Tuesday, June 23, 2015

Car Buying: Stressful...yet surprisingly rewarding


Are you in the market for buying a vehicle?  I recently found myself in the predicament of having to navigate the often very stressful and intimidating world of car shopping, only to come out on the other side empowered, educated, and confident in my decision.

Tip # 1:  Although it is not always a possibility, try to start looking before you are in desperation mode.  Car buying negotiation and research is best done over time, without the added pressure of necessity or emergency.  I began the car-buying process by asking around for opinions from friends and co-workers.  Everyone has great advice to share from their own car buying experience, and usually want to talk about it because it often becomes a big life event for many people.  

Tip # 2:  Do not feel obligated to purchase a vehicle when shopping around.  Even if a Salesperson has been extremely helpful, do not feel obligated, and especially if they are pressuring you, DO NOT FOLD.  There is power in walking away.  I had never purchased a vehicle before, and wasn’t sure what to expect.  I had visions of Car Salesmen circling me like sharks at the Dealership to get a sale….well it wasn’t quite this way, however, you do get a sense of urgency to “make that sale” and all the tactics are used, whether you realize it or not.  The first tactic I encountered was the Finance Manager assuming that I was purchasing the vehicle that day, after I had met with the Salesperson for all of 15 minutes.  Yes, there are levels of Salespeople, first you deal with the Salesperson, and then you meet the Finance Manager, who is essentially there to close the deal.  I had to be confrontational and say to the Finance Manager, “I’m not planning to buy a car today.  This is a big purchase; I need time to think about it.”  I was then told, “We sell 20-30 vehicles per week…it might not be at the lot when you return, in fact I’ve had cars sold right after someone left the lot.” I was given the gimmick of, “Just take the car home for 24 hours, and see how you like it, that way no one else can buy it…”  This is because the Dealership knows if you go home to think about it and do not have an obligation to come back, chances are you will not return, especially if you research prices and find you can get a better deal elsewhere.  I had to say “No thank you” many more times than I am comfortable with (at least 10 times!) before I finally left the Dealership.  Evidently, the vehicle didn’t sell as soon as I left the lot because I received several phone calls over the next week or so asking when I would be coming in to purchase the vehicle, they couldn’t hold it much longer, etc., until I finally told them that I would not be purchasing the vehicle at all.  At first, I didn’t want to say “no” because I was scared that I was passing up a good deal, but, then I realized that I really didn’t like their sales tactics and I wanted more time to become informed and make the best choice for my needs.  You must lean into these uncomfortable moments and learn from them, because you will be glad that you ultimately made the choice that is best for YOU. 

Tip # 3: Shop around, not only for the right vehicle, but the right financing.   I also approached several banking institutions (Credit Unions mostly) to request information regarding car loans.  You need to know that you have options.  When you begin to discuss financing with the Car Salesman, they will most likely tell you that their interest rates are the lowest (I spoke with three different Dealerships that said this).  Well, I ended up finding an interest rate lower than all the Salesmen I negotiated with, just by doing my own research, and taking my time.  It is in THEIR best interest for you to finance with them…but, you have to realize that you should make decisions based on YOUR best interest, because you will be making the payments.  It is quite possible that you could get the better interest rate through the Salesman, but, by doing your due-diligence, you will be confident that you are getting the better rate in whichever route you choose.

Tip # 4:  Know what your needs are, and know what your personal financial limits and goals are…there may be options that you haven’t considered that may help you achieve your goals while staying within your budget.  Because of my modest income as an AmeriCorps VISTA, I automatically assumed that I would only be able to afford a used vehicle.  After speaking with an Industry Professional, I began to realize that if I buy a used vehicle, that is most likely out of warranty, how will I pay for any unforeseen mechanical problems?  I would inevitably have dip into my Emergency Savings, or worse, put debt onto a credit card.  I slowly began to think about the possibility of a new vehicle, which would still be under warranty.  I began my research online, and you will see that the majority of warranties are 3 years or 36,000 miles for General, as well as 5 years or 60,000 miles for Power Train.  Additionally, the company I ended up purchasing from includes the first year of maintenance for FREE.  I had to weigh my options, and decided that it was in my own personal best interest to have a reliable vehicle, with an excellent resale value.  And after shopping around, I was able to see that I could afford a new car, and then began the next step in the car-buying process.  First, I chose 2-3 vehicles (different makes/models).  I did some comparison research on each one, to have an idea of what options they have, and what prices to expect, and then I took a day to go to Dealerships and test drive.  This is one of the most important steps, as you will be able to narrow your search just by a simple test-drive.  I went into the process thinking I wanted one particular model more than the others, and ended up changing my mind after the test drive, liking another vehicle much better.

An excellent resource is the Consumer Reports Car-Buying issue (showing Pros and Cons of different vehicles), check your local library or their website:  http://www.consumerreports.org/cro/index.htm

There are multiple websites that can help you compare pricing in your local area: True Car https://www.truecar.com  and Edmunds www.edmunds.com/

These websites can show you what other people have purchased specific vehicles for most recently in your local and surrounding areas.  And you can use this information to your benefit when negotiating with the Car Dealerships.  This also works for Used Vehicles.  Interestingly enough, when I was car shopping, I ended up negotiating with at least 4 different dealerships.  You do not have to feel loyalty to one particular dealership, even if you did test-drive with them.  Many of them will negotiate with you via email or text, so that is even easier for communication, less intimidating, very simple and to-the-point.  In the end, I purchased my vehicle from a Dealership in another City from a Salesman that I never met, and they delivered it to me at my home, which is over 90 miles from the Dealership.  I had no idea this was an option before beginning this process!  Since I didn’t have a car at the time, when I looked online at Dealerships in other areas, I checked for Free Vehicle Delivery.  I even negotiated for All-Weather floor mats!  I told the Salesman that was giving me the best price, “If you throw in the all-weather floor mats, we have a deal,” and it worked! 

Tip # 5:  Don’t give too much information; there is power in your silence.  At the car dealership, you may be asked, “How much do you want to pay per month?”  They don’t tell you their lowest price; they want to know your highest price!  So, use your power of silence and don't say a number.  Just say that you are not interested in purchasing anything today, you’re just beginning to shop around.  Once you remove that lingering pressure for purchase, you are free to ask questions about the vehicle and make your comparisons, also that way the Salesperson is aware of your intentions.  Now, during negotiation, you will have to talk price.  And when Salesmen told me their price, I would ask if they could come down from that price because it was too high for my budget.  Most likely they will say, “What number are you thinking you want to pay?”  I would then say a price and most times, they would say that it was impossible.  I presented one particular Salesman a quote from another Dealership to show that it was possible, and they did come down to meet that number! Now, it did take a day or two for their response, however they did meet my “impossible price”…this is the time when you really have to be patient. 

Tip #6:  Be sure to research the offered warranties and see what is best for your needs. The Finance Manager will most likely try to convince you that you need many additional extended warranties, which will drive up the price.  Be prepared for this conversation, do your research ahead of time. In my case, I decided that I only wanted the Road Hazard package for the tires.  I made it very clear to the Dealerships during negotiation that I would only be purchasing the Road Hazard warranty and that helped take the pressure off of having to say “no” so many times.  These extended warranties may be something that you are interested in purchasing, just be aware it will raise the price of the vehicle. 

Bottom line, it is always best to educate yourself, just try not to get overwhelmed, because it is a lot of information to process.  My negotiations lasted 4-5 days after almost one month of research, and I had moments of frustration but, it was all worth it when I finally negotiated the deal that was best for me.  Once you realize you have the power to say yes or no, you take control of the entire process.

Monday, February 17, 2014

My Money Smart Challenge

I have completed the first three modules of FDIC's Money Smart financial literacy curriculum! Honestly, I thought these courses would be informative yet easy. I was highly mistaken. At the beginning of each module I was asked a series of questions to test my knowledge. I never passed a pre-test. Here are some I missed:

Which of the following is an example of a secured loan?
a. Home loans and home equity loans
b. Most credit cards
c. Personal loans
d. Student loans

In which two of the situations below would you need to see the customer service representative at a bank?
a. Refer you to a person who can help you
b. Deposit your money for you
c. Take applications for loans offered at the bank
d. Answer general questions

Which of the following must be included in the Truth in Lending Disclosure? Select all that apply
a. Amount financed
b. APR
c. Finance charge
d. Total payments

Did you think you knew the answers? You better recheck! The first one is a, second is a and d, and the third is a, b, c, and d.

Here are some major benefits from just the first three modules of FDIC's Money Smart curriculum I'd like to share with you. 

1. Choosing the right financial institution for your specific needs will save you much frustration. For example, when I moved out of my parent's home to attend a university I never thought about changing banks. However, without the joint support of my parents as well as my student level income I was charged numerous bank fees. I could have easily avoided those fees by simply doing a little research and choosing the best checking account for me.

2. Its good to know how much your financial institution is insured. Insured institutions are guaranteed by the FDIC (Federal Deposit Insurance Corporation). So, if the institution fails the FDIC would return your money, up to the insured amount. To calculate the insurance coverage of your accounts go to FDIC's Electronic Deposit Insurance Estimator at www.myfdicinsurance.gov/  

3. Financial institutions may share your information with other companies to offer you other products and services. Federal privacy laws give you the right to opt out of some sharing of your personal financial information. To learn how to opt out go to www.optoutprescreen.com 

Financial literacy is the first step out of asset poverty. See my previous blog for more information on what exactly is asset poverty at http://newcenturyida.blogspot.com/2013/11/my-asset-poverty-status.html. Our New Century IDA program uses  FDIC's Money Smart for partnering Crosby Scholars participants. Info on Crosby Scholars programs can be found at http://crosbyscholoras.org/ , to participate contact EISR’s Barbara Johnson at barbara.johnson@eisr.org 

Be on the lookout for the next blog on my Money Smart Challenge progress!


Friday, November 1, 2013

My Asset Poverty Status

I recently had the opportunity to attend a conference entitled Pathways to Prosperity: Integrating Asset-Building throughout Communities. It was here that a term I had never before heard was being thrown around, asset poverty. Being a contradictory set of words I was instantly confused until I learned the meaning. “A family can be defined as asset poor if it has insufficient net worth to support itself at federal poverty level for three months in absence of income, i.e., net worth less than $4,577 for a family of three in 2009” (Assets & Opportunity Profile). As I was assumedly standing in a room of mostly asset stable professionals I realized I might be the only asset poor individual in the room.

My predicament
  • As an AmeriCorps member I serve at poverty level and make only about $1,000 monthly
  • I would consider my educational degree of a B.A. in Art History an asset. With this I may be able to expedite time without employment if I was to lose my current position
  • I have no economic assets such as a vehicle, home, or significant savings
  • However, I currently only have two bills, rent and utilities, about $550 monthly

As you can see, if for any reason I lost my position or received a surprise expense, I would be in hot water very quickly. On the other hand, I learned at the conference ways to combat my asset poverty status. I decided to take the Money Smart Challenge. Money Smart can be found at http://www.fdic.gov/consumers/consumer/moneysmart/adult.html and is a free, highly reputable, financial literacy curriculum. New Century IDA uses Money Smart for Crosby Scholars participants. Info on Crosby Scholars programs can be found at http://crosbyscholars.org/, to participate contact ESR’s Barbara Johnson at barbara.johnson@eisr.org. With the Money Smart curriculum I can learn techniques to become more economically savvy and begin to implement savings. I will also learn about credit building options.  Since I have no credit to date, learning these methods will help. I plan on using this information while choosing my first credit card!

I know that once I establish stable savings and build credit then I can look into making my first asset purchase such as my own home or vehicle.  What do you think? Would you consider yourself asset poor? If not, prove it with http://www.playspent.org/

If you want to look into ways out of asset poverty like me or if you’re interested in helping build asset stable communities I suggest reading Asset & Opportunity Profile: Winston-Salem and Forsyth County found at http://www.forsyth.cc/housing/Documents/WinstonSalemMEOPReport.pdf

Be on the lookout for the next blog on my Money Smart Challenge progress!




Works Cited
"Assets & Opportunity Profile: Winston-Salem and Forsyth County." ASSETS & OPPORTUNITY PROFILE. (2012): n. page. Web. 31 Oct. 2013.