Photo Courtesy of ToeStubber

After posting my article, "When Buying A Car (and in Life), Knowledge Is Power", several people left comments and sent emails asking for more details regarding the negotiation with the car salesman. I left this part out of the original post because it would have made the post extremely long and boring.

There are several key tips to remember before you step on the car lot to search for your next vehicle. You don't want to go into a dealership "without a clue". The car salesman will see it and probably use it to make a sale of a car you probably didn't need to buy. (I want to make it clear that I am not saying that all car salespeople are bad but they are there to earn a paycheck. The majority of their paycheck is earned by the commission they make from selling you a car).

Tip #1: Know What You Are Looking For. If you don't know what kind of vehicle you are looking for, the salesperson may point you to a vehicle that is in their best interest and not in your best interest. My cousin and I researched different vehicle types and we narrowed it down to two vehicles (a Honda Civic or a Nissan Sentra).

Tip #2: Know Your Price Range. My cousin and I sat down and discussed the maximum amount he could afford to pay for a car. This is usually easier once you've done Tip #1. Don't just look at the monthly payment. You also need to consider insurance and maintenance costs.

Tip #3: Arrange Financing in Advance. Once you know what you are looking for and the price range you are willing to pay, the next step is to arrange financing. Of course, being a personal finance blogger, I have to say you should not finance a depreciating asset and save until you have enough money to pay cash. The rational side of me realizes that paying cash is not possible for everyone due to different circumstances. If you are going to use credit to finance the purchase of your new car, the best place to start is your local credit union. Most credit unions offer low cost auto loans. Check this website to see if you are eligible to join a credit union. If you aren't able to join a credit union, the next place to check is an online website like Bankrate to compare interest rates among various lenders.

Tip #4: Know the Value. Searching websites like Vehix.com and Edmunds.com can help you determine a fair market value of the vehicle you are looking to purchase. Once you know what the the fair market value, you can be in a better position to negotiate with the dealer.

Tip #5: Negotiate, Negotiate, Negotiate. Once you know what vehicle you are looking for and the fair market value of the vehicle, you are ready to make your purchase. The price on the window is not set in stone. The posted price is set allowing room for negotiation. Car dealers know that the educated buyer is aware that the window price is just an asking price and not what the buyer will ultimately pay. If the salesperson is not willing to be reasonable, don't be afraid to walk away. There are plenty of car dealerships out there and alot of them are hurting for business.

Hopefully, this post will help you make a better deal on your next vehicle purchase. If you've recently purchased a vehicle and used any of these tips, feel free to share your experience.

I spent most of my Saturday at a car dealership. I've done this a few times before having bought 3 brand new cars in the past; prior to my financial awakening.

Fortunately, even though I spent most of the day at the car dealership, the new car was not for me. My Uncle called me up on Friday advising he was ready to buy a new truck and wanted me to go along to help him out. For some reason, when my family has financial questions, they seem to call me. I'm glad to help out when I can.

I was going to write a post about the entire experience but it would be an extremely long. I've decided to take a different direction and just highlight three main points from this experience:

• It's financially beneficial to have a good credit score.
  
• Know the full details of your financial situation.
  
• Never co-sign for a car loan.
  

It's financially beneficial to have a good credit score. My uncle had no idea what his credit score was. He didn't even know there was a such thing as a credit score. Turns out, his score was only in the high 500's. Not the best score when you are trying to make a large purchase on credit (with no down payment). With a good credit score, you have options and the transaction goes alot smoother.

Know the full details of your financial situation. Again, for the same reason as posted above. Not only that, he was not sure how much money he made or who his creditors were. This can save you time and embarrassment (if you have a poor credit score).

Never co-sign for a car loan. With my uncle's low credit score, he had very limited options for purchasing his new truck. I purchased my car from the same salesperson and same dealership so the salesperson knew that I had a good credit score and stable income. The salesperson is a distant relative so she pulled me aside and asked if I would co-sign on the loan. I do appreciate the fact that she did not ask me in front of him. That would have been extremely awkward!!
As much as I wanted to help him out, I had to decline. I did not want to risk him not making the payments and having this car loan on my credit report for the next 6 years. Luckily, his wife had a high enough credit score to co-sign on the loan.

After spending about 6 hours at the dealership, my uncle drove away in a brand new 2008 Nissan Titan. I drove it and I have to admit it is a nice truck but I think financially it is not going to work out. The payment is a bit much for their income and gas will be a killer. I tried to talk him out of it and explain the cons of purchasing a new vehicle but in the end, my words fell on deaf ears. I know the feeling as I had been there before. You want something and you will not stop until you get it; whether it makes financial sense or not.

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