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12 Steps for a Successful Automotive Purchase

Colorado Homeowner Association HOA Management | Team Strategy
Published by David C. Stiver BA MA in Finance · 25 January 2021
Tags: automotivepurchasestrategies
12 Strategies for a Successful Automotive Purchase
1) Know what you can afford.  Don't over-extend your budget.
2) Have an idea of the car(s) (make, model, year, etc.) you desire before going to the showroom.
3) Unless absolutely necessary, purchase used vehicles (approximately 3-4 years old). Remember: New cars depreciate approximately 30-50% when they leave the lot.  The first three years of a five year loan is all interest.  Why not let someone else pay all the interest?  This interest situation places you into an "upside down" position during the initial years of the loan.
4) Always negotiate from the Dealer Cost Upward and "NEVER" from the Sticker Price downward. All those options are simply free money for the dealership. They were paid for in the total Dealer Cost price from the manufacturer.
5) Check Consumer Reports for dealer cost and reliability data.
6) The Salesman is not your friend. The Sales Manager is not your friend. Finally, the Finance Manager is not your friend!!!
7) Know your Credit Score. Obtain your MY FICO score by visiting E-Loan.com.  Go to MY FICO.com to obtain an interpretation of your credit score. Financial TIP: All financing (i.e. the specific interest rate you receive) is not determined by the Credit Reporting Agencies.  The Interest Rate you receive is determined by the Dealership.  As such, the sales representative will receive a bonus for each 1% in additional interest he/she can charge you.
8) Whenever possible, obtain your financing from your local bank and/or credit union.  Pre-qualification is a sound financial practice.  By pre-qualifying, you will know exactly how much car you can afford and will be limited to the amount of car you can buy.
9) Never disclose to the salesperson your intentions of trading in your old vehicle. Never give your title to the salesperson prior to the signing of the final contract documents (Especially  if you take the vehicle home for a test drive).
10) Forget the Extended Warranty.  Most vehicle  manufacturers warranty the most critical components of the vehicle (Power Train for 70-100,000 miles).
11) Avoid any Rule-78 clauses in the contract.  A Rule-78 clause is pre-payment penalty clause.  What does that mean?  For example; you finance your vehicle for 60 months (you should never go beyond 48 months on a new car), you decide to pay the vehicle off in 36 months.  How much interest will you pay? Answer, all of  the interest that would have accrued if you had simply paid every month for 60 months Avoid Rule-78 clauses at all costs.
12) If you Trade-In your vehicle have the value of your vehicle deducted from the Dealer Cost first.  Not after the Salesman adds on Dealer-Prep, and a myriad of other costs ( This dilutes the value of your Trade-In).



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Colorado Springs CO  80936-6630
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