For most people, the decision to buy a car is a very serious matter. For one, the judgment must be made that one's current vehicle needs replacing. Then, as finances are considered, the choice of which car to purchase next looms.
Personal finance author and radio host Dave Ramsey promises to help potential car buyers make correct decisions during the process.
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Ramsey begins by emphasizing the importance of buying a used car over a new one. For one, new cars lose an enormous amount of value the minute they are driven off the lot.
And there are good quality used cars available for much less cost than new cars. But there are some major determinations to make and mistakes to avoid when selecting the best vehicle to purchase.
Ramsey acknowledges that many people believe the used car market is difficult at the moment. And buying used does involve a few risks to remember.
But The Ramsey Show host walks potential car buyers through eight big steps to help them make smart decisions in the end.
Ramsey suggests starting with a serious look at your finances
The first thing Ramsey suggests is figuring out exactly how much you can actually spend. In fact, he says, a car buyer's goal should be to pay for the full amount of a used car in cash.
This involves both saving money beforehand and scaling back the amount of money you will spend on the new-to-you vehicle.
This approach will save you a lot of money in the long run. Paying cash means you avoid taking out a car loan. And you won't have to pay interest on the loan.
"For example, let's say you borrow $10,000 for a car with a 9.34% interest rate (the average) and a term of five years," Ramsey wrote. "You'll end up spending an additional $2,554 in interest!"
Next, Ramsey encourages people buying used cars to abandon the notion of finding a dream car. The important thing, he says, is to find the right car that fits your lifestyle and budget.
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This involves fairly simple factors such as:
- Do you want a car or truck?
- How many people it should fit?
- What kind of fuel mileage does the vehicle get?
- How much cargo space does it have?
"You won't find a vehicle that checks every box," Ramsey wrote. "Be honest with yourself about your wants versus your needs, and think long term about how you'll use your car."
The third step Ramsey suggests: Shop around, both at traditional car lots and online. Importantly, he recommends, do not jump on the first deal you like. There are others to consider.
Fourth, be sure to take the time to figure out for yourself how much the car is worth. You can start with Kelley Blue Book, then buy a vehicle history report.
Also, reading used car forums and checking the car's recall history are important tasks to complete. Then, getting an insurance quote will help you understand a bit about other additional expenses for which you will be responsible.
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Ramsey shares more thoughts for after you choose a used car to buy
Another meaningful step is to inspect the car yourself. There are some basics things to check for, Ramsey explains, that you can do even if you are not a mechanic.
These involve checking the oil level and color, the transmission fluid and the level of coolant and brake fluid.
On the outside of the vehicle, be sure to look at the paint job, the tires, the tail pipe, doors and lights.
Inside, Ramsey says, check wear on the steering wheel, seats and pedals. Also lock and unlock all doors, check the air conditioning and heating, and watch the temperature gauge while the car is idling.
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Looking over a car takes care of understanding only some of the details that need to be known about a vehicle.
Ramsey's sixth step involves taking the car for a ride and getting its feel while going over flat surfaces as well as bumps.
Listen to the engine and whether it sounds smooth while accelerating. Also important: Notice if the brakes make any unusual noises.
Then, Ramsey says, when you are getting close to making the purchase, have a mechanic inspect the vehicle. You can either take it to a trustworthy garage or set up a mobile inspection.
The final step, according to Ramsey, is negotiating the price. He acknowledges that many people are intimidated by this process. But, when paying cash, remember you have some leverage.
"When negotiating the best price on a car," Ramsey wrote, "Just remember to bring your research to the table, pay in cash (no matter what offers get thrown your way), take your time, and don’t be afraid to walk away!"
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