Things You'll Need:
- Budget
- Down Payment
- Loan
- Ability to research
- Insurance
- Savings Account (with a high APY preferably)
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Step 1
So you've done your research and you have settled on the Honda Fit as your next vehicle. First, we have to decide on which one we want so we will know how much it will cost. Do you want one with an Automatic or Manual transmission? Are you fine with just the standard Base trim without the extras in the Sport package? Do you want navigation? What color do you want? Do you want a new or used Fit? For the purpose of this article, we will be buying a new Honda Fit from a dealer.
Once you have decided, visit Edmunds.com for pricing information. You need to know the invoice price (what dealers pay) and the MSRP (Manufacturer's Suggested Retail Price). Keep in mind that dealers don't really even pay as much as the invoice price for the car due to several manufacturer incentives. -
Step 2
Now let's take a look at your budget. Do you even have one? If not, figure out where your money is going. Can you afford a car payment per month? A good rule of thumb is that you should be paying no more than 20% of your net monthly income on a car payment.
If you're going to get a loan, decide on how long you want one. Longer loans cost more but have lower monthly payments, do what is right for your budget. -
Step 3
Save up for a down payment. It is suggested that you should save up 20% of the price of the car to avoid being "upside down" on your loan (this way you can skip the GAP insurance as well).
Save up by putting into a high yield savings account however much your car payment will be. By doing this, you are proving to yourself you can pay for it every month. When your goal is reached and you have enough for a down payment, you are ready to buy. -
Step 4
Before we go comparison shopping, check your credit (check my other article on how to track your credit every year). Is your credit good enough to get a loan without a high interest rate? Generally, anything above 700 will get a great loan, with less than 7% APR. Check Bankrate.com and Bankingmyway.com for useful information and current rates.
Next, shop around for the loan with the best rate. Check credit unions first as they usually offer the best rates. With a loan already prepared, you can use this as a bargaining chip at the dealership as they will have to beat your interest rate if they want to give you a better loan. Having money already ready also signals that you are a serious customer who is ready to buy TODAY. -
Step 5
Now let's comparison shop. Rather than wandering all over town, sit at the comfort of your own home and compile a list of all the dealerships you want to pit against each other. The more, the better. I recommend searching on Google maps or visiting Honda.com for a list of dealerships in your area.
After you have done that, you can either send one email with all the dealerships' email addresses on them asking that they give you their lowest OTD (Out the Door price, which includes everything you will pay in final, including taxes) or you can email each dealer individually asking if they can beat or meet the price you want it for. The price you should at least aim for invoice price + destination fee + doc fee + taxes + title = OTD price. Edmunds.com has a calculator: http://www.edmunds.com/car-loans/ -
Step 6
Once you find the dealership with the best price and the exact car you want, print out the proof of their offer, and go to the dealership with loan, down payment, insurance info, and pen in hand.
You have to make sure you get the OTD price offered to you or you walk out. If the dealership plays any games with you, if they try to change your price, walk out and go to the next dealership on your list with the next best price. Do all calculations and have the salesman always sign his name on the final price. This way, they are legally responsible for their agreements. -
Step 7
After your purchase, always make sure you check every inch of the car before driving off the lot, driving off the lot means you have taken delivery of the vehicle and it's value automatically drops as it is now technically a used car.
Notify your insurance company of your new vehicle and make sure you have the appropriate liability, collision, and comprehensive insurance policy for you. It is recommended that you have better liability coverage than the other two in case you are responsible for an accident. The more liability you have the better your chances are at not getting sued or at least you may be covered on some legal fees.
Comments
vantran04 said
on 8/7/2009 Thanks for the comment and the link. Another great site to check out how much cars are selling for in your area and nationally is truecar.com
ahonda123 said
on 8/5/2009 This is a great comprehensive guide. Kudos to the writer. Additionally, there are some dealerships that try and avoid the typical nonsense. You can always visit www.dchacademyhonda.com for straight forward best pricing. This could help cut down on a few of those steps.