For most people, the decision to buy a car is a very serious matter. On the one hand, it must be judged that the current vehicle needs to be replaced. Then, as finances are considered, comes the choice of which car to buy next.
Personal finance author and radio host Dave Ramsey promises to help potential car buyers make the right decisions during the process.
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Ramsey begins by emphasizing the importance of buying a used car rather than a new one. For one thing, new cars lose an enormous amount of value the moment they leave the dealership.
And there are good quality used cars available at a much lower cost than new cars. But there are some important decisions to make and mistakes to avoid when selecting the best vehicle to buy.
Ramsey acknowledges that many people believe the used car market is tough right now. And buying a used vehicle involves some risks that you should remember.
But The Ramsey Show host guides potential car buyers through eight big steps to help them make smart decisions in the end.
Ramsey suggests starting with a serious look at your finances
The first thing Ramsey suggests is to figure out exactly how much you can really spend. In fact, he says, the car buyer's goal should be to pay cash for the full amount of the used vehicle.
This involves both saving money upfront and reducing the amount of money you'll spend on the new vehicle.
This approach will save you a lot of money in the long run. Paying cash means you avoid taking out a car loan. And you won't have to pay interest on the loan.
“For example, let's say you borrow $10,000 for a car with an interest rate of 9.34% (the average) and a term of five years,” Ramsey wrote. “You'll end up spending an extra $2,554 in interest!”
Next, Ramsey encourages people who buy used cars to give up on finding the car of their dreams. The important thing, he says, is finding the right car that fits your lifestyle and budget.
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This involves fairly simple factors such as:
- Do you want a car or truck?
- How many people should it fit?
- What kind of fuel consumption does the vehicle get?
- How much cargo space does it have?
“You won't find a vehicle that meets all the requirements,” Ramsey wrote. “Be honest with yourself about your wants and needs and think long-term about how you will use your car.”
The third step Ramsey suggests: compare prices, both at brick-and-mortar car dealerships and online. The most important thing, he recommends, is not to jump at the first offer that you like. There are others to consider.
Fourth, be sure to take the time to determine for yourself how much the car is worth. You can start with Kelley Blue Book and then purchase a vehicle history report.
Additionally, reading used car forums and checking the car's recall history are important tasks that need to be completed. Next, getting an insurance quote will help you understand a little about other additional expenses you will be responsible for.
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Ramsey Shares More Ideas for After Choosing a Used Car to Buy
Another important step is to inspect the car yourself. There are some basic things to check, Ramsey explains, that you can do even if you're not a mechanic.
These involve checking the level and color of the oil, transmission fluid, and coolant and brake fluid levels.
On the exterior of the vehicle, be sure to look at the paint job, tires, exhaust, doors, and lights.
Inside, Ramsey says, check the steering wheel, seats and pedals for wear. Also lock and unlock all doors, check the air conditioning and heating, and watch the temperature gauge while the car is idling.
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Examining a car involves understanding only some of the details that need to be known about a vehicle.
Ramsey's sixth step is to take the car for a spin and feel it over flat surfaces and bumps.
Listen to the engine and whether it sounds smooth when accelerating. Also important: Notice if the brakes make any unusual noises.
Then, Ramsey says, when you're about to make the purchase, have a mechanic inspect the vehicle. You can take it to a trusted shop or schedule a mobile inspection.
The last step, according to Ramsey, is to negotiate the price. He acknowledges that many people feel intimidated by this process. But, when paying cash, remember that you have some leverage.
“When negotiating the best price for a car,” Ramsey wrote, “just remember to bring your research to the table, pay cash (no matter what offers you're presented with), take your time, and don't be afraid to walk away!”
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