Buying a Car: What You Need to Know to Get the Best Deal!

Most people overpay or are stuck with bad car loans. Learn how you can find a great deal and buy a reliable car that you love!

Car Buying Guide


For many families, car payments are a part of their finances and a big chunk of their budget. 

Average monthly payments for new vehicles are $530 for new vehicles and for used cars, it’s around $381.

It doesn’t have to be that way though. 

When we switched over to buying our cars with cash, it really freed up so many options.

Besides having more flexibility with our money on a monthly basis, we also found that we tended to save a significant amount on the total purchase price with our cars. 

Getting to that point takes a mindset shift and a system. It’s not overnight, but you can set things up where you’re moving in that direction. 

And when you keep your car costs affordable you can then redirect your hard earn money towards other goals that matter to you. 

I want to help you out with that today. 

One of our goals for 2020 was to get a replacement car for my husband Rob. He uses it for his commute. While the Maxima had been a fantastic vehicle for many years, it was becoming obvious that we needed something else. 

Originally we were looking at hunting around this summer once we had taken care of the kitchen renovation project. Long story short, we found ourselves last month scouring online and at dealerships for his car. 

We found a great one that we love that was well within our budget. I’m going to take you through our process for finding it and buying it outright – which I recommend for sure, but I know that we’re all at different parts of our journey so you may want to look at financing part of your purchase.

How can you make sure that you’re getting the best deal on not only the car but your rate? 

Bob Sherwin is here on the show today to answer those questions. He’s the indirect auto underwriting department at Coastal Credit Union so he’s the perfect person to walk us through the process. 

In this episode we’re getting into:

  • finding a reliable car that going to last
  • Preparing to save up as well as how to best prepare if you’re financing the purchase
  • Negotiating the best deal – you have more power at the dealership than you think

Sounds good? Let’s get started!

Essential Resources for Buying a Car

If you two are thinking about buying a car soon, here are some handy resources to help you get the best deal on them!

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.

If you are hunting for a car loan, take a minute to review competitive rates and deals Coastal is offering now to make buying a car easier!

How to Find a Reliable Car

Whether you’re on the hunt for a new or used car, one of the key things you need to look out for is finding a reliable vehicle. 

So the best deal on a car is a car that you’re not going to have to put a lot of money into after you own it as well. That’s something that people need to consider.

J.D. Power does a good report where they look at reliability five years out. So that’s a great resource. It’s no holds barred.

They just tell you the truth about which cars are going to perform; historically have performed. And I would use that.

Now, if you’re only planning on leasing a car or only having it for three years or two years, maybe it’s not as important. But the reliability. But then you have to worry about resale. So reliability equals higher resale value.

Historically speaking, that’s. Yeah. So even if it’s something that you’re not going to keep, you want to be able to get your money back out of that if you’re going to sell it.

Bob Sherwin

Buying reliable used cars can be the financially savvy thing to do – after all new cars depreciated an average of 20-30% that first year and by year five it’s down to around 60% –  but many couples hold back getting a used car because they’re worried about getting hit with huge car expenses.

However, by researching upfront and following through on routine maintenance you can really win with used cars.

Car Buying Research

So how do you find a reliable used car that’s affordable and that you’d love to drive? 

Nowadays there are so many options. When we were hunting around for my husband’s replacement car we looked at Consumer Reports, Car Gurus, and Edmonds

We wanted to look at not just the purchase price, but the total cost of ownership. How reliable were they? If we did need repairs, would they be pricey? 

Bob also had another great recommendation – CarFax

Carfax is another source. You can key in the VIN of the car. It will tell you how many people have owned the car, if it was ever commercially insured, if it’s been in any accidents.

I also pick CarFax because we’ve had the experience where what we were told with both a private seller and dealership didn’t match what was on the report. 

For our experience, most people are honest, but you really want to do your homework with any cars you’re thinking of buying

With CarFax the report can cost money – well worth it in my opinion – but if you’re using a tool like Autosmart that Coastal offers members, you can get them for free. 

Doing your research even before you step onto any lot or see any car in person may seem like overkill, but it’s one of the best ways you can find the best deal and car for you. 

Using these sites and tools we were able to narrow down our list.

Initially, we wanted to go for a hybrid, but based on what we saw was available and the fact that my husband didn’t want a Prius, we then widened the net to cars with fuel-efficient cars (35mpg or better).

It also gave us an idea of what to expect with the price range and we used that later to negotiate with the dealer. 

Saving Up for Your Car

Let’s talk for a minute on a big question that people have – How do you save up for a down payment and hopefully get to the point where you can buy a car with cash?

I’m going to be honest unless you have a significant amount of income coming in. It takes having a system so you can build up your payments.

For us, it was a process. So years ago when we were first married, we had a car loan. I had a Volkswagen Jetta.

Long story short, we decided that we needed to pay it off early.

Now here’s the deal – after that final payment was sent in, we began a plan to save up for the next one, even though both cars were reliable and fine at the time.

So you think of a car loan, you make the payments every month. It’s the same idea.

When you’re saving up ahead of time, you have some more flexibility. If you have a tight month, you don’t make a payment into that savings.

In general, though, if I had a car payment of three hundred, then start saving $150 for the next car.

Let’s say you keep this up for three years, then you’re looking at a $5400 that you can put towards a down payment and you can trade-in or privately sell your other vehicle.

So that can be a significant help in lowering the car payment on the next one. Or you could decide that you’re just going to buy it outright with what you already have.

But let’s say instead of lowering that car payment you were making for $300/month that you kept it, but you put it into savings.

Now at the end of three years, you’d have$10,800 to put towards a car, which is enough to get a fantastic used car.

We got ours for under ten thousand or you can drastically reduce your next car loan.

The point is continuing those car payments after you paid off your current one ahead of time. Don’t take a break. Even if it’s a smaller amount that you’re putting aside every month, it makes a difference.

Basically, we haven’t had a car payment in over 10 years now and I can’t imagine it any other way. But of course, you could be at a different point with your finances where you do want to do some financing with this car purchase.

What do you need to do to get things ready? Bob walked me through the process that coastal members go through. Plus, he has some tips on how to prepare your finances so you can get a competitive rate on a car loan.

The Financing Process of Buying a Car

Bob Sherwin: So you want to know where you stand financially credit-wise, it’s wise to go ahead and check your credit report, make sure there’s nothing on there that you didn’t know.

Was there a collection item that may have gotten by the medical collection or something that’s not even tied to you whatsoever? So you want to make sure those things don’t exist.

And then you if you can go ahead and communicate with your credit union, see what rate you qualify for, and use that as a bargaining chip when you go into the dealership.

A lot of times they’ll say, you know. This is the best interest rate I can give you today. And you can look at them and say, well, actually, I’ve got my own interest rate right here because I went ahead and got pre-approved.

So having that knowledge, knowledge is king and any kind of negotiating. So again, get pre-qualified.

They may even have a better rate for you. Sometimes if you’re buying a new car, the manufacturers will have tremendous rates because it’s in their interest to push those new cars out.

So, you know, Toyota might have good rates. Honda, Chevy, Ford, and those are paid. The manufacturer will actually funnel some money over to the finance side in order to get that great rate.

So sometimes we’re not the lowest. We try to be, but sometimes they have those suspended rates is what they’re called, that you actually qualify for a better interest rate.

All the power to you because the money you don’t spend on interest, there’s more money in your pocket.

The Art of Negotiating at the Car Dealership

Elle Martinez: You have your finances in a good spot. And you know what you’re supposed to do before you go to that dealership or head over to test drive that car from Craigslist, though, you have got to be prepared.

We had good experiences with the dealerships we went to doing our car. But let’s be real. They are there to sell you a car. You have to be aware of the game so that you can play to win.

Bob Sherwin: So you want to be careful every time you go into a car dealership to take a test drive. Let them know that you’re not looking to buy that day. Just say, look, I’m not here to buy. I’m here looking for a car and I’m looking for the best deal. If they demand that you fill out a credit application, you say, look, I’m not into that. I’ll walk if I have to.

Don’t be afraid to walk. You can go somewhere else. So you just want to let them know I’m here to look. I’m not here to buy.

Now, if you treat me right and you have a great product, I may come back to you. And I probably would come back to you and just let them know upfront. The thing to remember is that salespeople at these dealerships, they are there to make money.

And most of them aren’t paid on how much money is made on a car. They’re looking for how many cars they can sell in a period of time. Usually it’s a month.

Sometimes they’ll have a fast start to the month and they want a bunch of cars out by the 15th. And they get a little extra bonus.

So but if you’re honest with them, they’ll hook you up with the right salesperson who likes to take the time to make that relationship rather than just go on further quantity over quality.

The other thing is this – if you’re buying a new car, they have these surveys that they have to score well on in order to maximize their money from the manufacturer.

So you should get treated well if you’re not getting treated well. You have the opportunity to take it out on him in a survey.

So you let him know if you’re treating oil. I’ll treat you well on your survey. And that’s going to strike a chord with them right there.

Now, I know sometimes you want to immediately go home with a car that you see on the lot, but it can be in your best interests to hold off just a little while longer.

So you go home and you think about it. And then this is what I would do. I would start negotiating with the car dealership online. It’s a lot easier to negotiate. You know, your computer is small.

Some of these sales managers and salespeople are big people and they stand over you and try to intimidate you or tell you about how their kid’s dog just died and all this stuff.

You don’t have to put up with that online. You’re just it’s very basic. This is what I want. What’s the best price you can get me at?

Then you go to TrueCar– dealers hate TrueCar. I was at a convention a couple of years ago and there was a true car booth there. It was a digital dealer conference.

So this was all the high tech stuff all over the country that all came to Tampa, Florida for this conference. And nobody was going to visit TrueCar because car dealers, a truck are because [TrueCar] actually farm it out to all their participating dealers and they cut each other down to nothing. So they’re losing money on that. Yeah. So that’s a great resource.

What Car Dealership Fees Should You Pay?

Elle Martinez: Having that separation really does make a difference. When we were shopping for the car, we used the auto smart tool that Coastal had and it was fantastic because we could see what the price was even before we stepped onto the lot and that they would honor that price.

So if you are not into negotiating in person, going online and doing some of that, there can be different for you.

So you find the car that you like. You ready to sign the papers? But you look at it and notice that the price is higher than you expected. There are fees, taxes involved, which ones are negotiable and which ones aren’

Bob Sherwin:

So you’ll have a title fee. Title fees are 100 percent accurate. That’s what the dealership is being charged by the DMV. Same for the tax. The tax is what it is. You’re not going to get around those.

The documentation fee, that’s the one that everybody always jumps up and screams. So sales in dealerships don’t make a lot of money. Not on new cars, new cars.

It’s very much. Bottom price. Just trying to get out of their inventory and where dealerships make money is in service. So is maintaining your vehicle. Cars are extremely complicated now. They’re complex to fix a heater in a car. You do this. Look up photos for fixing a heater in a car. And literally the entire car is just dismantled from the inside out. And if you can imagine the labor involved in doing that. I have a guy who works for me.

Two weeks ago, I had to replace a light bulb in his headlamp. It was three hours of labor because the front bumper had to be removed. It’s all those little things. Yeah, though there’s nothing simple about a car anymore.

So the documentation fee may get back to that. That is a fee that they have designated that they are going to charge every customer who walks in the store. You’d be hard-pressed to not find a dealership that has that. Basically what that is, is the bare minimum that they’re charging to keep their front end operation open. There just isn’t a lot of profit in new car sales. Used car sales. Totally different story. You get a used car in and this is more of a price topic, but you get a used car in and you’re in a dealership.

First thing you have to do is you have to take that car. However, you obtain the car or there was an auction or from a direct seller, you have to run it through your shop. You have to make sure that you’re not selling something that, you know, is all duct-taped together and it shouldn’t be on the road. Remember that dealers put their name on that. They’re putting it out to the public. They don’t want that. They don’t want any bad units out there. So they get that car in. And that shop, bill, can be anywhere from two to three hundred dollars all the way up to I think eighteen hundred dollars was the reconditioning average reconditioning on dealership that I checked with last week when I was preparing for this.

So you see, I mean by the time you put new tires, verify everything is up and running brakes. It can get pretty expensive. So when you think you’ve got that great deal on a used car, the thing you have to think is, well, how did they get such a great deal on it? That’s when you want to start looking at the tires. You want to definitely make sure you take it to your mechanic to ensure that it was maintained properly, that it was recondition properly. You know, if there’s a dent on the fender. Who cares, you bought a used car. That’s not what you should be concerned about. Couple of scratches here and there. You know, it’s fine if the dealer fixes it for you.

What you need to worry about is what’s going on under the hood. So new cars come with a warranty. You’re gonna have that. Warranties are awesome. But you can never buy an aftermarket warranty. That’s a that’s a misnomer. There are service contracts. The only warranty that you ever get is from the manufacturer, which you can buy a service contract.

Should You Get a Service Contract for Your Car?

Elle Martinez: So then the question is, is it worth keeping the service contract?

Bob Sherwin:

Yeah. So this gets really complex if if you’re buying a new car and you don’t know how long you’re going to keep it. I would advise not buying a warranty. There are aftermarket warranties that you can purchase. So you don’t have to buy them from the dealership at the time of purchase. If you decide three years end that you’re you know, you’re going to keep this one for the long haul. You’ll love it. You can go back to the dealership and buy a warranty or an extended service contract. So but if I’m buying a used car and I don’t know who drove it before me, I don’t know what part of the country it was from. I’m really going to consider that used car warranty or service contract. Definitely. So here’s the thing. When you’re buying a service contract from a dealership, you’re buying a used car.

We’re gonna go off the used car example. So I’m in I’m buying a used car. And this car has fifty thousand miles on it. It’s two years old. And the dealership is saying, I want to sell your warranty. Well, the first thing you want to do and this is so critically important, you want to look at that dealer and you want to say, I want to use car warranty. If they say, well, no, it’s we I can put you on a new car warranty.

No, you want to use a car warranty. The difference is a new car warranty. The warranty date and mileage starts from the very moment that car was sold to its first owner.

So if you were to buy a six-year, seventy-five thousand mile warranty. That would end when that six-year period is up from the date of the first person buying it or seventy-five thousand miles, which you’re only thirty-five thousand miles away from.

So if you buy a used car warranty and it’s a six-year, seventy-five thousand mile warranty, a used car warranty starts on that date and goes seventy-five thousand miles from the mileage of the time you purchase it at the time you purchase it. So it is nuance, but it’s important if you’re buying a used car, get a used car warranty or service contract.

Your Own Car Buying Hunt

Elle Martinez: That there you have it. Hopefully, you feel more empowered and educated when you go for your next car. And I have to say, we picked up so many tips from Bob with our own car hunt.

And if you want to find out more about buying a car, we have an extended interview on our YouTube channel.

We talk about things like:

  • how to decide if it’s better for you to trade in your old car or to sell it yourself.
  • more about how dealerships work
  • understanding those dealership fees more

Check it out now!

Support the Podcast!

Thank you so much for listening to the podcast!

  • Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and become financially free, please share.
  • Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your review on Apple!
  • Grab a copy of Jumpstart Your Marriage and Your Money. My book is designed for a busy couple to set up their finances in 4 weeks. Get tips and tools that have worked for other couples on their journey of building their marriage and wealth together!

Music Credit

Like the music in this episode? Music by Lee Rosevere and Audiio.

Sign up for weekly newsletter full of tips, stories, and more to help your family become financially free

Get the best of Simplify & Enjoy in your inbox