Is Now the Time for a New Car?


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Is Now the Time for a New Car?

I've put it off for so long. Although I could have afforded to have a new (modestly priced) vehicle, I've never had a car note. I've always been conservative, especially when it came to being locked in a note of any kind. But we're at the point where I need something else again. When DD was born two years ago, I was driving a small single cab truck, which we sold and got a Mazda Protege. It's been a great little car, but it is now starting to give us problems. The problems are minor and inexpensive to fix, but they are becoming more frequent and the car has 165,000 miles on it. Needless to say, we kind of need to get something else soon.

Right now the prices on new cars are great because nobody is buying them. I'm thinking about a Corolla or Camry. I want something that's inexpensive but very reliable. Are we crazy to consider a new car with the uncertainty of the economy? We can afford the note. However, I just hate the idea of being locked down with a note in case the economy gets worse. Any advice? Julie

Consider a Reliable Used Car Instead

I am on my third reliable used car in the last 17 years. I will never buy a brand new car as I cannot deal with the amount of value that is lost the minute you drive it off the lot. If you shop around you can find a well cared for vehicle with a warranty for much less money. With the slowing economy, many people in my area are abandoning their fancy newer cars in lieu of smaller or no payments. That puts a lot of newer cars out there for purchase. If you live near a college, look there. Many young people buy more than they can afford and have to sell quickly because they cannot make the payments. Since you have the money for the payments, make them to yourself for a while and use that money to pay cash for the car. It does you no good to give away your money in interest. Jamie

Continue to Maintain Current Car

Before you give up on the Protege, look into just getting the minor repairs made. We've owned a 1997 Mazda Protege with a manual transmission since it was brand new. It now has nearly 180,000 miles on it. Beyond oil, antifreeze, gas and tires, we've only had to have the water pump replaced once, some coolant added once to the A/C, and the timing belt changed (it wasn't broke, but we had it changed while the water pump was getting changed). All this work for a little over $600. We did not take it to the dealer. Instead, we used a small shop in town. In all, we've had the car a dozen years, driven by two adults and a teen, and it's still going strong and has been the most inexpensive vehicle we've ever owned. We're keeping ours until it won't run anymore! And I know several people in town who have used this same model until the car reached more than 175K miles and then gave the car to their kids because it was so reliable. Joan

Lender's Advice

I have been a lender for 12 years at a wonderful not for profit credit union, so I can always tell the truth to all of the members I take care of. I go over this with each and every one of my car buyers. This list has saved my members thousands of dollars over the years!

  • Get pre-approved with your credit union before you go shopping. (Credit Unions typically offer the most competitive financing, especially in this economy. Also, it gives you an idea of what kind of budget you can have for the new purchase. Additionally, this helps to protect you from that black hole called the Finance Managers Office where they try to sell you stuff at exorbitant prices to increase their profit tat you don't need! (Except for GAP Insurance. Buy that from your credit union. Best consumer protection for the price. Should not pay more than $300-$350 for this protection though.)

  • I always urge my members to do research on the make/model they are interested in. How much can your budget afford? Check the ads for 2012 make/model(s) that you like and then check the newspapers for the prices being advertised for that same make/model for last year. How much depreciation?

  • Never buy a brand new car, regardless of how much you put down (unless you pay for the car in full). You will be financing at least one year of depreciation. I always buy a car that is at least one year old.

  • Buy a make/model with re-sale value and for dependability. Hate to say it, but Honda, Toyota, Nissan and Subaru hold their value better than American made cars. Hyundai and Kia are getting their acts together however and could be up there in re-sale value within four to seven years!

  • Don't do business with any dealership that tries to rush you into buying.

  • If you are doing research on the Web, be aware that dealerships often offer a lower price on the Web than what is being advertised on the lot. So, if you see a vehicle you like, check the dealership's Web page first and see if it's being offered any cheaper. This happens all the time.

  • Know how much your trade-in is worth. Usually, you can get more for your old car if you sell it outright.

  • Finally, get the car you really like. I can't tell you how many times I have done a loan for one of my members, and they tell me months later that they regret not buying the car that they originally wanted. Be happy with the car you purchase so the monthly payments are easier to live with!

Lynette

Shop Price and Financing First

You have an exquisite sense of timing. Now is a great time to shop for a new car! While a Camry is a bit more expensive than a Corolla. I suggest adding the Toyota Prius, Honda Accord and maybe the Honda Civic to your shopping list. All of these have an excellent history of nominal problems. OK, you do have to change the oil regularly and tend to regular maintenance. Prepare your list of items that you have to have, then a list of wanted items to make the shopping easier.

Shop your financing first. I have found great financing deals at credit unions. Dealers may also have good financing deals, but you will need to know your credit score before shopping. I had a dealership offer me an above market financing rate until I mentioned my credit score (above 775). I told the dealership that they could either give me a competitive rate or keep the car in their inventory. Amazingly, they offered a much better interest rate then.

After you have a handle on financing, use the Internet to get a handle on the dealer's invoice price. At this point in the year, the dealer invoice is about the maximum you should pay for a new car. Do not be afraid to use the Internet to get firm pricing from dealers in near by communities.

The end of December is the ideal time to shop, so go for it. Given you are likely to hold on to the car for quite a while, I suggest you try for a 2012 model rather than a 2013 but if you find exactly what you want in a '13, work on the dealer's price and financing. Richard

Things to Consider

Why not buy a slightly used car (two to three years old) for cash? Then you don't need a note! Prices on used cars should be great now as well. Plus, you aren't losing the depreciation cost, as someone else already did. Also, if you can only afford the note if you keep your job, you'll need to consider how "secure" your job is. Deinken

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