We may not take money from our parents – but we definitely take their advice. Especially when they’re industry experts.
This month’s chat with an industry expert features…my father, Robert (or Gus, as he’s known in the business) Donaldson — part owner and Executive Vice President of Forman-Price Vehicle Leasing Corp.
Buying a car can be a daunting task – and that’s putting it lightly. Dad has spent over 40 years in the industry and truly understands all there is to know about buying a car…and can sense if you’re getting the best bang for your buck. He’s been kind enough to answer all of our questions on how millennials can best enter the process of buying a car…
Why should millennials consider buying a car?
Transportation – convenience – enjoyment. A car is a source of freedom, and it’s the most convenient way to get around.
What’s one thing you see millennials not know or understand before coming to you to buy a car?
Not knowing what most suits their needs – and not staying away from flashy and impractical. The other thing they don’t know is how to navigate the process – and how to understand rebates as well as outside financing and not to be sold something you don’t need. For example: most American-made cars now come with 5-year, 100,000 mile, powertrain warranties. If you only drive 12,000 miles a year, do you really need an extended warranty? The dealer will try to convince you that you do.
Do I always need to put a certain amount down?
Absolutely not. Very often, at advantageous rates, it’s a negative to put money down. Functional economics tells you that if the interest rate is 1.9%, you should borrow as much money as you can get.
What if I don’t have a credit history yet?
Enlist a parent to co-sign – or, in this case, be prepared to come up with a large down payment to get approved. There are also many first-time buyer programs out there through the manufacturer for you to take advantage of – including college graduate programs.
Is it smart to buy a car online – and if yes, where? Is Craigslist trustworthy?
A good experience can be had buying online, but that’s the exception – and not the rule. The rule is different for new cars than for used cars. Used cars can be purchased from every walk of life – and are best investigated in person, not purchased by viewing a picture online. The opportunity to assess the credibility of the salesperson is more easily done in person. Dealing with a live person in a dissatisfied transaction is much more productive than trying to get retribution from an email address. Sites like Craigslist are unable to monitor the reliability of people selling on their site – it carries inherent risk. Anything can work out and you can get lucky – but again, it’s exceptional when something of that nature comes off without a hitch. There are many more disasters born from online purchases from far away places – not to mention the shipping expense.
How do I educate myself on the best purchasing programs?
Independent investigation. Don’t rely on dealers to disclose what’s best for you. They will most often sell you what’s best for them. Check with credit unions and explore manufacturer sites about rebates and compatibility with finance programs.
How do I know if a dealer is being honest with me?
Approach the deal analytically – and don’t be pressured into signing anything until you’ve had time to investigate. The deal will still be available tomorrow, in spite of what the salesman will try to convince you of. Try to find a reputable dealer by referral from people who you know have been treated fairly, and avoid disreputable dealers.
Where can I go to buy a car besides a dealership?
Private sales are very risky. Independent used car lots are also very risky. A new car can only be purchased from a franchised dealer. Used cars should be bought from your grandmother! But, CarMax – an independent used car distributor – is very reputable if you want to buy a used car, or sell your used car. They stand behind their product and won’t abandon you if the deal turns into a heartache. While their prices are more expensive, they have used car superstores all across the country and if you have a CarMax Warranty, you have access to repair facilities through a nationwide network.
What are the benefits of buying a new car versus a used car?
Maintenance is cheaper than repairs. New cars, cared for properly, have manufacturer’s warranties and will generally only require maintenance. Used cars often come with a litany of repairs – not seen or known about at time of purchase. Budget constraints are often more easily calculable in new car circumstances – i.e. payment, oil change, etc. In the long run, it’s easier to stay on a budget with a new car because unforeseen circumstances are a rarity. Used car nightmares can become money pits. A new car is more easily shopped than a used car – and comparisons between new car dealers are more conclusive than investigating independent used car sales. “Apples to apples” comparisons can only be done on new cars, while used cars all differ based on mileage, equipment and condition.
Is there a best car for millennials?
There is no one best car – but considerations should be paid to affordability, insurability, fuel economy and resell value. Information on all of the above is available across the web. But to pick a brand – Subaru, Honda and Toyota are all very reliable, fairly-priced and good resale valued products. As the expression says, “Show it the key and it runs.”