The First-Time Car Buyer’s Guide to Snagging Big Savings on an Auto Loan
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- By Nicholas Pell
- January 9, 2013
Buying a car is a difficult process, especially for the first-time buyer. When you buy a car for the first time, there’s a good chance you’ll be overwhelmed by the process of searching through the various first-time buyer auto loans, and the notoriously high-pressure sales tactics of dealerships.
The good news is that you don’t have to be lost in the process. While dealerships need you to buy, you can always walk off the lot and get an auto loan and car elsewhere.
Go Banking Rates spoke to Mike Rabkin of From Car To Finish, a concierge service for people looking to buy cars and got his top car-buying tips. As an insider in the world of car buying, Rabkin has helped literally thousands of people get the cars they want for less. Much of Rabkin’s recommendations fell into specific considerations before locking yourself into an auto loan.
#1. Consider Needs Versus Wants
The process of purchasing a car is largely the process of winnowing down the field to the cars that best suit your wants and needs — but start with the needs.
“You could find something that’s rated well, but that doesn’t mean that it meets your needs,” says Rabkin. Instead of obsessing over ratings, ask yourself what you’re going to be using the car for, how many passengers you typically transport, and how often you have cargo. This will help you eliminate the potential field down to something more manageable.
#2. Review Vehicle Ratings
Only after you’ve winnowed the field down to what you actually need, the next of Rabkin’s car-buying tips is to looking at consumer and vehicle ratings.
Rabkin recommends Consumer Reports and Motor Trend, both of which are good at explaining technical specifications to a lay audience. Another thing to consider at this point: the insurance premiums on different cars.
“Two cars that compete with each other might have widely different insurance premiums,” reveals Rabkin. Call your insurance provider or its competitor to look into this ongoing expense. The car insurance premium might put a car, and its auto loan payments out of your effective price range.
#3. Go on a Test Drive
Once you’ve narrowed your choices between three to five models, it’s time to start test driving. Rabkin recommends using auto dealership locators from manufacturers’ websites to locate dealerships that are close to one another, with an auto mall being the best option.
Rabkin suggests that first-time car buyers “do it all in at once while everything is still fresh in your mind, so you can remember the differences.” Bring along a pen and a pad of paper to take notes. Look at your notes when you get home and aren’t under dealer pressure to make a decision by a salesperson. You should also drive the car as you would a car that you own to get a feel for how it actually drives. “Don’t be afraid to gun the engine to see how much pickup the car has,” says Rabkin.
#4. Research Price Points
Once you’ve decided between one or two models, start researching the invoice price and the MSRP of the vehicles you’ve chosen. Look for rebates and do your negotiating over the phone, not in person. “You don’t have to go into the dealership to negotiate. I don’t,” Rabkin notes.
Always speak to a manager when you’re negotiating. Not only are managers the only ones empowered to make decisions regarding price, they’ll also be more willing to cut you a deal. This is because the sales team works on commission based on price, whereas managers earn money by selling a certain number of cars throughout the month. Thus, they’re less concerned with what the individual car sells for.
Ask them how much the markup or markdown is on each model, rather than haggling over a specific price. This allows you to get a better deal, without being locked into a specific car.
Finally, dealerships don’t usually have the best auto loans. The place to begin looking for an auto loan, according to Rabkin, are places that you already have a relationship, such as your bank or credit union. When you do get a price, make sure to get it in writing, preferably with a signature and a locked time frame, which should be weeks, not days.
#5. Avoid Add-On Features
First and foremost, check to make sure that the vehicle identification number (VIN) matches the one written in the contract and other paperwork.
After that, Rabkin’s next gem of car-buying advice recommends that those taking on first-time buyer auto loans should “just say no” to basically every add-on that the dealer tries to sell you. “A lot of this stuff has been done at the factory already anyway,” he says, adding that “you’re going to be overpaying at the least.”
Walking into a car dealership blindly will increase your chances of going over your budget and being pressured into taking on an auto loan that you really can’t afford. Adhering to the car-buying tips outlined above will help reduce the anxiety of being a first-time car buyer and give you the confidence to make an educated decision.
(Image: Emilio Labrador)