New car buying guide: the algorithm (2021)
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Re: New car buying guide: the algorithm (2021)
#2Not sure who needs to hear this, but you can buy a nearly new car used and save 1/3 to 1/2 of the cost. One big benefit is you let somebody else find out if new models are lemons. Another benefit is you don't need to haggle, as there will be many different options at different prices and you can quickly find out if the price is reasonable by checking KBB.
Re: New car buying guide: the algorithm (2021)
#3Not sure who needs to hear this, but you can buy a nearly new car used and save 1/3 to 1/2 of the cost. One big benefit is you let somebody else find out if new models are lemons. Another benefit is you don't need to haggle, as there will be many different options at different prices and you can quickly find out if the price is reasonable by checking KBB.
Also you put yourself after the first leg of the defect curve. Buying used is a stressful experience with no guaranteed outcomes, but I'd never buy new
Re: New car buying guide: the algorithm (2021)
#4Not sure who needs to hear this, but you can buy a nearly new car used and save 1/3 to 1/2 of the cost. One big benefit is you let somebody else find out if new models are lemons. Another benefit is you don't need to haggle, as there will be many different options at different prices and you can quickly find out if the price is reasonable by checking KBB.
You grossly increase the chance of a lemon with your strategy.
Why would anyone sell a near-new car for 30%+ off *unless* they knew the vehicle is crap?
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Buying lightly used (~3 year or ~5 year) cars is likely the superior strategy. There's a set of rich buyers who want to keep up with the latest trends. This leads them to leasing vehicles for 2, 3, or so years. Other times, they have enough income that they can just buy new entirely but sell within 5 years when nicer technology comes out.
There's likely nothing wrong with a 3-year-old car. Its just that the lease is up so they're moving on.
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In contrast, think of the kind of person who buys new at like $40,000 and then turns around and immediately tries to sell the vehicle 6 months later for $25,000. There's probably something very wrong with that car.
Anyone selling just a few months after buying is someone who actively regrets their decision to buy.
Re: New car buying guide: the algorithm (2021)
#5> You do not want to use financing products that dealerships offer - they are worse than the ones you can shop around for. Get preapproved with your bank or and other bank and get the preapproval letter ready before step 5.
That seems unlikely to me, though this depends on which car company you're buying from.
Take Ford for instance. A significant amount of Ford's business is banking/financing. Much like how the Dealership wants to sell you a car, Ford actively wants to be your financier and they're competing against the banks to get your business.
Furthermore: Ford is known to sweeten the deal and offer financing-credits rather than straight $$$ off of a car. For example, you might find that Ford can offer 5% right now, when typical banks are going to be offering 8%. This is effectively Ford choosing a "shadow-discount" in the form of financing-incentive. They're willing to lose money on the finance but gain a customer. Its a hidden negotiating tactic on top of all the other offers they're doing to you. You might as well give the sales-guy the opportunity to offer you a financing deal.
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But Toyota doesn't have as big of a financing arm, and its more of an (expensive) service to the customer. You'll probably lose money on Toyota financing compared to a regular bank.
I think its a good idea to be pre-approved. This means that you know what the "fair" % interest rate should be right now, and get a good idea of what "shadow deals" various car manufacturers are doing.
I know I've seen 1.9% APY deals in the market today. Financing is seriously just another step in this annoying negotiation process you have to normalize and account for.
Re: New car buying guide: the algorithm (2021)
#6Car dealership in US are in their own league. Coming from Europe it is difficult to appreciate at first. But when you see headlines like:
"Roma was purchased last month by Texas car dealership magnate Dan Friedkin, who is worth $4.1 billion."
Yes, that a Texan car dealership buying the AS Roma (soccer team, Italian capital).
When I came in US, I had no car, I saved money, went to dealership (Toyota) and pointed a used Matrix, test drive it, and said, I will buy it. The guy started to show me a long form (like 3 letter pages long form)... I said I do not want to make a loan. He looked at me like I came from another planet. I want to buy the car. He said that he can only accept a bank check. It was close to noon on Saturday, I asked if he could drive me with the Matrix to the nearest bank quickly, he reluctantly said yes. Maybe he thought I was going to scam him or something. He did stay in the car, while I asked for a bank check. He drove me back to the dealership. Unfortunately I had to leave the car, so they do a final inspection and prepare some papers. I came a week later to pick up the car.
Clearly the sales guy seemed a bit puzzled by the transaction. But there was no way I was going to drag a car purchase process like describe in https://github.com/kutinden/buyingacar/blob/main/README.md (13 steps !?)
Now I see the why Tesla sells online. US dealerships have been fat cats for too long.
Re: New car buying guide: the algorithm (2021)
#7This BS is why I bought a Tesla.
Re: New car buying guide: the algorithm (2021)
#8Not sure who needs to hear this, but you can buy a nearly new car used and save 1/3 to 1/2 of the cost. One big benefit is you let somebody else find out if new models are lemons. Another benefit is you don't need to haggle, as there will be many different options at different prices and you can quickly find out if the price is reasonable by checking KBB.
Is that still true today? I know in years past it was, but used car prices are so high right now. I've seen many 2 year old cars selling for nearly as much as new lately.
Re: New car buying guide: the algorithm (2021)
#9> You do not want to use financing products that dealerships offer - they are worse than the ones you can shop around for. Get preapproved with your bank or and other bank and get the preapproval letter ready before step 5. That seems unlikely to me, though this depends on which car company you're buying from. Take Ford for instance. A significant amount of Ford's business is banking/financing. Much like how the Deal…
For example, Subaru has 1.9% APY on Outbacks right now, and Ford has 0% on Mach-Es. Whether the car itself is a good deal will vary, but if you already have plans to get a specific model or would come out ahead of your other preferences after counting the interest savings, it would be silly not to take the deal.
Re: New car buying guide: the algorithm (2021)
#10Not sure who needs to hear this, but you can buy a nearly new car used and save 1/3 to 1/2 of the cost. One big benefit is you let somebody else find out if new models are lemons. Another benefit is you don't need to haggle, as there will be many different options at different prices and you can quickly find out if the price is reasonable by checking KBB.
> nearly new car used and save 1/3 to 1/2 of the cost
This is pretty old advice, inaccurate for any car worth it's salt that you're buying.
Good luck buying a slightly used Toyota for 1/2 cost, it's more like 6% off each year.