This material is based upon work supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, and the Office of Family Policy, Children and Youth, U.S. Department of Defense under Award No. 2010-48869-20685.

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Welcome to the Military Families Learning Network

Webinar:Secrets to Smart Car Buying

Welcome to the Military Families Learning Network

Webinar:Secrets to Smart Car Buying

This material is based upon work supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, and the Office of Family Policy, Children and Youth, U.S. Department of Defense under Award No. 2010-48869-20685.

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Today’s SpeakersElaine Courtney has extensive experience teaching financial management, nutrition education and volunteer development programs. She received a B.S. and M.S. degrees from Florida State University, has done post graduate work at University of Minnesota and University of West Florida.  She is a member of the Association of Financial Counseling, Planning and Education and is an Accredited Financial Counselor. Employed for 30 years with the University of Florida Extension Program in Okaloosa County (faculty member; ranking IV). 

Michael Gutter, Ph.D. is an Associate Professor, Interim Family and Consumer Sciences State Program Leader, and Financial Management State Specialist for the Department of Family, Youth, and Community Sciences, in the Institute for Food and Agricultural at the University of Florida. His BS is in Family Financial Management and his PhD is in Family Resource Management from The Ohio State University with a specialization in Finance.

Additional Resources Availablehttps://learn.extension.org/events/1327

CAR PURCHASING STRATEGIESElaine A. Courtney

University of Florida/IFAS Extension

Okaloosa County

ecourtne@ufl.edu

WHAT ARE THE SECRETS TO WISE CAR BUYING?Preparation

Shopping

Negotiating

Has this ever happened to you?• SKIT

Preparing to Purchase• Needs, wants?• How much can I afford?• Financing

The Dream…

Research• Auto Types• Reliability• Safety www.hwysafety.com• Gas mileage

• http://www.fueleconomy.gov• Insurance for type of auto

Chat Question• Have you ever looked up the maintenance cost prior to

purchasing?

The car should fit your budget

Do the math!

Transportation as part of the budget

Food 13-15%

Housing 32-42%

Child Care 15-25%

Clothing 3.8-4.2%

Personal 2-5%

Transportation 17-18%

Medical 6-7%

Education/Recreation

0-10%

Gifts/Contributions

0-10%

Misc./Emergency

2-10%

Savings 0-10%

Insurance 0-11%

On average, Americans spend the following percentages of their income in each category:

Source: Florida Master Money Mentor, Budgeting PowerPoint, 2010.

Get ahead before it is time to buy

Make a car payment to yourself

Monthly Amount

Number of Months

Annual Percentage

Yield

Total

$200 24 1% $4,846

$200 48 1% $9,790

Save $50/week or about $6.67/day

Check your credit report• www.annualcreditreport.com• Check for errors• Pre-qualify with bank, credit union or other lender• If not offered comparable interest rates, ask why

• New federal laws

Type Loan Term Rate

New 48 months

2.6%

36 months

2.0%

Used 48 months

2.7%

Used 36 months

2.6%

Auto Loan, Average Rate Example

Source: Bankrate.com, Jan. 6, 2014

Get a PAL!

• Preapproval• Credit Union • Bank• Need not reveal details to salesperson

How will you pay•Cash•Determine the amount to be borrowed•Research financing options• Bank• Credit Union• Dealership

Impact of Interest RatesPurchase Price $10,000 $10,000 $10,000 $10,000 $10,000

Down Payment $2,000 $2,000 $2,000 $2,000 $2,000

Amount Financed $8,000 $8,000 $8,000 $8,000 $8,000

Interest Rate 6.0% 10% 14% 18% 22%

Loan Term (months) 36 36 36 36 36

Monthly Payment $243 258.14 273.42 289.22 305.52

Total Finance Charges 761.68 1293.04 1843.12 2411.92 2998.72

Impact of Shortening the Loan Term

The person taking 84 months pays $2,916 more interest than the person paying the car off in 36 months.

 3 Years

(36 Months)5 Years

(60 Months)7 Years

(84 Months)

Amount Financed $20,000 $20,000 $20,000

Contract Rate (APR) 6.5 6.5 6.5

Monthly Payment $612 $391 $297

Total Payments $22,032 $23,460 $24,948

Finance Charges $2,032 $3,460 $4,948

New car depreciation

• Depreciation – decrease in value• Drive new car off lot

• Used car• Average depreciation 20%

Upside down on a car loan

• Owe more on the car than it is worth

Avoid being upside down

• Down payment of 20% or more• Especially if it is a new car

• Pay off car as soon as possible• Try to avoid loans that are more than 48 months

• Avoid expensive interest rates

Impact of down payment

Down Payment $0 $5,000 $10,000 Amount Financed 20,000.00 15,000.00 10,000.00Interest Rate (APR) 5.00% 5.00% 5.00%Monthly Payment 460.59 345.44 230.29Total Payments 22,108.32 16,581.12 11,053.92Finance Charges 2,108.32 1,581.12 1,053.92

Source: FINRA Loan Calculator, http://apps.finra.org/Calcs/1/Loan

48 month loan term for all

Consider the whole picture

• Auto loan• Consider the total cost• Avoid short term thinking such as only considering monthly

cost

• Maintenance• Gasoline• Insurance

Get the best deal

• Don’t combine transactions:• Trade-in• New Car• Financing

• You will get a better deal if you negotiate each one individually

• Or if you sell to a private party• Be cautious when dealing with strangers

Poll Question• Are you planning to purchase a new or used automobile?

Buying Like

an Expert

Getting Ready to Go• What to bring

• The invoice price for the car you are interested in• Checkbook and/or cash for downpayment• Loan pre-approval forms• Auto insurance information, including proof of• Driver’s license• Social security card• Title and registration, if you are trading in a car

• Who to Bring• If vehicle will be jointly-owned, bring spouse• Friend who is not emotionally involved in the situation

The Goal of the Game

• Most car salesmen are playing the same game with the same basic game plan• Goal:

• Sell you a car• At a high price, so they make maximum commission

• Once you understand the game, you:• Deal effectively with the car salesman• Get what YOU want

The “Greeting” and Test Drive

AKA: Salesman’s attempt to lead you through specific steps that will lead him to his goal

• Greets you warmly• Asks you some “innocent” questions• Shows you a car HE suggests is right for you• Does the “walk-around”• Invites you to sit in the car• “How about a test drive?”• Back at the dealership, do-or-die moment• Customer’s curiosity is peaked

Negotiating the Selling Price

1. Salesman will ask basic questions

-- Tries to make the negotiating start out friendly

2. He will want to discuss monthly payments

- Never negotiate based on monthly payments

-- “I’m not interested in discussing monthly payments.I only want to talk about the selling price of the vehicle.”--- Negotiate up from dealer’s cost

3. How will you be paying for the vehicle?

- “I only want to talk about the selling price right now.We can discuss finances later.”

4. YOU are the one who will determine the way the negotiations go!

- He will continue to try to back into his game

- It’s up to you to keep things on track

-- Stay strong and focused on your buying goals

FIRST Rule of NegotiatingNever appear anxious, worried, or desperate.Remain calm, casual, and willing to walk away at

any time.

Negotiating the Selling Price

5. Tell him you are ready to make an offer

- Let him know that “you are in no hurry to buy a car; however, if my offer is accepted, I am prepared and willing to sign the papers and drive the car home today.”

SECOND Rule of NegotiatingNever negotiate down from the sticker price.

Always negotiate UP from the invoice price (new cars)

or wholesale price (used cars).

Negotiating the Selling Price

6. Once you’ve made an offer, be quiet

- Sit and wait for a response- The salesman will probably insist your offer is too low

Negotiating Tip

Whoever speaks first after an offer is made is in the weaker negotiating position

7. The salesman will try to get you to raise your bid

Negotiating Tip

Never negotiate against yourself

Never raise your own bid until they make a counteroffer

Negotiating the Selling Price

8. Let the games begin

- The salesman will walk over to the Sales Manager’s office

-- Sit back and relax

--- Sooner or later, the salesman will return

---- He and/or his Sales Manager will present their counteroffer

---- Sit and think

---- They will probably speak first to break the tension

---- At the appropriate moment, show your flexibility by raising your bid

Negotiating TipAlways raise your offer in small increments $50 -

$100 at a time

Negotiating the Selling Price

9. The game will go on

- Back and forth

--- Shake their heads

--- Try to get you to spend more than you have planned

10. Eventually, your offer will rise to your pre-set limit

- When it does, FREEZE!

-- Don’t budge

11. If they won’t sell at YOUR price

- Thank them and leave

-- If they WILL sell at YOUR price…

Negotiating the Selling Price

Closing the Deal

• Negotiations finally end when • They are convinced you absolutely cannot or will not

go any higher in your price

• They know they are making a profit…even a minimal one

Gap Insurance

• Upside down on car loan• Auto insurance pays off market value• Gap pays off any difference• Need if likely to be upside down

• Extra long loan term• No money down

• Do not purchase unless necessary• Compare prices

• Dealer• Lender

Surviving the Business Office• Selling price agreed to..sent to Business Office

• Discuss financing• Pre-approved financing• Dealership financing• Cash

• Read ALL fine print• Think twice about all those “extras”

• Extended warranty• Paint protection / fabric protection• Rustproofing /Undercoating• Alarm systems• Window Etching• Window tinting• Insurance: disability, life• Etc.

• Remember…The Business Manager is another salesperson working on

commission

Negotiating

Negotiate the price of the car,

not the payments.

SKIT

THOUGHT TO REMEMBER…

Car buying is a

process…

not an event!!!

Congratulations!

are now in control of the “Car Buying Game!”

YOU

Summary• Consider all costs• Save for a down payment• Get a PAL• Do your research• Negotiate

Sources• Consumer Federation of America,

Car Buying Power Points and Brochures.• Consumer Reports• Edmunds.com• US Air Force FTAC Curriculum• Florida Master Money Mentor Curriculum