how to become an exotic car broker

Here is a detailed post on How To Become An Exotic Car Broker. Suppose you are looking for how to become a car broker. Then reading this article may help. It also includes how to become an exotic car dealer.

Selling cars can be a tough business to become successful with. It takes a certain personality and technique to be able to swing a deal with interested clients. Although buying or leasing a regular car is one thing, those who have enough money to buy luxury cars, will be dealing with a different kind of car salesman. If you’re interested in becoming a luxury auto broker and working with high-end automobiles and clients, it’s important to know what it takes to land this position.

how to become an exotic car dealer

How To Become An Exotic Car Broker

A luxury auto broker and an ordinary car broker share a lot of the same skills, but there is a significant difference between the two, and that’s the money involved. Luxury car brokers deal with people who are ready to make an extremely expensive purchase. Many will even pay for the cars in cash. A professional luxury auto broker needs to make his customers feel comfortable with making such a big financial commitment, even if the client is already wealthy. For this job, you will need to be familiar with luxury cars, and you’ll need to foster relationships and build partnerships with other industries, such as manufacturers, shipping companies, mechanics, and so on. Of course, you’ll also need to know a good deal about cars and their worth. A luxury car broker must also know various selling techniques, how to relate to customers and how to negotiate.

Education Requirements

To become a luxury auto broker, you must have a lot of experience in the field, or, you must have significant experience in sales. Although a formal degree isn’t required, it is likely that most luxury car brokers have at least a high school diploma or a GED, as well as some college education. A college degree in business, communications or even math might be helpful, but most car brokers are also familiar with how a car operates mechanically. You might also want to have experience working in a car dealership, as you can learn from those who are already experienced.

If you want to know how to become an auto broker that deals with luxury cars, though, the most important thing is to know the steps to get there. Before you can open a luxury car dealership, you must first get an auto broker license. Licenses for an auto broker license will vary from state to state, but the process is more or less the same across the board. You will need to fill out a lot of applications and forms, apply for your salesperson license, submit dealer forms that comply with your state’s Department of Motor Vehicle registrations board, and take out Surety Bonds. As part of the application process, you will also need to choose the location for your dealership, obtain liability insurance and have a business inspection. Contact your state’s DMV office for more specific information.

Finally, you will need to have a lot of money in order to open any auto dealership, but you’ll need even more to open a luxury car dealership. This could be something like a bank loan if you don’t already have the money yourself. You’ll need to be hard-working, patient, consistent and possess strong interpersonal skills.

Industry

A luxury auto broker may choose to work at a luxury auto dealership that’s been around for quite some time, or they may choose to open up their own dealerships. Most luxury car dealerships work closely with other dealers and private sellers, shipping companies that can import cars, banks and of course, their clients. A luxury auto broker may work in an office or they may travel between different cities to meet with their clients.

Years of Experience and Salary

An auto broker’s average salary is between $40,000 and $60,000, but for a luxury auto broker, it could be as high as $250,000 a year. The reason that it’s tough to find an auto broker’s average salary is that most luxury auto brokers (and general auto brokers) make their money from a commission of each sale. This means that those who sell more cars, especially more expensive cars, will bring in more money from each sale they make. Although luxury auto brokers aren’t guaranteed more pay with more experience, it’s likely that the more experience they have in selling cars, the higher their closing ratio will be.

Job Growth Trend

Having a car is a necessity in the United States, and even though having a luxury car is not a necessity, there are wealthy people, car collectors and retirees who would like to own their dream car. Because of this, luxury auto brokers will continue to be in demand, and luxury brokers who are dedicated and who work hard can make a tidy profit.

Used Car Websites

Buying a new or used vehicle is a big decision — both financially and in terms of the amount of time we spend in our cars. And wouldn’t you know it, there’s an app for that. Cars, trucks, and SUVs of all types can be found online today. You don’t even need to leave your couch to research, browse, inquire, and finance your next vehicle.

Here are some of the best used-car websites around.

Autolist.com
Because it’s an aggregator (like Kayak.com), the easy-to-use Autolist site displays millions of vehicles from many different sources. Users can view details such as the length of time a given vehicle has been on the market, plus any price changes for that vehicle. Autolist has one of the highest-rated used-car apps available. It works with Android or iOS phones, and just like the website, it checks multiple online databases to help you locate your dream car. The app also has instant price-drop alerts and high-res pictures to help you find the best deals on the most local listings. Shoppers can even apply for financing. With family sharing, as many as six family members can share information through the app. Add to that reviews, industry insights, a Rotten Tomatoes-style aggregator of older vehicle reviews, and buyer’s guides to help steer you through the car-buying process.

Go to Autolist


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Autotempest.com
Like some of the other websites here, AutoTempest’s search results are drawn from multiple sources. Their website and app work similarly to the others, including the ability to save searches. They have lots of other useful information as well, including an up-to-date blog, buying guides, and car reviews. While you can filter your searches, the criteria for doing so are much more limited, although some might consider it to be streamlined. Either way, the essential information is provided. Choices include make, model, distance, price, year, mileage, vehicle type, transmission, and whether it’s for sale from a private party or by a
dealer.

Go to Autotempest


Autotrader.com
Because Autotrader.com nearly predates the internet itself, its longstanding reputation has built up decades of trust. Available as a website since 1997, it has over 3 million listings drawn from 40,000 dealers and 250,000 private sellers, and its selection is immense. The website has a wide variety of filters that can help you narrow your search down to exactly the type of vehicle you’re looking for. You can save your searches and even apply for insurance and a loan.

Go to Autotrader


BringATrailer.com
Bring A Trailer used to be a listing of interesting cars for sale around the country, now it is a full-blown auction site, with rare and unusual vehicles selling for sometimes astounding figures. It is the place to find that social ride or merely kill endless amounts of time browsing high-dollar exotics and absurdly clean early 2000s commuters. Recently, a pristine 2000 Honda Civic SI sold for $50,000. If you are in the market for something unusual or are willing to pay top dollar for your dream car, check out BaT.

Go to Bring a Trailer


CarGurus.com
This is a company that seeks to build trust through transparency. You will find many of the same search options on their website as you’ll find on the other sites. However, you’ll also find the CarGurus valuation of a given vehicle based on typical search criteria on top of this. This algorithm is similar to the methods used by KBB. The information they use to make this determination includes comparable car listings and pricing data on vehicles that have recently sold. Ratings are based on mileage, trim, vehicle history, and a multitude of other factors. CarGurus rates each available car deal as being Overpriced, High, Fair, Good, or Great.

Go to CarGurus


Carmax.com
Carmax is a dealership specializing in high quality used cars, many available with the internet-famous Carmax warranty. This website isn’t the best for those looking for a killer deal because of their no-haggle policy, but it is an excellent place for people who want the most effortless car shopping and buying experience. For those looking for the ease of browsing and buying online, without the anxiety-inducing Craigslist test drive, Carmax can be a good option. Browse, buy, and the car can be ready for pick up, virtually all online or on their mobile app.

Go to Carmax


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Cars.com
Cars.com is one of the largest automotive search engines. With thousands of listings covering almost every car, there is also a new tool that rates the value of used vehicles relative to the current market trends. Cars.com has fewer private sellers, but it’s a great way to search dealers in your area and compare pricing for similar vehicles. It also has extensive sorting options to narrow your search by the specs and features you are looking for and leaving out those you don’t want. In addition to consumer reviews, the site has now built up an extensive archive of expert reviews written by its editorial staff.

Go to Cars.com


CarsDirect.com
This site works to simplify buying a car, and like Autotrader and others on this list, they can help find financing. The search criteria include make, model, distance, price, mileage, year, color, engine, and even photo availability. CarsDirect also has buying guides, rankings, and vehicle comparisons. Like similar sites, you can save your searches and vehicles of interest. The website also has educational videos, including reviews, car news and reports, and tools that include a trade-in valuation.

Go to CarsDirect


Carvana.com
Carvana is another used car dealer that built a business around making the buying experience easier. Buy with confidence with a 7-day money-back guarantee, and have the car delivered to your door. All Carvana vehicles have accident free vehicle history and pass a 150-point inspection. You can also sell your vehicle to Carvana, even without buying from them. They claim you will get a real offer after filling out a form, which takes just a couple of minutes. With used car values near all-time highs, it may be a good time to see what your car is worth to them. Carvana is also the inventor of the car vending machine for those looking to buy in person. It’s a neat gimmick worth checking out.

Go to Carvana


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Craigslist.org
Primarily a classified site, Craigslist doesn’t have many fancy graphics or options, but the site’s selection is fairly broad, and postings usually include photos. You’ll need to be super savvy if you’re going this route because the site is rife with scammers, but it is possible to negotiate a worthwhile deal here. Search filters here include distance, price, make and model, year, mileage, condition, number of cylinders, drivetrain and fuel type, color, size, title status, vehicle type, and transmission type. A point of interest to some, some sellers on Craigslist might accept cryptocurrency like Bitcoin in exchange for the vehicle they’re selling. You can also create email alerts for the specific attributes of a vehicle that you’re looking for.

Go to Craigslist


eBay.com
eBay Motors isn’t just an auction site for rare vehicles anymore. There are thousands of used and new cars listed by dealerships and private sellers to peruse using classified-style listings. Whether you are shopping for a custom show car or a late model Chevy, eBay likely has at least one of those vehicles. Other great searches on eBay motors include the “Replica/Kit Make” section, as well as the “Racecar (Not Street Legal)” category. Just be careful in terms of trusting sellers since eBay makes it difficult to recoup any monies lost to fraud or misrepresented vehicles. A pre-purchase inspection by an independent third party is highly recommended if you’re not able to see the vehicle yourself in person before buying.

Go to eBay


Edmunds.com
Edmunds originated as a paperback booklet available at newsstands. Decades of experience have made this a well-respected name in the industry. The website allows you to save searches and favorites and also lets you filter your selections. Although their search functions look similar to the ones available on other sites, they often have more features and options to choose between. That allows buyers to narrow and refine more thoroughly. Edmunds also has a wealth of advice and articles to help educate people about the car-buying process and the vehicles themselves.

Go to Edmunds


EnterpriseCarSales.com
If you don’t mind a car with plenty of miles on it, Enterprise’s former rentals can be a good choice. They offer a no-questions-asked, seven-day “buyer’s remorse” period, in addition to their 12-month or 12,000-mile limited powertrain warranty and one year of roadside assistance. Enterprise also provides financing. Unlike most of the other sites mentioned here, the company sells cars only from one source: their retired rental fleets. They also take trade-ins and have special programs for college graduates or first-time car buyers. The website allows you to search by the monthly payment you can afford alongside the same criteria you’ll find on other sites.

Go to Enterprise Car Sales


Hemmings.com
For classic car, truck, or motorcycle collectors, this is a ‘don’t-miss’ destination. As well as vehicles, Hemmings helps you locate hard-to-find parts for project cars. Search for vehicles or parts by make, model, type, price range, and category. With more of a community feel to it, this site maintains a blog and regularly sends out newsletters. Hemmings also sells merchandise related to this niche market. They have an email list, fantastic videos, and special events, not to mention apps for Android and iOS, and several print publications to subscribe to.

Go to Hemmings


KBB.com
The words “Blue Book price” have been a part of the American vocabulary for nearly a century, and the Kelley Blue Book website and app both trade on this longstanding name recognition. Not only are they known for providing accurate estimates of your car’s market value, but their site has tools for checking your credit score and calculating car payments too. Expert reviews, top ten lists, and recall postings make this site a longtime go-to favorite for automotive information. They also cover motorcycles, snowmobiles, and personal watercraft such as jet skis. KBB even has an instant cash offer section on their website.

Go to Kelley Blue Book

Car Buying Guide

Introduction

Listen to the hype—whether it’s on TV, online, or in print—and you’d think saving money on a vehicle is as easy and fast as flipping the TV remote. Wrong! Did you know a dealer or online auto service can sell or lease you a new set of wheels for exactly what the dealer paid the manufacturer and still make $500 to $1,500 on just the car itself?  00:00 00:00        

Car buying guide introduction video.

Did you know that “Zero Percent” financing may cost you more than financing at a bank or credit union—even if the bank or credit union’s rate is 7 percent?

Do you hate dealing with dealers and look forward to buying or leasing a vehicle online—or from a buying service—just so you won’t have to deal with the dealer yourself? Guess what: you have to deal with a dealer, even if you use a buying service! All new vehicle sales—repeat, all—have to involve a dealer.

Car Buying Websites

Do you think the Internet has made it safer for you to research and/or acquire a new vehicle? Think again! In just the past three years, the entire auto business has been ripped apart, reinvented, and re-launched. “In an instant, your privacy, your money, and your good credit can be stripped away—and that’s if you’re dealing with the ‘good’ car guys!”

That quote, from the latest edition of my book Don’t Get Taken Every Time, sums it up. (Read the Introduction and Chapter 1 of the book.)

Straight Answers

“Just click here and this beautiful convertible can be yours for $1 under invoice. Unbelievable! And we’ve got Zero Percent financing. Even more unbelievable! And we’ll give you a free computer when you buy from us! And we guarantee the value of your trade-in!”~ Guy on the TV Commercial

Why this car buying guide is different? Because it frankly tells you the truth. I’ve written this special buying guide for you to give you straight answers about the car buying and leasing process.

For over 30 years, I’ve tracked the inner workings of the auto industry. As President and co-founder of the non-profit Consumer Task Force For Automotive Issues, and as co-founder of the Privacy Rights Now Coalition, I’ve pretty much seen it all when it comes to wacky sales gimmicks, deception and consumer abuse. And, it’s my sworn duty to keep those things from happening to you!

And will this guide work! If you follow this guide, you can probably keep thousands of your hard-earned dollars in your pocket rather than in the dealer’s.

A major promise up-front: This guide is about educating you, not trying to hype you. Confusion and deception are rampant in the auto industry and on the Web.

For instance, where is it cheapest to finance? A lot of studies show that normally credit unions offer the cheapest and most straightforward vehicle financing. Credit unions generally don’t use double-talk and outright deception to try to get you to finance with them, either. But here’s the rub: a bank, and at times even a car dealership, could be the cheapest for you—specifically—to finance. And dealerships in particular aren’t going to tell you if their financing will cost you more.

So, how do you find the cheapest and best loan for you? We show you how to “shop” for the cheapest and best rate. Read on to learn how to do that! Thanks for reading. Your pocketbook, as they say, will thank you.

Chapter 1. Dealership Tactics

What’s Really Happening Down at the Dealership?

To win in any auto transaction, you first have to understand what the other side is trying to do to you, and why. Since “the other side” always includes a physical automobile dealership—even if you’re buying or leasing from an online service—I’m going to take you inside a typical dealership right now. What’s really going on down there?

The pressure game starts before you go near a dealership, either online or in person. Just look at the dealer ads: they promise low payments, sales, big money for your trade and respect for your intellect. But, as with most selling, these promises come with some crossed fingers. Did you know that many dealers make more during sales than they do at non-sale time? That’s because we consumers automatically equate the word “sale” with “save.” That’s dangerous math. Dealer advertising really has another purpose: To get you to rush down in a fit of excitement (“Really? Just $99 a month?!”) without stopping to think.

The “Track” System Takes Over

A “track” system is an automobile sales program designed to put every customer through the exact same sales steps with the sole intent of selling that customer instantly for the maximum profit. The key words here are “instantly” and “maximum profit.” When you arrive at a dealership (or log-on to most auto websites) the dealership begins to “work” you: put you through the track system.

The objective is always the same: Get you to pay more for every item and service than you were planning to pay. Want to spend $450 a month? A savvy dealership will get you to pay $550. Or they will happily sell you a car for $450 per month—but it will be a car you could have bought for $350 per month. Nice of them.

The car dealership is concerned about its profit, not your budget.

The people at virtually any dealership and most websites and buying services, friendly though they may be, have a little different objective in the car transaction than you do. Their goal is always to maximize profit. And that might mean leaving out an important fact or two.

To take one example, what would you do if you owned a dealership that sold cars ranked lowest on the government crash safety reports? Would you tell all your customers: “Oh, don’t forget—our cars are the most dangerous on the road!”

See the problem? To survive, the dealership must either lie about the dangerous test results, or simply forget to talk about the results.

What’s the Outcome of This?

The sellers of automobiles generally can’t give you good advice about what you should spend, number one. No salesperson in the auto industry ever prospered by volunteering to cut the price on every sale or always telling the whole truth about its vehicles.

Number two, the sellers of a particular automobile generally can’t give you the answers you need to questions about such matters as a car’s safety, reliability or resale value.

But these questions are important, aren’t they? And you’ll need the answers before you even look in the direction of the dealership.

Why? Because once you’re engaged with these folks, the “track system” will take over and speed you along recklessly whether you like it or not.

Car Dealership Tactics

Here’s a look at a few of the tactics track systems use to “work” you.

You stop into the dealership simply to pick up a brochure. Even though you have no intention of buying, the smiling salesperson requests your driver’s license, your Social Security number or simply your address. Or maybe they want to register you for a fabulous free trip to Paris.

Even though you haven’t given permission, many dealerships will now search their databases and quickly open a file on you. And because many dealerships are now owned by conglomerates that already have information on you, the dealership has an informal “read” on your credit without even pulling a credit report!

With that informal “read,” the dealership then begins to plan the maximum profit they can make on you, based upon your credit worthiness. And you really only stopped into the dealership to use their restroom.

More Tactics

  • The Dealership T.O.s You
    “T.O.” stands for “turn over.” You’re sitting in a salesperson’s office, thinking about how much more fun it would be to change the oil in your car in the dark rather than go through this, when your salesperson returns with reinforcement— another person. The new smiling face asks for more money. And then the salesperson asks for more. The T. O. system operates on the principle of “fresh faces can work miracles.” A miracle, in this instance, is defined as more profit. And as long as you keep giving, they’ll keep asking.
  • The “Note” System
    Rather than “T.O.ing” you, some dealerships use the note system: The salesperson steps out, returning with a nice note from the sales manager asking for more money. And then another note, then another. Usually, the salesperson comes back with five notes, and usually the last two ask for raises of odd amounts of money—for instance, $113.29 or, finally, $23.19. The note system has one basic problem. It makes you think the dealership is negotiating when it’s really only play-acting. Consider the “odd” raises. These are simply designed to make it look like you’re really a hard bargainer. You know, you think you’ve got them “down to the pennies.”A tip: Many Web-based sellers use versions of the note system.
  • The Four Square System
    The salesperson divides a piece of paper into four squares and then asks for your “wish list.” What do you want to pay a month? What do you want for your trade? What do you want to pay for the new car? However ridiculous the sums, each are written in a square. Then they ask for a large deposit, and then they ask for your signature in the fourth square.Daily the methods used by many dealerships and online selling organizations grow more sophisticated and subtle.Then they begin to “work” you on each square separately. You wanted to pay $20,000 for the car? They ask for $40,000! Very slowly the salesperson negotiates down, constantly scratching through figures. By the time they finish, the paper is illegible, you’re frazzled, but the salesperson is smiling. You’ve agreed to pay an additional $1,200 to $1,500 profit.The four square system is probably the worst system in use today because it was designed solely to confuse you and produce some very nice profits. Don’t deal with dealerships that use this system.
  • Spot Delivery, or “Yo-Yo” Selling
    “You can drive it off today!” That is the most expensive statement any car dealer or Web seller can make. Spot delivery means emotion is ruling you rather than good sense. It also means you (very conveniently for the seller) won’t have the opportunity to compare costs and terms.The real danger in Spot Delivery: Spot Delivery has become a fraudulent selling technique at many dealerships. These dealerships deliver you a car on any terms you want. Then a few days after you’ve taken delivery, they call you up and say “Oops, your contract wasn’t approved at the figures you wanted. We need an extra $1000 in cash, your payment has gone up $300 per month and we’ve added 12 more payments!”What can you do if that happens? Usually nothing. They’ve already sold your trade-in, and you unknowingly signed an agreement to let the dealer raise the price! This type of Spot Delivery is called “yo-yo selling” by unethical dealerships, and is endemic in the auto business. It is also the subject of hundreds of lawsuits at this very moment.How do you protect yourself from spot delivery? Never buy or take delivery of a car on your first visit to a dealership or a website.
  • The “Business Advisor” or “Financial Counselor” Scam
    Even if you have the cash in your pocket to pay for a vehicle, you’ll be forced to talk with a dealership’s finance sales staff. Or, as they are quaintly called at some dealerships, “Business Advisors” or “Financial Counselors.” Why do these high-pressure finance salespersons insist on talking with you? Because dealerships make much more money on financing these days than they normally make on the sale of an actual vehicle. Many dealerships will do almost anything to convert you to their financing, including shading the truth a bit.And if the dealership can convert you to their financing, they’ll sell you credit life and credit disability insurance that’s almost always more expensive than a credit union’s or a bank’s but sounds downright cheap on a “pennies per month” basis. Then they’ll sell you “protection” packages (rust proofing, undercoating, fabric conditioning) “for just $19 per month.”Why, you can afford that! But over 60 months, you will pay over $1,140 for products that cost the dealer $100. The same approach works for extended warranties or mechanical breakdown insurance, too.

Daily the methods used by many dealerships and online selling organizations grow more sophisticated and subtle. For instance, many dealerships now track customers’ movements by computer, rate their moods on scales entered in computers, and flash their progress in the buying process on computer screens so managers and other salespeople can monitor the dealerships’ careful plan to sell.

How Can You Avoid These Traps?

Buying a car isn’t one negotiation, it’s many: your trade, the new car you’re buying, the financing—and the newest, most popular profit centers—warranties, protection packages, alarm systems and other add-ons.

If you don’t know what you’re doing, you can save money in one area and pay too much in the other; no fun at all. That’s why dealers can sell cars for “no profit” and still make thousands on you. And that’s why you need to pay very close attention to the right steps.

Chapter 2. Buying a Vehicle

Many Negotiations, Not One

If you really want to save money and still like your car after the fourth payment, you’ll have to look at the car-buying transaction in a new way. Most people find a car and adjust their budget to fit that car’s payment. That’s the wrong way, and usually means you end up eating pinto beans for years on end.

The Right Way, Step-by-Step

The FoolProofMe approach doesn’t start with the car at all; it starts with your budget. We encourage you to slow down rather than speed up. Emotions in car buying should come after you’ve done it right.

And we define “right” as saving money and buying the right car, too. Doing it our way, versus simply following the dealership’s lead, can literally put thousands in your pocket.

So, throw out the conventional thinking and consider this:

  • All cars are bought for cash.
  • No cars are bought with trade-ins or payments.
  • Trade-ins and payments only provide you cash.

Right now, based upon your budget and your old car, you have an exact amount of cash available to you to buy a new car. That amount of money is called “Available Cash,” and it’s—logically enough—made up of all the cash you have available to buy a car.

“Available Cash” is made up of three things:

  1. The cash your payment will buy you, called “Loan Cash.”
  2. Any cash your trade-in may give you after paying off your current loan. That cash is called “equity.”
  3. Any other cash you may have—rebate money or savings, for instance.

Know your Available Cash figure and you’ll always be on budget.

Understanding “Available Cash”

Understanding “Available Cash” helps you understand your budget.

Here’s an example of “Available Cash.”

You say:

  1. “I take home $2500 per month after taxes and deductions.
  2. I drive a three year-old Mustang convertible.
  3. I owe $13,000 on it.
  4. I want to trade in my car.
  5. I don’t want to make more than 48 payments.
  6. Now, what can I afford to buy?”

You plug all that information into the Available Cash calculator and you’ll get this answer: “Okay, according to all that information, what you really said was, ‘Based on my budget and my trade-in, I have $26,000 in Available Cash to buy a vehicle.'”

Know your Available Cash figure and you’ll always be on budget.

What’s Your Personal Available Cash Figure?

That’s easy to determine. Use the calculator in the right hand column after you complete the following steps (You can use our Available Cash Worksheet).

Calculate Available Cash

Your Available Cash is the maximum amount you have to spend on a vehicle. This calculator enables you to determine:

  1. The amount of cash a vehicle loan will yield.
  2. The total Available Cash from all sources, including the loan, you have to purchase the vehicle.

If the estimated amount of Available Cash is too little for the vehicle you would like to purchase, you have several options. A higher monthly payment and/or a longer loan term will typically yield higher initial Loan Cash, thus increasing your Available Cash. You may also want to consider alternative vehicles that better fit your budget.

To estimate the value of your trade, visit the Edmunds website.

Available Cash Calculator
Trade-in value
Amount you owe on your trade-in
Down payment
Monthly loan payment you can afford
Loan term (in months)
Interest rate%
Loan Cash$ 
Available Cash$ 

This calculator is solely for informational purposes. It gives you reasonably accurate results of your Available Cash. Results for your actual loan will vary based on your final rate and loan amount.

This calculator is solely for informational purposes. It gives you reasonably accurate results of your Available Cash. Results for your actual loan will vary based on your final rate and loan amount.

Use these steps to figure your Available Cash:

  1. Determine a “Wholesale” Value for Your Trade-in
    “Wholesale” is the amount of money a dealer will pay for your old vehicle. But “wholesale” isn’t a definite figure, the amount can vary from dealer to dealer. At most dealerships the objective, incidentally, is virtually always to give you as little for your old vehicle as possible.If you are very smart, you need to determine your individual vehicle’s wholesale value. Here are three ways:
    • A good way: Clean up your trade and drive it to three or four used-car departments of new-car dealerships, and tell the manager you are thinking about selling your old car, not trading it. The highest offer a dealer makes to buy your car is its true wholesale value.
    • A quick but less accurate way: Go to www.nadaguides.com and look up your current vehicle. This figure isn’t exact—it’s an average for all cars in a specific category, so use it only as a guide.Caution: NADA Guides is a commercial site used by many dealers and others in the business to solicit your business. So, be cautious as you use this site, ignore all the ads and come back to FoolProofMe.
    • What if you still owe money on your trade-in? If you still owe money on your current vehicle, you will need to know its “pay-off” to figure how much “equity”— cash value—the vehicle is worth. For a rough estimate of the amount owed, multiply your payment figure by the remaining months in the loan. Subtract that figure from the vehicle’s wholesale value to determine a conservative estimate of the vehicle’s equity. For a more accurate figure, call your financing institution and ask for the pay-off (or “loan balance”) amount. You’ll need your loan account number to get that. Write your pay-off and equity on your Available Cash Worksheet.
  2. What Can You Really Afford to Pay Each Month on a Vehicle?
    Do you want to pay more than you’re paying now? Would it make your life easier if you had a lower payment? You decide. Once you decide what would be a sensible payment for you, write the figure on your worksheet:
    • I want to pay _____ dollars per month.
  3. How Many Months Should You Finance?
    Finance for the fewest months, not the most months. Some lending institutions will finance you for 8 or 10 years. But the truth is, you’re making a big mistake if you finance a car for more than 5 years—and you would be smart if you didn’t finance more than three years. Financing longer means you’re paying vastly more money in interest, and virtually always guarantees that you will owe more money on your vehicle than it is worth. If it falls apart, you’re still going to be forced to make payments on it.And get this nice benefit of financing for less months: By financing for the fewest months that will fit your budget you actually can buy more vehicle. For instance, the difference on a $30,000 loan financed for 48 instead of 60 months is only $4 a day. Pay the higher payment, finance for 48 months rather than 60, and you’ll save over $2,000 in interest. Great! You’re already saving money. And wouldn’t it be nice not to have car payments for that fifth year? So how many months should you go? Jot that number on your Available Cash Worksheet:
    • I want to make $____ payments for ___ months.
  4. How Much Other Cash Do You Have on Hand That You Plan to Spend on a New Vehicle?
    Are you looking at a car with a rebate? Include that figure here. Do you have savings that you plan to use as additional down payment? Include that figure.

Now, let’s use the facts on your worksheet to determine your Available Cash using the Available Cash Calculator in the right hand column.

When you finish, congratulate yourself. Your Available Cash figure rules! To stay within your budget, Available Cash is all the money you’ve got in your car buying account. That’s all the money you have to pay for everything: cost of car, taxes, other charges, insurance, etc. Exceeding your Available Cash is like bouncing a check on your budget. And you know you don’t want to do that.

Chapter 3. Research Before Buying

Save your emotions for the moment you finally drive away on budget in your shiny car with an extra thousand or two in your pocket.

Put Your Emotions Aside

Don’t go near that dealership! Once you know how much Available Cash you have, get the hard facts about the vehicles that fit your Available Cashfigure before you go any further. For instance:

  • What vehicles fit your budget?
  • What do these cars cost the dealers?
  • What are the vehicles’ safety records?
  • What about mechanical reliability and maintenance costs?
  • What about insurance costs?
  • What about operating costs, such as fuel economy?

Resources for Research

The following resources available online can help you find the information you need to choose wisely. Please remember that these are third-party sites that FoolProof doesn’t control. These are sites, however, that I have found provide generally sound, helpful information.

Manufacturers’ “Consumer” Sites

The manufacturers all offer “consumer” sites which supposedly tell you objective information about their vehicles. Frankly, these sites are nearly worthless when it comes to learning anything negative about a vehicle. If a manufacturer’s most popular car is having serious problems with its airbags, you’re not going to read about that problem first on the manufacturer’s site.

Big tip: Do not rely upon manufacturer (or dealer) websites when you are making decisions on safety, reliability, or resale value. The sites can be fun to visit, regardless. Most now offer “virtual” tours of individual vehicles. Just use your search engine and any manufacturer’s name.

Did you know some dealers and online lenders charge you thousands more in interest to finance a used car than they would to finance the same amount on a new car?

Now It’s Time to Shop for the One Vehicle You Like!

Like a chocoholic’s first whiff of a candy factory, your first visit to a dealership or website poses the maximum danger to your pocketbook. Those new or newer cars look so good. And you’ve waited so long. Whether online or in person, sellers know how to turn up the fires of your enthusiasm and singe your reason.

So put your emotions aside. Be wary. Slow down. Save the emotions for the moment you finally drive away on budget in your shiny car with an extra thousand or two in your pocket. Now that’s something to get excited about!

Big FoolProofMe tip: For decades, I’ve told people that buying the right used car is one of the smartest things you can do.

New cars are the worst investment in the world. They depreciate in seconds, thousands of dollars, the minute you drive off the lot.

But buying used can be the worst thing many people do, because they don’t understand the specific problems used-car buyers face, on the Web or at a dealership. For instance, did you know some dealers and online lenders charge you thousands more in interest to finance a used car than they would to finance the same amount on a new car?

How do you stop that from happening to you? Keep reading. We’ve got a special “Buying a Used Vehicle” section for you, and the information is priceless. But first, let’s deal with new vehicles.

Chapter 4. Buying a New Vehicle

Ready to Match Wits with the Dealership?

Good! You can match wits and win. Just keep reading.

Simple Rules to Remember:

  1. Narrow Your Choice
    Narrow your choice to one or two models or makes before setting foot on a car lot. Why? Trying to think about a big list will do nothing but confuse you.Be aware during your first dealership visit: You are under the microscope at a dealership. Many dealerships already have you in a database. Most are anxious to pull a current credit report on you. All want to use information about you to maximize their chances to make a big profit. Don’t let that happen! Unless you definitely plan to finance at the car dealership, don’t allow any dealership to pull a credit report on you at this stage.For instance, many dealerships will ask for a copy of your driver’s license before they will let you test drive a vehicle. A dealership has a right to know if you have a valid license. But you don’t have to allow them to request a credit report at this stage. How to stop this? Say up front, “I do not authorize you to pull a credit report on me.”
  2. Choose Two Nearby Dealerships
    Now, choose two nearby dealerships that stock the vehicle you like. If you’ve done your homework, where you buy isn’t important as long as the dealership is reputable.
  3. Find Only One Car at Each Dealership
    You can’t buy three cars. Keep it simple: Find the one you like the best.
  4. Take Control of the Transaction
    Tell the salesperson you are not buying a car today under any circumstances, but you will buy soon. Today you are just shopping and fact-finding. Check the car out. Take a test drive. But be firm and don’t let the salesperson lead you into any discussion of buying today. If you start to feel pressure or confusion leave immediately.
  5. Copy the Information from the Manufacturer’s Suggested Retail Price Sticker
    Copy all the information from the Manufacturer’s Suggested Retail price sticker before leaving the dealership (MSRP, not the dealer’s sticker). The MSRP is the sticker with the lowest price on the vehicle’s window. Copy all the dollar information from that sticker. For instance, the vehicle’s base price, then the name and price of options. (Use our “Auto Shopping Worksheet.”) For now, ignore the dealer’s sticker, which is always higher than the Manufacturer’s sticker. The dealer sticker contains hugely inflated profits.
  6. Compute the Dealer’s Invoice Cost
    A very important step. Use one of the online price guides below to calculate this amount. Some credit unions and banks can also help you determine dealer cost. Some dealers also say they will tell you dealer cost, but I would not rely upon their figures. Why is knowing the dealer’s invoice cost so important? Dealers want you to negotiate down from their inflated asking price, a very expensive way to negotiate. The FoolProofMe approach negotiates up from what a dealer paid for the one car you like. Don’t ever think percentage discounts from dealer asking prices; don’t ever think “sale” price. Know what the dealer paid for the car you like and negotiate up from that. Here are two links to two of these invoice-pricing services Edmunds.com or nadaguides.com.Big tip: The main job of sites like these is to make money on you. They’re loaded with ads, and at times used by some dealers to try to trick you. So, use caution when using the sites.
  7. Check to See if the Car Will Fit Your “Available Cash”
    Here’s the moment of truth. After you pay for the car, and give the dealer a profit, and pay tax and other charges, will you still be in budget? We have a simple Vehicle Buyer’s Fact Sheet to help you compare your figures and determine this. But first decide how much profit you want to pay a dealer, the last variable in the transaction.

Know what the dealer paid for the car you like and negotiate up from that.

What’s a Fair Profit?

Most car sellers believe they have a perfect right to make as much money on you as possible, even if the price you’ll pay will wreck your budget. If dealers can try to make as much as they can, FoolProof believes you have a right to pay as least as a dealer will take. Doesn’t that make sense?

You have a perfect right to pay all the profit you want. But if your objective is to pay the least profit a dealer will take for the car, you’ll need to start negotiating up from what the dealer paid the manufacturer for the car.

That figure usually already has “hidden” profits in it. And at times, a dealership will be happy to accept “cost” rather than lose a sale. The only way to know whether a dealer will do so is to offer that figure and stick to it for a while. But if starting at “zero” bothers you, add any figure you’d like as a profit figure.

Chapter 5. Negotiating the Right Way

Your Second Visit to the Dealership

The buying visit! You are way ahead of the game right now. You’ve been patient, and all that homework is getting ready to really pay off.

  • You know how much money you can spend (your “Available Cash” figure.)
  • You know what the one vehicle you like cost the dealer.
  • You know what your old car is worth.
  • The dealer—not you—is under the gun: They can lose a sale if they don’t do it your way.

The secret to winning (saving lots of money) is to stay in control, keep things simple and never be pushed.

Don’t give a deposit until your offer is approved in writing.

The Following Steps Will Help You

  1. Make an appointment with your salesperson
    These men and women work hard and many work on commission. If you liked the person who waited on you during your first visit, go back.
  2. Put these pieces of information on a summary sheet or take your Vehicle Buyer’s Fact Sheet with you.
    • The wholesale value of your trade-in if you’re trading.
    • Your available cash figure.
    • Your maximum offer on the one car you like.
    • Your maximum difference figure, if you’re trading.
  3. When you arrive at the dealership, ask to go to the salesperson’s office.
    You take the initiative; you take control of the situation. Tell the salesperson you are definitely going to buy a car, but not necessarily from that dealership. Say there are other cars you like as well as this one. Why say this? To increase your bargaining power.
  4. If you have a trade, ask to have it appraised.
    Do this before you discuss the new car at all. Keep the transactions separate. But beware: many dealerships will at first refuse to give you the true wholesale value of your car at any time. They’ll want to talk about “allowance,” a meaningless figure, or worse, may refuse to have your car appraised at all right then. If you run into a dealership that refuses to deal straight with you, find another dealership.
  5. Agree on the amount the dealer will give you for your trade.
  6. Make an offer, and be prepared to negotiate on the new car.
    You’ve finished talking about trades. You’ve agreed what they will pay to buy your car. Now it’s time to see what you must pay to buy their car. Two separate transactions. Your goal now, using the cost of the car you like, is to set the scale of bargaining in your favor. How do you do that? Whatever your first offer, expect the dealership to counter offer. And don’t be afraid to counter offer yourself—just offer a very small amount of money.The negotiating conversation might go like this:Salesperson: “What if I could give you a 10 percent discount?”You, the smart shopper: “No, let’s do it my way. I’ll offer you $15,000. Invoice cost on that car.”The flustered salesperson: “But, my boss will never accept that!”You: “Well, why don’t we offer it and see? I’ll even sign a buyer’s order saying I’ll buy at that figure.”A now calmer salesperson: “Okay. Let me fill out this sheet. And I’ll need a deposit before I can take this offer to my boss. To show him you’re serious, you understand.”You, very firmly: “I’m sorry, I won’t give you any deposit until my offer is approved in writing.”Salesperson: “But we’re not allowed to do it like that.”You: “If you can’t, I’ve got an appointment at a dealership that will.”The salesperson leaves, then returns and agrees to do it your way. You’ve offered $15,000. They now ask $20,000.You: “I’m sorry, no. How about $15,025?”Startled salesperson: “What?”You: “Okay, make that $15,030.”Do you get the idea? Set the scale of bargaining in your favor. Raise your offer a time or two, that’s part of the game. But don’t raise it much. And don’t give a deposit until your offer is approved in writing. Dealerships use deposits simply to make it harder for you to escape. Warning! Some dealerships, rather than taking money, will ask for your driver’s license or credit cards as a deposit. Don’t give those to them.
  7. When you reach agreement
    When you reach agreement and you are looking at a completely filled out “buyer’s order,” compare the “amount due” line to your “difference” figure from the Vehicle Buyer’s Fact Sheet.Quick FoolProofMe tip: Beware of hidden fees in the price that are not itemized on the purchase order, such as extended warranty and rust-proofing fees.If you don’t see the difference figure, ask the salesperson. Make sure it includes tax, tag, title, and any other dealer charges. Are you on budget? If this figure is below your difference figure, you’re home free. If it’s above it, stop the transaction. You’ve just gone over budget.
  8. If the difference figure is okay, give a small deposit.
    Dealers will ask for hundreds or thousands, but, unless you’re asking them to order a Cadillac without air conditioning or to paint your car pink and purple, don’t do it. Any amount of money makes a contract legally binding. $50 should be enough.
  9. Now be prepared to deal with one or two or even three other “salespeople.”
    You’re not free yet. Even if you’re paying cash; even if you have a check in your pocket, many dealerships will virtually force you to talk with finance managers (also known as “financial counselors” or “business managers”). They’ll also insist that you talk with their “after-the-sale” manager. This might be a separate person or the finance manager. Whatever, as we noted earlier, this person will try to sell you warranties, “protection” packages such as rust proofing and undercoating, and add-ons such as alarm systems.
  10. Be prepared for the leasing switch
    And don’t forget, this is the time a dealership may try to switch you to leasing. Don’t automatically fall for it. Remember that the dealership wants to convert you to leasing because the dealership generally makes a lot more money leasing you a car than they would selling you the very same car.
  11. If you’re buying, we recommend a simple approach for evaluating the value of dealership financing, insurance, protection packages, warranties, and other add-ons. After the sales pitch, which invariably presents dealership products and services as the cheapest and best, simply say something like this.”That sounds fine. And if your loan and products are cheaper, I’ll certainly finance with you. Now, would you mind giving me a copy, completely filled out, of the contract you want me to sign so that I can compare it to other sources?”Credit unions and banks will be happy to give you exact figures and tell you the exact cost for the loan itself, life insurance, disability insurance and warranties. If the dealership is cheaper, shouldn’t they be willing to give you these figures, too? To the penny?If the dealership will give you the exact figures, take those figures to a credit union and a bank, and ask that institution to compare their figures to the dealership’s figures. Finance where it is cheaper overall. But if a dealership won’t give you the details—if the dealership won’t let you compare costs line-by-line, what does that say? Doesn’t it have to say they are more expensive?If the dealership will give you the exact figures, take those figures to a credit union and a bank, and ask that institution to compare their figures to the dealership’s figures.What about their insurance, protection packages, warranties and the like?At times, it might be sensible to buy extra rust proofing and undercoating protection—though many consumer groups doubt the need for extra protection. And at times an extended warranty might make sense—though manufacturers’ warranties are good these days. But it never makes sense to spend hundreds and thousands more than you need to for these products. Unfortunately, some dealerships are now trying to charge $1,200 and more for rust protection they used to sell for $200; they’re trying to sell $300 warranties for $1,900 or more. We don’t think you should spend that type of money without very carefully comparing products. Who wants to throw away an extra $2,000 without thinking?
  12. After you’re finished with the finance salesperson
    Don’t celebrate quite yet. If you’re financing at the dealership, many will insist that you take the car home that minute. It’s called “spot delivery,” remember. But don’t do it. Go home and diffuse a little. Check the dealer’s figures again. And give the dealership time to fix the little things wrong with any new car. You did check it over carefully, didn’t you? Make a list of the squeaks, rattles, sticking knobs and scratches, and have them fixed before you agree to take the car.If you’re financing at another source, make sure you have all your paperwork necessary for their loan.
  13. When you finally pick up your new wheels
    Check it over carefully. Don’t look at it in the rain when it’s hard to see flaws in the finish.If everything’s okay, smile. You did it the right way and saved a lot more than change!

Chapter 6. Buying a Used Car

The FoolProofMe Way

Aused car, wisely bought, is a much better buy than a new car for most of us. You can buy more car, lose less in depreciation up front and enjoy lower payments—three good reasons to smile. But if you’re not careful, buying a used car can be a disaster! You might pay too much for an unsafe car that’s a lemon and vastly overpriced.

Buy a used car the FoolProofMe way, and you’ll be driving a fine car every time.

The Steps for Buying a Used Car

  1. Determine your Available Cash
    Like in chapter 2 of this guide.
  2. Shop for cars with an NADA loan value about $800 under your Available Cash figure
    Don’t worry about the car’s asking price. That’s what the dealer dreams you’ll pay.Incidentally, the reason you’re looking for cars $800 under your Available Cash figure is to leave room in your budget for dealer profit, taxes and the like.When you buy a used car, where you shop isn’t nearly as important as how carefully you shop. Look at multiple websites online. Look on used car and new car lots.Quick FoolProof Tip: Don’t shop on rainy days
    On rainy days, it’s hard to see body damage and you’re less likely to give the car a thorough check-over. Don’t be in a hurry. Each used car is unique. A car that looks just fine can be a monster.
  3. Get previous owner information, if possible
    If you’re looking for a car by yourself at a dealership, and have found one you like, without fail, get the name and number of the previous owner. If a seller won’t (or can’t) give you this information, don’t buy the vehicle unless you have it thoroughly checked out by a mechanic or diagnostic service. If the dealer will tell you the previous owner’s name, ask the previous owner:
    • How many miles were on the car when it was traded in?
    • What was wrong with the car? Make a list of the car’s problems, in detail.
  4. Get the vehicle inspected by your mechanic before you set the price
    Take the car to a mechanic of your choice. If the seller won’t let you have a vehicle inspected, don’t buy the car. Don’t even take it as a gift.Auto service centers, such as tire dealers or department store auto service facilities, are good for pre-purchase inspections, as are independent diagnostic services that do not make repairs. Also search used vehicle inspection services on the Web for inspection services in your area.With your list of problems from the prior owner, ask your mechanic to check the car carefully and tell you how much he’ll want to put the car in good running order—not to make it like new. Taking a car to a mechanic is the most important step you must take. Don’t buy a used car if you don’t do this.
  5. Use estimated repair costs to negotiate a better price
    Budget the repair costs and use them as bargaining chips. If your Available Cash figure is $5,000, and a mechanic says you need to spend $1,000 on repairs, you can’t spend more than $4,000 on that particular car. Don’t be shy in telling the seller that.Quick FoolProof tip: Forget the asking price
    Start bargaining up from loan value (or less). You can use a third-party, commercial, online price guide such as nadaguides.com to get loan value.What about used car “service agreements” and the like?
    Extended service agreements can be good. But many dealers and some other financing institutions charge two or three times as much for their agreements as they are worth. Don’t automatically fall for the dealers’ sales pitch. Shop around. If you are an auto club member, see what they offer.
  6. Negotiate warranties after price is set
    After you agree on price, negotiate a warranty. Don’t even mention warranties until you agree on price. If you do, some sellers will just add the cost of a warranty to their selling price without telling you.The warranty to fight for is a free 90-day, 100 percent powertrain warranty. Under the terms of this warranty the seller will repair anything that makes the car run for three months. Power windows and the like aren’t covered, but you can live with that. If you can’t get a free 90-day warranty, try for a 60 or 30 day.The warranty to avoid is any “50/50” warranty. It’s you pay half, they pay half. What’s the problem here? If you have a $50 repair, some dealer shops will bill you $100. Your 50 percent now just happens to be the whole bill.Extended service agreements can be good. But many dealers charge two or three times as much for their agreements as they are worth. Don’t automatically fall for the dealers’ sales pitch. Shop around. If you are an auto club member, see what they offer.

Chapter 7. Leasing a Vehicle

The Lease Hype

At some point during the car buying process many dealerships will to try to switch you from buying to leasing. If you’ve been to a dealership lately, or visited an automotive website, you already know that.

The pitch from these salespersons has been really successful, too. One study showed that only 6 percent of people plan to lease a vehicle when they enter a dealership, but 35 percent have leased before they drive out of that dealership. These people were converted to leasing on the spot. Why did that happen? Invariably because the sales pitch pushed these two points:

  1. “More car for less money!” That’s what we all want, isn’t it? And if you listen to the hoopla, leasing delivers that wish. “Lease it for just $199 per month!” And the ad is talking about a car you would pay $350 a month to buy!
  2. “No haggling, no confusing negotiations!” The dream of every car shopper. Lease a vehicle, the sales pitch says, and there’s no pressure and confusion! Everybody should lease!

Here are the secrets no traditional leasing company wants to tell you!

The Lease Reality

Leasing is simply another way to finance the use of a vehicle. A lease itself isn’t good or bad—it’s a financing tool. In a minute we’ll tell you how it works, and help you decide whether this type of financing tool makes sense for you.

First, you need to understand the simple reason dealerships push leasing over buying: Bigger profits for the dealership! Leasing hasn’t been pushed because it’s necessarily better for the customer. It’s been pushed because dealerships usually make a dramatically larger profit leasing you a vehicle versus selling you that same vehicle.

A sorry track record. The industry has made those profits on leasing because of the deceptive way leasing has been presented and sold. The Florida Attorney General’s office said it best: “The technical and complex language and the greed of some car salesmen causes car leasing to be an option that is fraught with many pitfalls for the average customer.”

And that’s an understatement! A typical lease customer, in one study, was overcharged $1,500. One was overcharged $10,500! In one state alone, over 40 types of leasing fraud have been identified. Think of that!

So, what’s the first lesson when somebody mentions leasing? Slow down! There’s a lot more to this than you thought.

Just what is a lease? In one way, it’s just like renting a car. You pay for the use of someone else’s vehicle. In a lease, you use the vehicle, you don’t own it.

Just what is a lease? In one way, it’s just like renting a car. You pay for the use of someone else’s vehicle. In a lease, you use the vehicle, you don’t own it. There’s one big difference in leasing and renting: If you’re renting a vehicle, you can usually turn it in early if you want to without paying a big penalty. If you’re leasing a vehicle, you may pay a monstrous penalty to turn it in early.

Why do lease payments seem so cheap? Because the lease payment is based on the fact you’re only using the vehicle—you don’t own it at the end of the lease. Your payment is therefore based on use, not on ownership. Let’s say you’re leasing a $20,000 car that’s going to be worth $5000 at the end of the lease. When you lease, you only make a payment based on $15,000. If you were buying that same car, your payment would be based on $20,000.

Why have leasing companies been able to make such big profits on leasing vs. selling the same vehicle? Because leasing, even with the new lease regulations, doesn’t require as much disclosure as buying a vehicle. Did you know leases don’t tell you an interest rate? Did you know leases don’t clearly tell you what you’re receiving for your trade-in? And did you know leases many times hide the important facts of the lease—the ones that cost you money—in ant-sized print on the back of the lease?

Two hidden dangers of leases. Leases can get you in trouble in many ways, but here are the big problems:

  • Unrealistic mileage restrictions. In a lease, you pay a penalty if you drive a vehicle beyond the miles stated in your lease. For instance, the lease contract might allow you to drive 15,000 miles per year. That’s fine, if you drive 15,000 miles a year. But some leasing companies deliberately give you an unrealistic mileage limit, and then charge you extraordinarily high rates for excess miles. For instance, they know from the miles on your current car you drive 40,000 per year, but the lease contract only gives you a mileage allowance of 15,000 miles. Penalties when you run over the 15,000 miles can run thousands of dollars.
  • Excessive wear and tear charges. Own a car, and you can ding it up all you want. It’s yours. But because you don’t own a lease vehicle, you pay money if the vehicle has excess damage over normal wear and tear when you finally give it back to the leasing company. But who determines “normal wear and tear?” The leasing agent, such as the dealership. And many leasing agents in the past have charged customers ridiculous amounts for wear and tear—they’ve turned “wear and tear” into a profit center. What’s your recourse if this happens to you? Virtually none. The lease contract gives the leasing agent the right to do this!

To Lease or Not to Lease

With all these problems, can a lease or a lease-type product be right for me?

It can be. You just need to decide which financing tool—a traditional installment loan or a lease-type product—fits your needs. And then you need to make sure you’re dealing with the right people when you’ve made that decision.

You can use these guidelines:

  1. Do you generally continue to drive a vehicle after you’ve made the last payment, and enjoy that feeling of “free” driving? If so, you’re generally not a good candidate for this type of financing. You’ll do better to negotiate carefully and buy the car you like. After that last loan payment you’ll own an asset (your car) that goes on providing transportation.Well, why can’t I just lease a car to get that low payment and then buy the car at the end of the lease? You can. All leases give you that right. But if you decide to buy your vehicle at the end of the lease you’re either going to need another loan right then to buy it, or you’ll need to have a pile of cash available to buy it. If you’ve got the cash, fine. But most people don’t have the cash. They’re forced to get another loan, and end up paying three or four more years on their car. Do you want to be making payments seven years or longer on the same vehicle? Probably not.
  2. Do you always trade for a new car before the old one is paid for? Are you the type of person who always has car payments? Welcome to the club! That’s most of us. And there’s nothing wrong with that, if you have carved out a truly affordable monthly vehicle payment as a part of your long-term budget. You’re a good initial candidate for this type of financing. If you’re always making payments anyway, it makes sense to make your payment as low as possible.
  3. Just how stable is your job situation? And how healthy is your general financial situation? If you buy a car and have trouble making the payments, you have a perfect right to sell that car for as much money as you can to pay off your loan. If you lease a car and have trouble making the payments, you don’t have the same rights. In fact, you may experience considerable financial difficulty if you try to break a lease early. Leasing is therefore safest for those who hold a secure job and are in good shape financially.
    • Well, my budget is so tight I barely break even each month. Should I lease? First, if you’re having budget problems, you probably shouldn’t trade cars at all. Think about fixing up your old car. If you don’t want to fix up your old car, think about buying a carefully checked-out used car. Don’t lease a car if you’re barely meeting your budget.
    • What about leasing if I have poor or nonexistent credit? Stay away from leasing if you have credit problems. These “subprime cut” leases, as they are called, will ruin you and provide you a junker, too. Leases like this are very popular now, because they are the hot, new profit darling of the leasing industry. Most of these leases are on junker used vehicles.
  4. How many miles do you drive a year? This is an important question! Most lease payments are based on the fact you will drive no more than 12,000 miles a year during the lease. Some leases (usually a “sale” lease payment) are based on a paltry 10,000-mile yearly driving mileage allowance. You put that on a car going up and down your driveway. So, imagine what’s going to happen if you are a high-mileage commuter who drives 40,000 miles per year. On an average three-year lease, do you know how much cash you would need to hand over to the leasing company because of those extra miles? From $5,000 to $11,000! What’s the moral here? If you’re a high-mileage driver, a leasing-type product may not be for you unless you make absolutely sure the lease is based on the actual miles you’ll drive.
  5. Are you stable financially, but yearning for more car for the payment? If you are comfortable with constant payments but want more car for the same payment, then a financing tool like a lease can be a good option. Maybe you need a bigger car, for instance, because the family has grown. Or simply like the looks of that electric red convertible. If you’re careful, a leasing-type tool can be good for you. Most leased vehicles are comprehensively covered under a manufacturer’s warranty during the length of the lease, allowing consumers to own a more expensive vehicle without the worry of large maintenance and repair bills.

Chapter 8. The Reward

Protect Your Pocketbook, Privacy and Your Sanity

We developed this Car Buying Guide to help protect your pocketbook, your privacy and your sanity. And does it work!

Many people who have followed the FoolProofMe approach to the car business regularly save thousands and thousands of dollars. How hard do you work to take home $2000?

In a business filled with pressure, hype and confusion, FoolProofMe offers you an oasis from that pressure and confusion.

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