|
|
Taking a Punch to Your Budget!Oct 26 '01 Write an essay on this topic.
Popular Products in Cars
The Bottom Line Do your research and know how much you have to spend and what you want to spend along with the value of the car you want.
We began looking for a used minivan about 2 months ago. Our family increased in number from 5 to six and not only could we not fit in our older car comfortably but both car and truck are in need of very costly repairs. Upon thinking about the situation we decided it would be in our best interest to purchase a used minivan that gets better gas mileage than our other cars. My husband has to drive about 140 miles round trip to work right now and will be doing so for about the next year. My husband is a union millwright so there is usually travel involved with his job.( Millwrights work on industrial machinery in repairing and putting in new equipment.) Our car was getting about 10 miles to the gallon so it was costing us $280.00 to $420.00 a month in gas to get him back and forth to work. So our thinking was that if we could find a minivan for a good price that got about 25 miles to the gallon on the interstate we could cut our gas bill a month to between $108-$162. Our savings would be between $172 to $258 a month. So with our savings it wouldn't be too hard to add a little to make a car payment. So off I go on a research mission. Because of both of us being married in the past and having bankruptcy on our credit reports we knew we would have to pay a higher interest rate. Now I thought I would show you the difference in simple interest rates and compounded interest rates. Example: Amount $100.00 for 5 year period at 7%. Simple Interest: Year Principal Interest Rate Ending Balance 1 $100.00 7.0 $107.00 2 $100.00 7.0 $114.00 3 $100.00 7.0 $121.00 4 $100.00 7.0 $128.00 5 $100.00 7.0 $135.00 Compounded: 1 $100.00 7.0 $107.00 2 $107.00 7.49 $114.49 3 $114.49 8.01 $122.50 4 $122.50 8.58 $131.08 5 $131.08 9.18 $140.26 Compounded interest not only figures interest on the balance but on the interest earned. I got this off of a web site that helped me understand the difference. The name to key in your browser is Simple VS Compound Interest. By keying that in you can also use the simple vs compound calculator on that page. The thing that makes the difference in the interest rates is the amount of time financed. If it is only a short amount of time like 2 years there won't be much difference but if it is 5 years the difference between them when financing $20,000.00 at an interest rate of 10% is $30,000.00 for simple and $32,210.20 for compound, now at 10 years it would be $40,000 for simple and $51,874.85 for compound. So keep in mind when dealing with compounded interest that you should keep the amount of time financed down to a minimum. Then I talked to a friend of mine who is works at a car lot in purchasing these are the things he told me. That they mark up used cars more than new sometimes even 100% of the purchasing price. That they have tons of room to make you a better deal. They usually use high pressure sales to try to make you feel like you need to buy right then or the deal is not good or the car will be sold to someone else who is already trying to get financing. They will always tell you that the last deal they offer is bottom line and that they can't go any lower when that's not true. Car sales people are given a check each week kind of like a salary but if they didn't make enough commissions that week to cover the amount that they were paid the the difference between what they made and what they were paid is put on there account and will be taken out of the next commission. So each sales person is trying to make enough on his first deals to cover the amount of his check and then to also earn over his check amount either against his previous amount owed or as a bonus. They have a quota that they have to meet each month and get a bonus for that. High sales gets a bonus each month also. So know that when you speak to a sales person they are not looking out for your interest but their own. Sometimes their jobs even depend on making their quota. I have worked briefly in sales and the first thing that they tell you is that the buyer must like you. People will not buy from someone that they don't like, but in some cases will buy things that they normally wouldn't if they like you enough. You need to get the person excited about the product(like when the car sales people start listing all the cars good points and telling you what a great deal it is.) then put a sense of urgency on the sale(like the car salesmen telling you the offer is good only for today or the car will be gone to someone else tomorrow). The basic line in sales is if you don't make the sale right then the percentages drop on making the sale. Then the next thing they do is ask you what kind of payment are you looking for. Most of the financing is done on the payment amount and not the total price. The will try to bump up the amount of payment by $50 or more dollars telling you that it's the best they can do and that you can pay just $50 more dollars right. This increases not only the salespersons money but also the dealerships money. So in buying a car. 1. The first thing you should do is decide how much you want to spend. 2. Decide how much you want to put down or what kind of trade in value you will want. 3. Apply for a loan with a finance company. Decide which one to try first based on your credit rating. If you have good credit then try to get pre-approved through a credit union they usually offer the best rates. If you have not very perfect credit then apply through one of the internet financing company's or a local one that specializes in not perfect credit. 4. Decide what kind of car you are looking for and what kind of price would be a good deal.( Put Kelly's blue book in your browser. That site will give you the retail value and bluebook and will also figure what your car is worth as a trade in.) 5. Look at used cars on the internet to get an idea of prices that dealers are asking so you know what is reasonable and what other cars like the one you want is being priced. You may even find one at a dealer on the net that's a great deal and that you want. There are many different sites that will find cars in you area( you can specify how far away you want to travel)and give you the prices, mileage, color, picture of the car, and everything it is loaded with(air conditioning and such). The Kelly Bluebook site will also give you the safety rating of the car and any problem that the model of car is experiencing. Information is power and now you are armed and ready to start shopping. You know how much you want to spend and hopefully your pre-approval amount, so that tells you the limit of what you could spend. Keep in mind that pre-approval loans are based on debt ratio and credit ratings so the loan amount could be higher than what you want to spend. The loan amount doesn't mean you have to spend the whole thing, it's giving you a maximum amount that they will finance. You know what kind of car you are looking for and the blue book and retail value and what other dealers are asking for the car. Now if you find a car at a local lot that you like, don't take the first offer they give you. The chances are that they will come down quite a bit. For example, I went to a local car lot to look at minivans, as we turned into the car lot the salesman, who had been in the process of crossing the street to the opposite side, ran to catch up with us and stopped us by stepping in front of our car. He then asked us what we were looking at and then started to give us his pitch before we were even in park. One of the minivans was a 98 Ford Windstar and when we asked the price on each one he told us that one was $13995. Which was the lowest one out of 9 minivans that they had. A week later I called and talked to the same man and told him that we were looking for one that was priced $10000 or under. He said he would check and call me right back, when he called he said that they had one that was $9995 and when I began asking him questions it turned out to be the same 1998 Windstar we had seen the week before. Then he wanted to know if we could come down right then and take a look because he had someone else looking at it and he really liked me and wanted me to have it. I told him that we wouldn't be coming that day but when we did I would be sure to ask for him(Yeah Right, we won't be going to that car lot). Now after a month of causal looking I found a 1997 Ford Areostar for $6795 that only had 50000 miles. So this is the one that we have decided on. The blue book value retail value is over $9,000 so we know we are getting a good price. Our next step will be to take it to our mechanic to make sure it is a sound investment. Then we know we want $1000.00 for our trade in. We already have our loan so it will be a matter of visiting the lot several times to try to get the initial price down( we are not expecting to get it down much since the asking price is reasonable). Then in making the deal and driving off in our new used minivan.  |
| Write the first comment on this review! |
