3 Rules to Getting The Best Deal When Car Shopping

Here are my iron-clad, no-exceptions rules to getting a good deal on a used car. Much more can be said on the subject but if you’ll follow these three simple principles, more of your hard-earned cash will stay where it belongs; in your wallet.

1. Buy Used
   New cars are cool. They smell nice. But they’re a terrible waste of money. The moment you drive a new car off the lot, that new car loses 5% of its value. If your investments did that, you’d accuse your broker of being a cheat. Buy a used car and let someone else take the depreciation loss.If you are concerned about hidden problems with a used car, I suggest test driving it over to your trusted mechanic (let the dealer know first) and paying $40-50 for a complete inspection. It’s like a home inspection; he’ll be able to tell you what, if anything, is wrong with the car. Take the inspection report back to the dealer and make him fix it or give you a better price. One time I did this it saved me and extra three hundred bucks on the final negotiated price. Buying used is the best way to get the most car for your cash.
2. Pay Cash (or check)
   Imagine this scenario; average guy walks into a car dealership and picks out the shiny new car that he’s been drooling over for days, agrees to pay 20k for it, and then signs a loan agreement at 7.5% interest. Guy takes the keys to his shiny new car and drives off the lot as happy as can be. But the moment he hits the street, his new ride drops in value a thousand dollars! Over the next three years, that guy pays $22,397 on his loan and interest. By the time his shiny old ride is paid off it’s only worth $13,046. Meaning, in three years he’s lost $9,350.

   Paying cash is hard to do. Americans on average have a negative savings rate. Meaning we have more debt (not including mortgages) than we have in savings and investments. That’s tragic. So here’s what you do; save more and only buy what you can afford. Shocking suggestion, I know.Buy any car you want, as long as you can pay for it immediately. I paid $500 for a car before. The next one I bought cost $2000. After that I paid $9,000 for a car valued at $11,500. That means when I drove off the lot, I was actually ahead $2,500, not in debt like the average guy. Cash is king.

3. Buy Japanese
   We live in a global economy. As consumers in a global economy, we expect the best deal for our money regardless of its original source. And for my money, Japanese cars have been the best. Get this; I’ve driven two Hondas over the 250,000 odometer mark and sold them both when I was done! Those cars still had value, even after a quarter million miles driven.Although I’m suggesting you buy foreign (I’ve owned 5 foreign-made cars), every single one was purchased from an American salesman and Americans have performed all of the repairs. Since every one of my cars has been purchased used, none of my cash has gone to foreign auto makers.So whether you take my suggestion to buy Japanese or not, you should carefully at two things: the car’s resale value and its dependability. The 2009 models with the highest resale value, 6 of the top 10 were Japanese. No surprise there. How about dependability? J.D. Power and Associates 2008 Vehicle Dependability Study puts Japanese cars at the top of 7 of 11 categories. These two stats simply confirm what I’ve experienced myself; Japanese auto makers give me the best car for my money.