Advice on Buying A Car?

Discussion in 'Life After the Academy' started by SamAca10, Jan 8, 2013.

  1. SamAca10

    SamAca10 Ensign - DWO

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    I'll receive my career starter loan later in the spring and have started thinking about potential car options, but don't really have a good base of knowledge in buying cars. I know that I'll most likely buy a used car using a portion of the career starter loan (not a new one, because car loan rates typically have better interest), but I'm not sure how to properly shop for one. Does anyone have any advice (besides google)?
     
  2. WestPoint2017

    WestPoint2017 Member

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    I may only be a freshman in college but I can assure you craigslist.com is the best route for used cars. If you buy it through the owner, not the buyer you are in the best situation because you are buying the car and its yours. No interest payments, nothing. You can compare the values of what is listed by the owner for the particular car and the value listed on sites like kellybluebook.com and can usually negotiate for a better price. My family and I have bought our last four cars on craigslist and all is well, they run great and we were able to drive the car as well as check its conditioned before purchasing them. You can look up the reliability of the car in magazines like consumer report. Lastly, you can contact the owner prior to meeting with them to make sure they are not a sketchy car thief!
     
  3. goaliedad

    goaliedad Parent

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    1) Obviously, the best used vehicle is the one that you know the repair history of. Vehicles in the family or friends of family fall into this category. Sounds like you don't have any of these available, unfortunately. You can finance a private party purchase using your USAA starter loan.

    2) To establish what you should be paying for a used vehicle, I suggest you learn about the 3 prices you will see for a used vehicle. The "retail" value is what dealers advertise a cleaned up (detailed) vehicle for on their lot. This is their starting point. You should do considerably better. The "private party" price is what you will find most vehicles advertised by the actual owner (driver) for. These days you are seeing fewer and fewer of these because of fear of fraudulent buyers passing bogus bank checks, etc. However, if you can get any vehicle at this price you are doing great. The "trade-in" price is what dealers give you when you trade it in. Where do you find these prices? See point 3.

    3) There are many sources for prices. KBB (Kelly Blue Book) is generally considered the largest. Edmunds is another good source for car research. You can enter a vehicle year, make model, options, mileage and your zipcode and find out the 3 basic prices for a vehicle. Do your own reports for any car you are considering buying before negotiating.

    4) There are many online sites for researching vehicles currently for sale in your area. Vehix, Autotrader and others exist. Even Yahoo fronts a vehicle page. 99% of these are dealer vehicles. Private party vehicles will be found in your local newspaper (sometimes - but many of these are dealer ads). If you have a particular car you are targeting (particularly ones hard to find) these sites are a excellent place to start.

    5) For negotiating advice, I suggest picking up a Consumer Reports car buying guide. I believe you can find them in news racks where you buy magazines. I believe they have a section in there on how to shop for a used car.

    6) I believe one of the best pieces of advice is that CR gives is to negotiate, price, trade-in, and financing separately. Do NOT let them know you are a cash buyer, nor whether or not you are trading in before negotiating the price YOU want to pay for a vehicle. DO NOT tell them you are military up front. In fact, do not tell give them ANY information about your personal situation. Make it appear that you do NOT need to buy a car. Anything you tell them will be used against you.

    7) If you are considering a "Manufacturer certified" (warranty) vehicle, understand that the difference between the KBB (or other) price and what you actually pay is the premium you pay for the amount of warranty (years and miles) for that vehicle. Understand how many miles and years remain on the warranty (from 0 on odometer and day 1 in service by the first owner) before you calculate the cost of the warranty.

    8) Buy a car you can easily resell if it turns out to be a lemon. I don't care if it is a "certified" car, when it won't start after 3 or 4 trips to the dealer and your CO is getting pissed when you are late, you are going to have to bite the bullet and dump it on CarMax (they'll buy anything whether you buy from them or not) and take your loss. A vehicle that always sells (Compact SUV, truck) makes your loss a bit smaller because there is often a high demand for these vehicles by dealers. Selling a convertible in the winter sucks. Cars that show up in rental fleets are also not in demand at any time.

    I'm sure I and others will come up with more.
     
  4. EDelahanty

    EDelahanty Member

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    I don't know what you mean by "car loan rates typically have better interest." Edmund's and Kelley Blue Book are good sources for ranges of prices you might expect to be depending on make, model,condition, and mileage. It's a while since I used it but I recall Edmund's offered a primer on buying a used car. Consumer Reports also provides information on reliability.

    You will also want an independent mechanic to check out the car.

    Since you are graduating in 2014, what is the rush to take down the loan? What are your obligations in the unlikely but nevertheless possible event that you are unable to commission? Do you still have the five year term at a favorable rate or does the deal change?

    Whatever you buy, don't blow the whole 25k on the car, even if you can get a great deal on a Sandy-soaked Beemer; make sure you have enough left over to pay for a tattoo.
     
  5. goaliedad

    goaliedad Parent

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    Biggest fallacy on the web that you can identify a sketch car theif by a simple contact. Most of them are quite good at what they do.

    If you don't know what a car title document for a particular state that you are purchasing looks like, don't buy private party. There are folks creating forged title documents out there.

    I am generally not a fan of private party purchases for most people. You really need to have an extensive knowledge of the process (every state varies), you have no recourse (except in civil court) if there are any issues with the paperwork. Most states have laws covering dealer sales. You should familiarize yourself with these (look online) before shopping.
     
  6. goaliedad

    goaliedad Parent

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    And any reputable dealer will allow you to take it to a mechanic for a once over (should be $100 - 200) and agree to fix any major issue (aside from normal maintenance) found for free.

    1000% agreement on flood damaged cars. NEVER EVER buy any vehicle that has had a salvage title unless you know the reason. For example, I have a vehicle that was totalled due to hail damage (couldn't get it in the garage when the storm came in). I bought it back from the insurance company with a salvage title. I will have to explain the salvage title when I go to sell it. A couple hundred dents should make it obvious why it has a salvage title. Flood damaged cars are likely to develop mold issues, electrical problems, and rust. You'll never be able to sell it.

    BTW, there is a whole industry that centers around taking salvage title cars in one state and retitling them in another state which doesn't check the background (there is a database for this) before issuing the new title. This is where CarFax is valuable (there are other services that do this as well, CarFax is the best known).
     
  7. icarus

    icarus Member

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    IMHO, anyone looking to get a first car in the price range of $20K-30K have plenty to choose from. For those that just want a reliable transportation and nothing fancy, there's brand new cars that come with 10 year warranty. Very important if you don't want to bother visiting the mechanic if there's issues.
    A lease return comes second in my book. A two or three year old car with 24-36,000 miles cost much less and still includes some warranty. There are Consumer Report comparisons for used and newer cars. And the standard for prices is of course KBB.com or Edmunds.com. Hope this helps.
     
  8. SamAca10

    SamAca10 Ensign - DWO

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    It's traditional to take the loan during the spring semester of the 2/c year, and I also have a bit of debt from eye surgery that I would like to pay off. I'm not planning on spending that much of the loan on a used car anyways because I see that as a really bad investment. I'm planning on throwing 5-10k into a Roth IRA, paying off my eye surgery, and perhaps purchasing my class ring with it as well as looking at other investment options. There's no need for me to have a new or fancy car when I'm not going to be able to afford it. I'm hoping to get a reliable used car at a decent price, but not entirely sure what that should be yet (and will purchase this car when I'm home on summer leave). Never hurts to look ahead! :smile:
     
  9. WestPoint2017

    WestPoint2017 Member

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    With every car we have purchased, we met with the seller at a public location and got the CARFAX report, history of ownership, reason for selling and additional information. NEVER BUY A CAR WITH A SALVAGE TITLE. It all stemmed from an email but most information was obtained and verified in person. There was a situation in which a Mazda6 was generously priced, but when we asked for all the records he didn't have it, so most likely stolen. Take your time when buying a car, it's obviously a big decision so make sure you find a well priced car that is reliable. Buying the latest consumer report magazine is my advice it rates all aspects of a multitude of cars, going back to the late 90s models.
     
  10. Aglahad

    Aglahad Member

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    It should be noted that you do not have to take out all 25k so please do not feel obligated to do so. I have nothing against investments but using borrowed money to fund risky, non priority ones is not the purpose of a career starter loan. But hey to each their own.

    For buying a car from a private individual:

    1. Craiglist or autotrader are both good options to start at
    2. Meet at a public location that is in a high traffic area
    3. If you have a mechanic buddy or know some that will come out for a small price, do bring them along. They know what to look at and certain questions to ask.
    4.KBB or NADA every vehicle and have some idea of the model worth before showing up. Trims, packages, luxury add ons etc. CARFAX

    From a dealer:

    1. Show up with a parent or older adult so they don't try to bully you around with price and pressure sales.
    2. Ask for the free CARFAX they usually offer
    3. Know what you are looking for before you walk in (research ads online)
    4. Walk in with a ceiling price in your head and stick to it. If they won't meet that price simply get up and walk out.
    5. Do not make it an emotional purchase there are always other cars out there.
    6. Dealers aren't buddies or friends, if they find out you are military they will put on the whole smooze tactic to get you comfortable and feel appreciated.


    This goes for both private/retail, but consider insurance costs, MPG, maintenance costs (for foreign cars like BMW), before you consider a vehicle. The price might be nice but the yearly add on costs could be insane.

    There are some other things but this is what I can think of for now, good luck!
     
  11. BR2011

    BR2011 USAFA Cadet

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    The rate does increase significantly if you don't graduate. As long as you put most of the money in easily liquidated accounts it isn't a huge risk to take the loan early though. You can give most of it back right away and maybe have a few grand to pay off at the high rate.

    I think all the good advice has been given. Just do your research on the model and year you want to see if it is good quality (JD Power is a good one for that), check the going rate on KBB, and search Craigslist/Autotrader/Ebay until you find what you want. I found my car through ebay, met the owner in person and had a buddy with me to check it out before I bought it. I spent around 9K on a 3 year old Corolla.

    Definitely save a good portion but keep a good chunk to have fun your firstie year and to pay for "life start up costs" (apartment, TV, Bed, pots/pans, etc) after graduation. I knew a bunch of people who blew it all on a car and ended up in the same cashless cadet position they had been in the first 3 years and had to wait for a few ENS paychecks to clear before they could buy stuff out in the real world. You don't want to miss out on fun weekends in NYC or Boston because you don't have the money for them.
     
  12. Pima

    Pima Parent

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    Or worse yet, some will start to use their credit cards to live, and go deeper and deeper in debt because now they have to pay off the starter loan, plus credit cards, which means less disposable income, and than they use the cards more, getting into a downward trend that becomes harder to get out of with every month.

    You would be amazed how much a 1st time PCS will cost. Apts will want a security deposit, cable, water, electric, gas, etc., may also want a deposit or installation fees. Those items alone can run you a thousand depending on where you live...look at your BAH rate, that will give you a rule of thumb. For our rental in NC, we require 1 month security, 1 month up front, and if they have a pet, 1 month there too. That is basically 4500 just to get in the house. Granted our home is for an O4 rate, but you get the jist, it is money you will need access to right off the bat.

    That is also before as BR stated you buy your bed, dresser, linens, pots, pans, etc. I am not even touching a sofa, a kitchenette, or that flat screen tv and surround sound. You will be looking at a couple of grand just there...seriously even buying all Wal-Mart furniture will dent your wallet.

    Take a gander on Target and you will see a set of linens, including towels on the cheap will be 150. Pots and pans, 75. Dishes, glasses, utensils, 200. First time food shopping bill to buy staples, will be a couple of hundred...salt, pepper, oil, garbage bags, laundry detergent all adds up.

    Our DS spent about 800-1000 and he is living in the furnished Qs (bed, and living room, but nothing else) so he lucked out financially, but what did occur which he was not expecting was his pay was messed up, and he didn't get paid for close to a month. Had he not saved part of that money in an easy access account, he would have been living off of his credit cards.
     
  13. Packer

    Packer Member

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    On used cars I always like to look at a Carfax. It certainly isn't fool proof and only reported things will be on it but it will often show some things that make me uncomfortable. If a car has had 3 owners in 2 years I am going to keep looking, if the car has been in the shop multiple times for repairs, I am going to keep looking. My attitude is that there are lots of cars out there and there is nothing special about any of them. Nobody wants to get a "good deal" that they have to put money into every other month.
     
  14. LineInTheSand

    LineInTheSand USCGA 2006

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    My advice.... buy what you want and have fun with it. You have a secure income for at least five years. You'll get 1/4 of that income in non-taxed BAH. You'll be out at sea for half of the year.

    You'll have money and you'll be able to pay off the lone.

    I don't know what your lone was. Mine was $30,000 at 1%. I don't think I can get that kind of lone these days... and yes, I spent it on a nice Infiniti, and I'm currently debt free.

    So don't get too far into the "save 95% of it" there's plenty of that to do, and you aren't getting interest on savings anyway, at this point.
     
  15. Jcleppe

    Jcleppe Member

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    My son took the USAA Loan, he was in ROTC so the loan amount was 25K. The payments for the loan started 6 months after he commissioned, during that 6 months he was able to save quite a bit since he had no loan payment during that time. One year after the payments start he will be promoted to O-2, the bump in pay will more then cover the payment.

    Be smart, don't get into a credit card bind or buy a lot of things on credit, but things with cash as you go. A card table works fine until you can afford a better table and chairs and so on.

    USAA has a car buying service on their website, my son found his car through that site. It can be a good resource.

    One tip, when you get the loan money start looking for a good car or truck, don't be in a rush. Look at as many places as you can and check them everyday, that great deal will pop up sooner or later. My son looked for 2 months until a fantastic deal popped up, he had the cash and could make a deal on the spot, having the cash in hand helps a lot and can even get you a better deal since you don't have to be approved for a loan.

    I have to agree with LITS, if your don't have any kids or other debts to worry about, buy what you want and have some fun. It will be all to soon that you will need to trade it in on that minivan. Just don't go crazy and buy smart. My son got a 2010 Red Mustang GT Loaded, a blast to drive. He looked for 2 months before he found one that was way below Blue Book. The car still sells today for a couple grand more then he paid for it. Just be patient.

    With the amount of time you will be at sea you could be able to make higher payments and pay the loan off sooner then the term.
     
  16. bruno

    bruno Retired Staff Member

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    I agree with LITS completely. When I was a brand new Lt just out of school, I mentioned to my dad that I was thinking about buying a new "Datsun" 280Z but was nervous about spending so much money on a sports car. My Dad's advice to me was: "I can't tell you what to do, but I can tell you what happens if you don't buy it- you get to be 45 years old, a wife and kids and you never owned a sports car!" ( I bought the car- then bought a few more sports cars after that- at some point his advice changed to think a little longer term but that was down the road some !) My advice- don't go crazy and drop every dime you have , but don't spend your life worrying about investing for retirement. You will only be 22 years old and unencumbered by personal responsibilities once in your life. You will have a well paying job & no college loans compared to your peers. So- plan to investe some of your paycheck each month, and keep a little reserve for emergencies and then act like you are 22 and not a 55 year old with retirement on the horizon:wink:
     
  17. Mario

    Mario Member

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    +1 :biggrin: Absolutely correct!!! Aahhhhhhhh......to be young again!
     
  18. SamAca10

    SamAca10 Ensign - DWO

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    I won't be at sea for half the year if I get flight school :wink:

    But all of your guys advice is really good. I will invest some of the money, but relax a bit and have some fun with it. Not too many college kids graduate with a good income and no debt, so I might as well enjoy it a little!
     
  19. Jcleppe

    Jcleppe Member

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    You may not be at sea, but you will be so busy at Flight School that you won't have much time to spend too much money except an occasional weekend trip when studying allows.

    There are some nice beaches all around Mobile AL, and of course New Orleans is only a few hours away.
     
  20. BR2011

    BR2011 USAFA Cadet

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    Not necessarily true. Most flight school students go months in between phases with nothing to do. I've seen a lot of good times/partying on Facebook from my flight school classmates
     

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