On January 17th of this year, I said goodbye to my beloved Mitsubishi Eclipse GT 2000 (Sage), after 70k miles together. Her leaking front seal, rear seal, and oil pan gasket would have cost $2.5k to fix, and with no guarantee that other age related problems wouldn't show up, I decided it was time for me to get a "new" (used) car.
Other than accompanying my parents on test drives when I was in the 4th grade, the car buying process was entirely new to me. With the death of my car looming over me, I hurried to research as much as I possibly could, so that I could have a safe vehicle in my near future.
I ended up purchasing a 2012 Honda Fit, 32,000 miles young, that I named Clarice (mostly because I like to sinisterly say "hello Clarice" each time I see my car :P). I bought her for $11.9k when the sticker price was originally $13.7k, so I am truly proud of myself. It's been a few months since my purchase now, and I've been getting an average of 35 MPG to boot! Woohoo!
MY PROCESS, AND WHAT I LEARNED ALONG THE WAY:
Step 0: Save money in anticipation that my current car would soon die. I was good about this and managed to save about $6k by the time I got desperate for something that I didn't consider a death trap.
Step 1: What type of car should I get?
I wanted something that would feel safe, that wouldn't need a lot of maintenance in the near future, that had no prior history of accidents/a clean title, that was small enough for city parking but big enough for a trip to IKEA, that saved me money on gas, and that wasn't horribly unstylish. Based on my preferences, I knew I was going to end up going for a Toyota or a Honda based on resale value and reliability. I had narrowed down to really wanting to go for a Honda Civic of a Honda Fit, the fit in part because my boyfriend has one (although his is a stick), and it's super awesome.
Step 2: Create a budget, look into financing if needed
I knew that I could buy a car for the $6k I saved, but I also knew that if I wanted a newer and younger car, I'd have to shell out more. So I began venturing onto all my local credit unions' website's , looking at who had the lowest auto loan rates. The sites will usually have a specific page dedicated to this, so it made it pretty easy, but I also asked friends and coworkers for recommendations. The lowest rate I found was at Cal Coast Credit Union, where with my awesome credit, I was able to score a 5 year loan for a static 1.84% interest rate. I applied for a loan and rate on $10k BEFORE I settled on a car, and used unbury.us to determine that my monthly payments would be around $185/month (this was doable for me) . Many people choose to go through a dealership for financing, but most credit unions can beat out dealership interest rates on USED cars, so I wanted to be a step ahead and save where I could.
Step 3: Begin the search, checking for fair prices
I started looking at every possible search tool to find the car I wanted. I searched local Honda dealers' stock online, went on yahoo vehicles, Craigslist, Tripe A car buying service, you name it. I even checked local rental car agencies that retire their cars after low mileage, but decided that wasn't worth the risk (too many drivers over a short span). When I started to narrow down my choices to something in the $11-13k price range, I began checking Kelley Blue Book (KBB) and Edmunds regularly to make sure prices listed were fair. Some were, and some certainly weren't.
After a couple of weeks of constant searching, I ended up stumbling across 2 different Honda Fits that were very similar. One was a white 2013 Honda Fit Sport, listed for $11.9k, and another was a grey 2012 Honda Fit listed for $13.7k, with only about 3k less mileage than the 2013. Having a preference for grey, lower miles, and no need for the "sport" edition, I called up the Mazda Used Car dealership that was holding the 2012. I told them that I was buying a car that coming weekend, and if they could match the $11.9k final sticker price of the 2013 I found (I emailed them the listing which was in the fair price range according to KBB), that I'd come for a test drive and walk out with it. I was sure they'd tell me to come in and see it in person, and wouldn't agree to a price...but to my surprise, they agreed!!!
Step 3: Factoring in taxes and fees/ down payments/ securing a loan (if necessary)
To figure out the total cost of the car's sticker price, plus taxes and fees, I emailed back and forth with the dealer, and also used a tool on the California DMV website called the Vehicle Registration Calculator to make sure I wasn't being charged for "extra" fees. I knew that the total cost of my car was going to be about $12.9k, $1k more than the sticker value, so I was ready to settle on how I was going to pay.
Since I was able to get up to a $10.4k loan with my credit union, I decided that the $6k I saved up for a car could be used better than for a large down payment. Most of my student loans have an interest rate upwards of 6.5%, so it was best to make a smaller down payment, and use the rest as a large payment towards my student loan with the highest interest rate. In the long run, this would save me a decent amount of money! I put all the money I'd saved for the car into my checking account, secured the credit union loan "check" for the dealer, and headed to the dealership that weekend.
Step 3: Test drive/ walking (driving) away with a new car!
My test drive went very well, although the Mazda dealership worker didn't know a thing about the Honda Fit, so I was lucky my expert Fit-owning boyfriend was there with me. I have a feeling that's why they were able to sell it for a lower price :P. It took about 2+ hours total, but I ended up putting $2.5k down on the car ($500 of which I got for trading in Sage), and used the credit union loan to pay the rest of the amount, $10.4k. All in all, I am super proud of myself that hard work and research got me a fantastic deal on a car that should last me a very long time!
Misc. Tips:
1) If you want a reliable car, don't buy a car without a CARFAX! Every reputable dealer will have this history check available for FREE, and there are even some websites where you can look up a VIN # to see if a car has been reported in an accident before you head to the dealer and see it in person.
2) If you finance through an outside bank or credit union, get approved for the loan you'd need BEFORE stepping foot inside the dealer. Once you do go to the dealer to see the car, do not make ANY mention that you already have your financing worked out, until you settle on a sticker price! Some salesmen/women will agree to a lower sticker price thinking that they may be able to get more money out of you with higher dealer financing rates, so keeping things hush hush until a price is decided can work in your favor.
3) Don't get caught up in the "extras" offered by the dealership, usually in the form of warranties. Most good dealerships will come with some sort of standard warranty already, and if you decide you want something better, do research beforehand instead of deciding on the spot.
4) The BEST way to haggle down a price is to use a competitor against them. If Dealership A has a similar car for $500 less, Dealership B is usually willing to match the price to steal your business. Also, I've found that doing this over email is nearly impossible, phone is slightly more possible, and in person you have an even greater chance because they know you are more "serious" by already being there. I personally chose to do it over the phone, so my meek looks and young age wouldn't work against me.
5) You'll get more money selling your car on Craigslist or to a scrap yard than trading it in to a dealer. I chose the lazy way out because I was stressed from the entire process, but looking back I bet I could have made a lot more money. My poor sage
6) If the car isn't sold through a reputable dealer with a warranty, take it in to get it checked by your local mechanic before you commit to buying.
7) USAA for those that are prior military is an excellent source for getting dealer incentives/information, and to lower the bottom line another 1$k. These are called "dealer hold-backs". You can also check most dealer sites for current incentives and special rates.
8) The internet is your friend! If you have questions, ask them to forums or use Google. The more resources you have, the more educated your decision will be. :]
