos on car repair and some tools. There are a LOT of used cars out there for less than 1000 that only need about 500 or so in parts to turn into a great car (unfortunately I wouldn't include 90's le sabre in this category). I would include a early 90's honda, toyota or some fords (escorts and rangers) in this category. There are usually pretty easy to work on, there is a TON of on line articles on them and Ebay and used book stores are full of automotive mechanics text books and quite a few community colleges offer continuing education classes on basic car stuff.
And some investment in your knowledge will pay HUGE dividends latter on evaluating the crap in the used car market (most of it-especially on buy here-pay here lots) from the diamonds in the rough (a lot of the cheap come and get it stuff on craigslist). Most repairs can be done fairly quickly and easily in a parking lot (assuming good weather) if you have some idea what you are doing. A decent set of basic tools can be had cheap on craigslist as well, and there are even threads on here discussing how to find them and what you need.
And the best, cheapest and easiest to maintain used car is an older compact two wheel drive pickup, ford ranger, toyota or nissan would be my recommendation. Nothing 4WD or modified, just somebodies commuter truck. They are usually sub 5000 and often much cheaper. They are simple and easy to diagnose and repair and are really, really useful when moving time comes around. BTW this is pretty much my universal advice for every new driver (usually teenager) or their parents for the perfect first car to learn all about owning a car and maintaining one.
posted by bartonlong at 9:30 AM on February 28, 2013 [1 favorite]
And some investment in your knowledge will pay HUGE dividends latter on evaluating the crap in the used car market (most of it-especially on buy here-pay here lots) from the diamonds in the rough (a lot of the cheap come and get it stuff on craigslist). Most repairs can be done fairly quickly and easily in a parking lot (assuming good weather) if you have some idea what you are doing. A decent set of basic tools can be had cheap on craigslist as well, and there are even threads on here discussing how to find them and what you need.
And the best, cheapest and easiest to maintain used car is an older compact two wheel drive pickup, ford ranger, toyota or nissan would be my recommendation. Nothing 4WD or modified, just somebodies commuter truck. They are usually sub 5000 and often much cheaper. They are simple and easy to diagnose and repair and are really, really useful when moving time comes around. BTW this is pretty much my universal advice for every new driver (usually teenager) or their parents for the perfect first car to learn all about owning a car and maintaining one.
posted by bartonlong at 9:30 AM on February 28, 2013 [1 favorite]
Response by poster: I suppose this is a relevant detail I should mention.
My father is a mechanic. He retired out of GM after many many years. And while his reliability to fix my cars is inconsistent (He has been "fixing" my car since November), I am sure he would accompany me to make sure I wasn't buying a lemon.
I just can't rely on him for devoted commitment. The more I can do on my own, before acquiring his help, the better.
posted by royalsong at 9:41 AM on February 28, 2013
My father is a mechanic. He retired out of GM after many many years. And while his reliability to fix my cars is inconsistent (He has been "fixing" my car since November), I am sure he would accompany me to make sure I wasn't buying a lemon.
I just can't rely on him for devoted commitment. The more I can do on my own, before acquiring his help, the better.
posted by royalsong at 9:41 AM on February 28, 2013
I'm a paycheck-to-paycheck person that is going through this process right now.
Step one is absoloutely to talk with your local credit union (not bank, credit union) about getting pre-approved for a loan. They'll ask you questions about your income (sources and amount) for the past three years, will check your credit rating, and talk with you about what you can afford for a monthly payment. We have good credit so our rate for a 48 month loan is under 4%, but if you have bad credit your interest amount could go up as high as 11 or 12%.
Once you have the pre-approval, do a lot of reasearch: look at autotrader.com and cars.com as well as local dealer websites for cars that are actually for sale, plus Kelly Blue Book (kbb.com) and Edmunds for car values and reliablity ratings. Consumer reports also puts long term reliablity ratings on-line but they're subscriber only -- see if your local public library can give you access to the on-line or print version of their used car reports.
Be patient, it takes time to find a solid car in the sub $9000 price range. Do a few hours of research to see what is the best possible car at your price point, and then wait for the perfect car to appear for sale. Typically a pre-approval on an auto loan is good for 30 days, so you have a little time. Don't settle for a car that isn't really what you want in a price range higher than you can comfortably afford.
posted by anastasiav at 9:46 AM on February 28, 2013 [1 favorite]
Step one is absoloutely to talk with your local credit union (not bank, credit union) about getting pre-approved for a loan. They'll ask you questions about your income (sources and amount) for the past three years, will check your credit rating, and talk with you about what you can afford for a monthly payment. We have good credit so our rate for a 48 month loan is under 4%, but if you have bad credit your interest amount could go up as high as 11 or 12%.
Once you have the pre-approval, do a lot of reasearch: look at autotrader.com and cars.com as well as local dealer websites for cars that are actually for sale, plus Kelly Blue Book (kbb.com) and Edmunds for car values and reliablity ratings. Consumer reports also puts long term reliablity ratings on-line but they're subscriber only -- see if your local public library can give you access to the on-line or print version of their used car reports.
Be patient, it takes time to find a solid car in the sub $9000 price range. Do a few hours of research to see what is the best possible car at your price point, and then wait for the perfect car to appear for sale. Typically a pre-approval on an auto loan is good for 30 days, so you have a little time. Don't settle for a car that isn't really what you want in a price range higher than you can comfortably afford.
posted by anastasiav at 9:46 AM on February 28, 2013 [1 favorite]
Also, consider socking away $200 a month for the next six months, *then* buying the car. You'll have $1200 more for the down payment. I know this could be hard (especially while you're carrying the expenses of your older car, but it will also give you an idea of whether a $200/month payment will really work for you.
posted by mskyle at 10:58 AM on February 28, 2013 [3 favorites]
posted by mskyle at 10:58 AM on February 28, 2013 [3 favorites]
Whether or not you can afford a new car for under $200/month is dependent on a number of different factors. I just bought my first brand new car (2 days ago!) and the car payment is about $260 a month ($0 down). However, the car is a Chevrolet Spark, which is mostly a city car, due to it being small and "underpowered." Regardless, I seriously adore it and found it to be one of very few sub sub-compact cars with 4 doors & heated seats (I've always wanted a car with heated seats). I bought the 2LT model, but the LS model has a starting MSRP of $12,185.
My car loan is for 6 years at an APR of 2.89%. I do not have great credit, but I also don't have anything derogatory recently, I own a home, and have a well-paying job that I've been at for 8 years. What I learned during my car-buying process (which took less than two weeks) was that the credit score that is generally used for auto financing rates is completely different than the scores you'll get from the three bureaus. It's commonly referred to as an auto enhanced score and is not, unfortunately, available to consumers (so you can't pull it and check to see if it's okay).
I applied for financing at a number of different places. I only remember the two lowest offers. Capital One offered me a car loan at 3.57% for a new car (used was 4.03%) while Bank of America's rate was 3.08% for a new car (3.53% for a used car). I told the dealer that I'd been offered 3.08% and their finance department offered 2.89% (they didn't even require proof of the BOA rate!).
The insurance is definitely higher on a new financed car since you have to get collision, etc. I pay ~$50/month for my 2001 Honda Civic, but the Spark is ~$120/month. Property taxes will also be higher.
Oh, and pretty much all dealers these days have a website where you can get an "internet price." This price is usually the lowest that the dealer will go and it is generally available for both new and used cars. Here is an example from the place where I bought my Spark. The listed internet price will not always be available to you as it includes rebates that you might not qualify for (the internet price for the car I bought included a $750 reduction for being a USAA member, which I am not so my price ended up being $750 higher than the internet price). If you find a car on a website that you like and the internet price is not listed, there will usually be an option for you to ask for a quote. The internet sales department will then send you the internet price, but they now have your e-mail address which can be annoying. So if you go that route, a single use e-mail address might be best. I'm still receiving e-mails from dealers.
But really- the best advice for a buying a car is to do A LOT of research before you ever even begin talking to a salesperson (whether you're buying from a dealership or a private seller).
posted by eunoia at 11:45 AM on February 28, 2013
My car loan is for 6 years at an APR of 2.89%. I do not have great credit, but I also don't have anything derogatory recently, I own a home, and have a well-paying job that I've been at for 8 years. What I learned during my car-buying process (which took less than two weeks) was that the credit score that is generally used for auto financing rates is completely different than the scores you'll get from the three bureaus. It's commonly referred to as an auto enhanced score and is not, unfortunately, available to consumers (so you can't pull it and check to see if it's okay).
I applied for financing at a number of different places. I only remember the two lowest offers. Capital One offered me a car loan at 3.57% for a new car (used was 4.03%) while Bank of America's rate was 3.08% for a new car (3.53% for a used car). I told the dealer that I'd been offered 3.08% and their finance department offered 2.89% (they didn't even require proof of the BOA rate!).
The insurance is definitely higher on a new financed car since you have to get collision, etc. I pay ~$50/month for my 2001 Honda Civic, but the Spark is ~$120/month. Property taxes will also be higher.
Oh, and pretty much all dealers these days have a website where you can get an "internet price." This price is usually the lowest that the dealer will go and it is generally available for both new and used cars. Here is an example from the place where I bought my Spark. The listed internet price will not always be available to you as it includes rebates that you might not qualify for (the internet price for the car I bought included a $750 reduction for being a USAA member, which I am not so my price ended up being $750 higher than the internet price). If you find a car on a website that you like and the internet price is not listed, there will usually be an option for you to ask for a quote. The internet sales department will then send you the internet price, but they now have your e-mail address which can be annoying. So if you go that route, a single use e-mail address might be best. I'm still receiving e-mails from dealers.
But really- the best advice for a buying a car is to do A LOT of research before you ever even begin talking to a salesperson (whether you're buying from a dealership or a private seller).
posted by eunoia at 11:45 AM on February 28, 2013
How many miles do you have on the LeSabre? Is there anything else wrong with it? How many passengers do you usually carry? Do you drive on the highway often? Long trips or short trips?
IIRC, those Buicks run on the 3800 V6 that is prone to coolant leaks. It could be a water pump ($300 max) or the intake gasket- $600-1000, depending on if you pay a mechanic or DIY. If it's feasible, you could get a thorough breakdown on what's going on with your car, then opt to fix it while you save more money for another ride.
Be careful, after my GM v6 started putt-putting, it wasn't long before the gasket completely went out and it was cheaper to just drop another engine in there.
posted by Giggilituffin at 12:33 PM on February 28, 2013
IIRC, those Buicks run on the 3800 V6 that is prone to coolant leaks. It could be a water pump ($300 max) or the intake gasket- $600-1000, depending on if you pay a mechanic or DIY. If it's feasible, you could get a thorough breakdown on what's going on with your car, then opt to fix it while you save more money for another ride.
Be careful, after my GM v6 started putt-putting, it wasn't long before the gasket completely went out and it was cheaper to just drop another engine in there.
posted by Giggilituffin at 12:33 PM on February 28, 2013
When buying a used car, it's worth the money to have it evaluated by a reputable mechanic.
posted by gteffertz at 3:05 PM on February 28, 2013
posted by gteffertz at 3:05 PM on February 28, 2013
Buy or borrow from the library Don't Get Taken Every Time. It was absolutely priceless in our car buy experience.
posted by HMSSM at 7:44 PM on February 28, 2013 [2 favorites]
posted by HMSSM at 7:44 PM on February 28, 2013 [2 favorites]
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Car loans are more expensive for used cars than new cars.
Still, if you have good credit, you can get a reasonable loan for a used car, maybe at 4.9% or so.
So, if you can get a loan at 4.9% for 48 months, you can buy a car worth about $8500 for less than $200/month.
Keep in mind that *you will be paying for this for four years*. If you had a kid tomorrow, they could learn to read before your car was paid for. You will still be paying for the car into 2017. Obama will no longer be president when you're done paying for your car. I say this because I want you to realize what sort of commitment a car loan is.
So. Go to your bank or another financial institution and tell them, "I want to get a loan for a used car" and they will work it out for you, as long as your credit is good. Make sure they give you a reasonable rate. If you can, tell them you intend to put $1,000 down. This will get you a better interest rate.
Once they approve you for a loan, they can essentially hand you a blank check that you're allowed to write up to some pre-approved amount. You can take this to a dealer or private party and exchange it for a car, filling in the amount as appropriate. A private party will want to verify that the check is actually good before handing over the title to their car. This is easiest if you meet at the bank that issued the check so that they can give the money directly to the seller.
All this given, you don't have any money, so if it were me, I'd just fix the Buick, because being beholden to some bank for four years, which includes the time in 2016 when your car is four years older than it already is, sucks and is not worth it.
posted by tylerkaraszewski at 9:02 AM on February 28, 2013