How do I know what price to pay for a car?

Let’s say you see a nice used car that you like on a dealer’s lot that is priced at $14,000. Is it a good price? Can I talk the dealer down to, say, $12,000? How much discount can I expect to get?

These are all common questions when shopping for used cars, especially if it’s your first car.

Let’s look at the answers.

Used car prices can vary greatly – even for the same make, model, year, and condition. Prices tend to follow the laws of supply and demand. Large gas-guzzling SUVs are cheaper in times of high gas prices. Convertibles are more expensive in sunny Florida than in cold North Dakota. Used car prices are cheaper when dealers have too many on their lots.

Dealers are experts at knowing local car-buying customers, what they want, and what they are willing to pay. They set their used car prices accordingly. However, dealers make more profit on used cars than on brand new cars. This means there is a lot of “wiggle room” in used car prices – a relatively large difference between what the dealer has invested in his cars and the prices he sets for those cars. Unfortunately, there is no way for us as consumers to know what a dealer has paid for his used cars.

Check prices to know what is fair

The first step to getting a fair price on a used car is to find out how much the car is worth. Is the dealer’s asking price fair or not? If not, then it is time for some negotiation.

Some newcomers to car buying assume that there is some kind of “standard” price for used cars. It is not true. However, there are used-car pricing guides, such as Kelley Blue Book and NADA Guides, that compile data from a variety of sources to publish their version of suggested prices, based on make, model, year, equipment, mileage, condition, and region of the country.

These guides often differ significantly in prices for the same vehicle, same mileage, same everything. Confused car buyers often ask, “Which is right?” or “Which is more accurate?”  Neither is more right or more accurate. However, the guides serve as a good benchmark for determining a fair price for a car you may be considering to buy. For example, if a dealer is asking $14,000 for a car that the guides show as only being worth $10,000, he’s asking too much and it’s time to negotiate a fairer price.

If you don’t check prices

We’ve seen questions from car buyers who ask something like, “How much can I talk a dealer down on this $14,000 car?”  The answer to the question is really another question. It is not so much how much you can talk him down, as it is how much is the car worth?

For example, a dealer may put a $14,000 price on a car that is worth only $10,000. He hopes that he’ll get a customer who hasn’t done her price research and who will “talk him down” to $12,000. The customer is happy because she thinks she got a $2000 price discount, and the dealer is happy because he sold the car for $2000 more than it was worth.

Asking prices are not selling prices

Nearly all used cars are sold for a price that is less than the original “asking” price. Dealers post asking prices on used car window stickers. Individuals selling used cars advertise them with asking prices. Dealer asking prices may be 20% or more higher than selling prices. Individuals usually price their cars about 10% higher than the price they are willing to accept.

Negotiate based on car’s condition

If you find a car you like and the price seems fair for a car in good to excellent condition, make sure you get a mechanic’s inspection and have the mechanic document any problems he finds. Assuming the problems are not serious enough to stop you from buying the car, use the mechanic’s report to negotiate for a lower price.

Also get a Carfax vehicle history report and do the same thing. If the car has been in an accident, even if the repairs have been done expertly, use the information to try to get a better price.

Where to buy

Used-car dealers are an obvious source of  used cars but it takes time to visit and find out which ones have cars you might be interested in. One way to save time is use an online site such as UsedCars.com that lets you search for discounted cars from dealers in your area.

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refinance auto loanRefinancing your car loan can often lower your monthly payments.

Auto loan interest rates are hovering at the lowest rates seen in many years. If you are currently paying a high rate, you may be able to benefit by refinancing at a lower rate.

Depending on the value of your car and the amount you owe on your loan, you might even be able to refinance and get cash back out of the deal.

Refinancing an auto loan is similar to getting any other used-car loan. You might refinance with the same company with which you have your current loan, or you might go to a different bank or loan company.

If you bought your car new and financed your loan through the car manufacturer’s “captive” finance company, you might find that the company does not do refinance loans. In this case, you’ll have to go to a bank or loan company for your loan.

Loan rates vary between different banks and finance companies. Refinance rates are usually higher than new-car rates, but lower than ordinary used-car rates. Shop around for the best rates.

Read the rest of this entry »

used car valuesOne of the most frustrating things about buying a used car is knowing not how much it’s worth — its value — a fair price to pay.

Two cars of the same year, make, model, condition, and mileage can have two very different values, depending on who is making the valuation. Even the same car can have different values, again depending on who you ask.

Companies such as Kelley Blue Book (kbb.com) and Nadaguides (nadaguides.com) make it their business to publish used car value guides, where their values are based on a number of variables such as auction prices, mileage, condition, optional equipment, market supply and demand, regional differences, and past price history. With all their expertise and experience, the values they produce are nothing more than educated estimates. One company’s analysis of the data will nearly always produce a different result than another’s.

Read the rest of this entry »

best car Honda CivicWe see this question being asked frequently: “What is the best car to buy?”

Of course, the real answer as to what is the best car can vary, depending on your own personal needs, preferences, and finances. Some people place a great deal of importance on reliability. Others might think safety or cost is more important. And others might feel that the best car should have great looks and high performance.

Many people believe that to get the best car, you must spend a lot of money — that the best cars are the most expensive one. Strangely, this is just not true. Actually, some of the best cars are the least expensive — and some of the most expensive cars are the least reliable and the least efficient.

One of the best automobiles, overall, is the Honda Civic. Why? Because it has the most perfect combination of all the factors that most car buyers look for — cost, fuel efficiency, reliability, cost of operation, cost of insurance, style, performance, resale value, riding comfort, luxury features, and handling.

Read the rest of this entry »

We hear the question all the time, “Where can I find a good cheap reliable car?”

The people who ask this question obviously have limited funds but are looking for the best car that can be purchased with the least amount of money. Unfortunately, finding a car that’s inexpensive AND good AND reliable can be very difficult. Although not impossible, it’ll take a lot of looking, test driving, and inspecting before the right car is found, at the right price.

Cars with prices in the $1000-$3000 price range (cheap) will nearly always be cars that are at least 10-15 years old, with lots of miles, considerable wear-and-tear, and may have been damaged at some time in its life. Again, this doesn’t necessarily make them bad cars, but it’ll take some effort to prove otherwise.

We also often see questions about which vehicles are the most reliable. Although some vehicle brands such as Honda and Toyota have exhibited outstanding reliability over many years, it doesn’t mean that every Honda and Toyota is reliable, especially those with lots of miles, accident damage, and those that have been driven hard and maintained poorly. It’s not wise to assume that an old Honda or Toyota, or any other brand, is going to be a good (or bad) buy based on the brand’s reliability reputation.

Read the rest of this entry »

stickshiftOne of the questions we see pop up often from young drivers is “How to drive a stick shift (manual transmission) car?”

The question arises for a number of reasons. Some people who are driving for the first time know they’ll be driving a “stick shift” car and are concerned that it might be difficult to learn. Others who have been driving automatic transmissions for years may be looking to buy a manual shift vehicle for the first time.

Manual transmissions (often called “standard transmissions”) were around a long time before automatics. It wasn’t that long ago that most cars had manual shifts although now it’s the other way around.  Manual shift is popular with car enthusiasts who enjoy the feeling of greater control over the operation of their cars. Some car owners feel that a manual is more fuel-efficient and provides better performance, although that’s not necessarily so with today’s much improved automatics.

Read the rest of this entry »

Buying a first car, or even a second or third, can be a perplexing and stressful experience. There’s so much to know and understand.

Which is the best first car? Which cars are most reliable? Which is safest? What should I pay for my car? Where is the best place to buy a car?

Where can I find cheap cars? How do I get a car loan?  What if I have no credit, or bad credit? How does the car buying process work? How will I know if I’m being cheated?

What about auto insurance? Which company has the best rates?

Should I buy a new car, or used? Buy from dealer or individual seller?

Can I sell/trade my car if I still owe money? How about buying versus leasing?

These are all common questions asked by first car buyers — or any car buyer.

We give you the the answers you need, the expert advice, and the specific knowledge you need so that you can go into your car buying experience with confidence that you’ll make the right decisions, get the best deals, and not get cheated.

Welcome to FirstCarGuide.com

 

Are certified used cars good deals or not for first car buyers?

Many car dealers sell “certified” pre-owned cars. How are these cars different from other used cars? Are they more expensive? Are they worth considering as a first car?

Most major automobile manufacturer’s dealers now offer “certified” used cars. A certified car has been inspected and repaired according to detailed manufacturer specifications before being placed on a dealer’s used car lot. Although manufacturer’s programs vary in details, all are fundamentally the same in concept.

Why is it important? Certified cars can significantly reduce one of the largest worries of used car buyers: that used cars can have hidden problems that cause problems and expensive repairs after the sale.  Read the rest of this entry »

How do I know how much car I can afford?

Assuming you’ll buy with a loan, you will want to have a monthly car payment that will fit within your current income, after considering all your other expenses. Don’t make the mistake of buying based on future expectations — a forthcoming raise, a new job, or other potential improvements in your finances. Your expectations might not come to reality and you’ll be stuck with a car you can’t afford. Base your purchase only on current, stable finances. Read the rest of this entry »

Figuring car payments is easy if you have the right calculator — it’s not easy math otherwise

car payment calculatorCar payment calculation is not simple math. It requires a rather complex business math formula that is not easily done by hand and most people are not capable, or not willing, to take it on. It’s not as simple as dividing loan amount by the number of months in the loan. Finance charges (interest), which change every month, must be accounted for.

It’s much easier to use a hand-held business calculator, such as the HP 12c or HP 17b, or, even better, use an easy online auto loan calculator which does the math for you.

To use a car loan calculator, you must know the amount being financed, the number of months you want to finance, and the interest rate. You’ll also need to know the down payment amount, if any, and the value of your trade-in vehicle, if any. You also need to know the sales tax rate that applies to your home location, not where you buy your car. Read the rest of this entry »

buy here pay here dealersBuy-here-pay-here car dealers provide auto loans to people with bad credit.

Most car dealers do not directly finance loans on cars they sell. They work with outside banks and finance companies to provide loans for their customers. It’s up to those banks and finance companies, not the dealer, to approve and provide customers car loans.

However, a different breed of used car dealer, called  “buy-here-pay-here” dealers,  do provide their own financing without an outside bank or loan company. They primarily function to sell used cars to people who have bad credit and cannot get approved for loans from conventional sources.

Buy-here-pay-here (BHPH) dealers can be recognized by their promotional ads or storefront signs. They use the terms “easy finance” or “no credit checks” or “we finance anybody” or “in-house financing” or “fast loan approval” or “we approve you regardless of your credit.”  They are sometimes called “tote the note” dealers. Read the rest of this entry »

best car for teensOf all the cars available to teenagers, which are the best first cars?

If you simply want the fastest answer to that question, without explanation, we would say the Honda Civic is the best all-around car for teens. The Toyota Corolla would be a close second.

If you don’t like the Civic or Corolla there are other cars with similar characteristics and different styling that might suit you better.

But what is it about the Honda Civic, Toyota Corolla, and similar models that make them great as a first car for teenage drivers?

First, they are economical — relatively inexpensive to buy, inexpensive to insure, and inexpensive to drive.

It doesn’t cost much to buy a new or relatively new Civic. Used models might be a little higher priced that other brands but that works in your favor too. When you get ready to sell or trade, Honda and Toyota vehicles hold their resale value better than most. Read the rest of this entry »

factory-to-dealer cash for first carsEven many experienced car buyers don’t know about the “secret” factory-to-dealer rebates given to dealers by car manufacturers.

Car companies often select certain models and styles for these rebates, and the selection can change from month to month.

Dealers can use factory-to-dealer cash (sometimes called “marketing support”) in almost any way they choose but most pass it along to customers in the form of price discounts. Some dealers might advertise the low prices (not the rebates themselves) or simply offer a discount to customers during the buying process. He may choose to give all or just some of the total rebate.

Most customers are not aware of which vehicles have factory-to-dealer rebates, or the amounts. Therefore, it is difficult to factor in those discounts in the negotiating process. However, our sister web site, Best Car Deals, provides such information.  Some of these rebates are very large and represent a significant discount off of sticker price. This is particularly true for last year’s leftover models that dealers must sell in order to make room for this year’s incoming models.

If a dealer gets a factory rebate on a particular model and gives it to customers as a price discount, he still makes his usual profit on that car, even though customers may be getting a great deal. Smart customers will expect the dealer to contribute some of his usual profit as an additional discount — which makes an even better deal. In many cases, customers can buy a car for less than dealer invoice price, which is only possible if the car manufacturer is helping with the deal.

In summary, factory-to-dealer rebates can be a large factor in making new cars — especially first cars — more affordable. Look for vehicles with the largest factory-to-dealer rebates.

You can get free price quotes for any vehicle at Edmunds.com. The prices you get will contain any current price discounts and manufacturer incentives that are available.

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zero percent 0% car loan financingCar manufacturers offer special sales incentives every month on particular vehicle makes, models, and styles. Incentives vary from month to month.

Incentives come in the form of direct-to-customer rebates, special lease deals, and low-interest loans, including 0% APR loan deals. See Best Car Deals for current new-car incentives, including 0% loans.

Zero percent financing, when offered, means that the customer pays no interest or finance charges on his car loan. This saves money. Monthly payments are smaller and total costs are reduced.

Calculating payments for a zero percent loan is easy. Simply divide the cost of the car by the number of months in the loan. Non-zero-percent loans are much more difficult to calculate and require a car loan calculator.

Are 0% loans good deals?

Maybe.

Read the rest of this entry »

best car dealsAs this is being written, this year, 2011, has become the best time to buy a new car in years. And 2012 looks to be even better.

In normal years, we would tell you that the best time to buy a car is when sales are slow at the end of the month, end or the year, or during vacation season. We would tell you that you might still have to negotiate your prices because dealers aren’t just going to give you a good deal because they like you.

BUT……..things are much different now. Sales have been slow for over a year and are still slow right now. As a result, we are now seeing some of the biggest and best car incentives on new cars that we’ve seen in years. Nearly every car manufacturer is now offering a combination of large factory-to-customer rebates, low-interest loan deals, 0% APR loans (even on long 72 month loans), special lease deals, free maintenance, and “secret” factory-to-dealer rebates that dealers usually give to customers.

Why has 2011 become such a good time to buy a car? Read the rest of this entry »

A Car Loan Story

David, 17, recently graduated from high school, landed a good paying job, and wanted to buy a new car.

His thought was that he would go to his neighborhood Ford dealer where he had been admiring a bright red Focus model that he felt he could afford, and arrange for a convenient loan to pay for it. He could easily get approved for the loan because his father knows the owner of the dealership.

The car cost $12,000 with discounts and rebates. He thought a 5 year (60 months) loan would be about right because he figured payments to be $200 a month ($12,000 divided by 60 months), which he could easily afford.

David was wrong — in many ways. Let’s see why. Read the rest of this entry »

new car rebatesCar manufacturers use incentives to make their new cars more affordable during limited-time promotions.

The most common incentive is a direct to customer rebate, although there can also be other incentives such as low-interest loans, 0% APR loans, special car lease deals, and “hidden” factory-to-dealer cash.

Incentive programs vary from month to month depending on which models and styles manufacturers feel need sales “help”. Slow selling models or last-year’s leftover vehicles typically get the best rebates and incentives. However, it not ususual for a brand new model to get good rebates or other incentives.

A rebate is a credit that you receive when you buy a new car during the promotional period. It shows up on your paperwork the same as a down payment, although the money comes from the manufacturer’s pocket, not the dealer’s, and is like a gift to you that reduces the amount you pay for your car.

However, a rebate is not a price discount. It doesn’t change the selling price of the car (although it changes what you pay).  Rebates and discounts are NOT the same, although both reduce the amount you pay for a car. Let’s explain. Read the rest of this entry »

Is it possible to get a car loan and buy a car with no credit?

The answer? Yes, under some conditions. Let’s explain.

It is a common situation, especially with young people who have never had a loan, never had credit cards, or never borrowed money for a car. Without a history of prior loans and payments, there is no credit history and no credit score, which is the number that represents credit rating.

In fact it is not quite sufficient to simply have a good credit score to get a car loan — or any loan. You may also need to have an established steady income (a job) and no excessive debts. You should have no recent bankruptcies or auto repossessions, which you wouldn’t be likely to have anyway if you have no credit.

So how is it possible to buy a car with a loan when you have no credit record and no credit score? Read the rest of this entry »

It’s difficult to recommend cars since there are so many choices, and so many types of people and personalities who buy them. We all have different likes, dislikes, needs, and finances. If we were all the same, there would probably only be one car brand, in one model, and at one price.

There are many differences in cars. They are far from being the same. Although they all can get us from Point A to Point B well enough, that’s where the similarity ends. There are different types of vehicles to meet different needs: 4-door sedans, coupes, sports cars, SUVs, trucks, minivans, to name a few. There are differences in size, style, safety, riding comfort, reliability, performance, color, technology, and of course, price.

One of the most important things that automotive consumers can do now to make sure they select the best vehicle for their needs — that wasn’t available until about the last 15 years — is to do research online, on the Internet. 

Read the rest of this entry »

What are the advantages and disadvantages of car leasing?

Car leasing has it’s advantages and disadvantages. Here is a summary:

Pros:
– Get new car every 2-4 years, with latest features and safety equipment
– Lower monthly payments
– Usually no down payment
– Car is always under warranty
– Lower sales tax (in most states)
– Avoids used car selling/trading hassles
– Automatic GAP insurance included (most leases) Read the rest of this entry »