 Personal Finance PowerPoint Presentation, large purchase process of something like a car determining the price. Get ready to get financially fit by practicing personal finance. Remember that when making financial decisions in general, we typically want to separate those types of decisions that are going to be the short term day to day types of decisions and the long term types of decisions. Those typically involving larger dollar amounts, those that aren't made as often, those that will have an impact for multiple periods into the future. The short term types of decisions, one of the approaches that we might use is a trial and error, a kind of tinkering type of approach, and we'll use that to fine tune our habits to make better habits over times for the day to day decision making process. For the long term types of decisions, those bigger dollar amount decisions, we can't apply the same tinkering type of method, but instead need to have the adage of we're going to measure twice and cut once. Meaning that we probably want a more formal method to go through the decision making process so that we can make that one decision more well informed due to the fact that it's going to have an impact on more periods into the future. We're breaking the decision process into the four categories. We've been talking about first category being the pre shopping activity, second evaluating alternatives and third determining the purchase price and then for post purchase activities. We're going to be focusing in on the purchase of a car because that's one of the big kind of ticket items on the personal side that we often think of you can apply many of these concepts to other larger items such as appliances and so on. And we might then or we will then later on look at the other big ticket item which is the possibility of the purchase of a home. So we're looking at most of this information can be pulled from investopedia how to buy a car buying a car involves certain financial and legal steps by Rebecca Lake updated February 12 2022. You could go there for more information for more research and for more references. Basics of how to buy a car when buying a car there are a few preliminaries to cover to make sure that you're prepared for the purchase they include things such as calculating your car buying budget. So as we've discussed in prior presentations whenever purchasing anything especially those larger types of items we want to determine what is the need that the thing we're trying to purchase is covering and we want to determine that in some detail. Obviously a car is going to be helping us to get from a to B but we also have other needs that might be involved in terms of getting us from a to B in some amount of comfort. And we want to determine what those needs are and then try to come up with a range or a budget that we're putting together to accommodate those needs now clearly when you're looking at something like a car. One of the issues with a car is there's a huge array of options. It's not like you're comparing something that's a bit more simplified even like appliances you got big differences in appliances to but they're not as big. You would think as all the types of differences they can go into a larger item such as a car and the luxurious items the things that are geared not specifically for the utilitarian purposes to get us from a to B can be a large part of the purchase price. So what we really have to do then is start to narrow that stuff down and try to think about what's my trade off between these, you know, more luxury types of items and the utilitarian items and hone down the budget. Otherwise, we will get overwhelmed quite quickly deciding how you'll pay cash or financing. So once we start to think about the price or our budgeting on it, we want to think about what are we willing to go for in terms of the financing options. You don't just really want to walk in to a dealership or something like that and not have any idea of the financing or how you're going to pay for the item, because of course from a sales perspective, there's two sides of the sales process. One is going to be the actual purchasing of the car and the other is going to be the financing of the car, which is part of the sales process because the financing includes the financing costs, which include the interest on the financing. So you want to have a good idea going in that you've already worked out your numbers in terms of how you're going to pay the car, how you're going to finance the car. When you talk and negotiate with somebody, you want to realize that it's not just the price you're negotiating. If you have to finance, you're negotiating through the finance table as well. And so it's going to be a long, a long process that you got to be make sure you got your coffee and you're ready. You got some sleep last night. So estimating what you'll put down if you're financing the purchase. So how much are you going to put down on the down payment? How much are you going to finance? And what do you think is reasonable financing? Deciding what type of car you want to buy. Clearly you want to determine, you know, the multiple factors in terms of the types of car that you are most interested in in terms of one utility and two, just luxury what you're using it for. In particular, but any days we also have to think about, you know, the gas mileage and so on how efficient is the car in terms of efficiency versus, you know, what we want the car for in terms of our personal like just desire for the look and feel of the car and so on. So where you want to buy a car from, i.e., private seller versus dealership. So where are we willing to go? Do we have, are we a type of person that likes to kind of negotiate? Do we have more knowledge about the car or left knowledge about the car? Are we, would we rather go someone where we can have more trust? Or are we someone that thinks that we would rather, we take on, you know, more investigation about the quality of the car that we're purchasing knowing what you can and can't negotiate when making the purchase. So clearly when you're in the purchasing process, you got, you want to be understanding, you know, when you're actually negotiating. And remember you're negotiating all the way through the financing step if you're financing. So you want to, you want to be on your toes the whole time, understanding what's required after the purchase to register and ensure the vehicle. So if you plan to finance a vehicle purchase, then you'll want to check your credit scores and reports. So if you're financing, you want to go into the financing option with a good idea of what you qualify for good financing and be ready to negotiate at that. This can help you gauge what type of loan terms most likely to qualify for. So you can determine what, you know, what loans you might qualify for when you're in a dealership and you're talking to their financing. You could, you could determine it if you think their numbers are appropriate. You won't want to depend on their numbers. You want to verify their numbers. And if they're not appropriate, then possibly you could find that financing elsewhere and then come up and cover the price in, you know, in another way. From there, you can compare the best car loan rates online, find the right lender, how to buy a car online. So clearly these days you got the online purchasing process. That's a whole lot of information. It can be quite overwhelming, but it can be quite advantageous if you're able to kind of sort and filter through it in an efficient way. So traditionally, if you want to buy a car, then you would head to the car lot and start kicking tires, which doesn't sound, that doesn't sound fun to me, but some people like that. So, but today it's easier than ever to shop and buy a car online. So at least do some research online. You can get a lot of ideas of comparison and people that have and are good at going in, kicking the tires, checking and checking things out, looking at and looking at the comparisons in detail. And that may may be preferable given the social distancing requirements associated with the COVID-19 pandemic. So obviously this has put more stuff online, which should help the research process, but does not eliminate, in my opinion, still, you know, given a physical look at the car, of course, if it's a large purchase. So there are different avenues for purchasing a car online depending on where you want to buy a new or used car, used vehicle, whether you'll pay cash or use financing. But generally, you can explore these avenues for buying a car online. You got the Facebook marketplace, local Facebook bargain groups, Craigslist, online auto trader magazines, car buying services, and then the dealership websites. So these are good sources of research for any case, right, even if you're going to be buying them in some other way. These tools are great comparison tools to research the car, and they're way more tools than we had in the past to research and compare and contrast cars. So any of these options could be suitable if you're looking for used vehicles to buy. But if you're interested in buying a brand new car, then you may need to head straight to the dealership website. So obviously, if we're talking about used cars, we got to open up a whole lot of different options, which has its pros and cons. It can be good to have a lot of different options, but it can be quite overwhelming as well. When you're talking about the new car, then that will typically narrow down the options that you will have a lot, which again has its pros and cons. It's nice to have a lot of options, but it's also nice to be able to kind of focus in on a particular item. And if you're looking for, say, the price of a car that is a new car online and you look up online how much it might cost, you might be able to get a whole lot closer to what you would think would be the reasonable price of the actual car. You can actually look up how much the dealership got the car for pretty close to that number, which can give you a good idea for the starting point number. That's a lot more difficult to do for something like a used car because there's a whole lot more variables that are going to be involved in the used car, such as how well the usage of the car was and so on and so forth, which you don't really know. So there's more unknowns there. With the new car, you would think that all the cars would be somewhat the same as new cars. There's still a whole lot of variables because then you've got all the differences in the features from car to car. So there's still a lot of different variables, but the variables are much less than with the used car, which can make things a little bit easier to kind of do your research and go into the dealership with, you know, pretty good idea, at least of a set price or bottom line price that you think that they might have gotten, you know, the car for that. Then you still got to go to the financing side of things as well, which you want to make sure that once you've got the price set that if you need to finance, you got that in the back of your mind that you're going to be dealing with as well. So when buying a car online, keep in mind that some parts of the process may require you to go offline. For example, you may want to test drive the vehicle to see how it runs or have it inspected by a trusted mechanic. That's usually going to be a good practice. So you would generally want to be driving the car, I would think, to look on it. But, you know, maybe if you can go to a dealership and you can drive a similar car or something like that and you purchase online and you purchase a car that has the features you want and so on, then that might be a way to go. But I would at least it would be nice. You would think to test drive, you know, the car or at least the same model of the car and so on as well or have a mechanic take a look at it. That could be a nice option as well. So, but other things such as negotiating a sales price discussing add-ons or extra extras such as a warranty package and applying for a car loan can be done virtually. And that could be quite nice for a lot of people too, because you don't have the same kind of pressure. It used to be, you know, if you go into the dealership and you go into the finance department, then you're dealing with the warranties and you're dealing with the loan and so on. That can be an intimidating process and you're probably already worn out from hackling over the actual car itself, right? So if you're able to kind of take a step back and then look at this in more detail, then you might be able to get to a more comfortable place, which is probably good for both the seller and the buyer in terms of warranty and loan. And some of the good things about this online kind of stuff is that if both the seller and the buyer feel less pressure and they're more comfortable to make the decision and they have the more information to do so, that should build actual trust over the long-term process to make the whole buying process possibly easier. So some of these online tools I think are ultimately good things for the car purchase. So how to buy a car with cash? Now if you got cash to buy the car, that should eliminate a big chunk of the pain, which of course is the financing, which you have to deal with the financing. You got to deal with, you know, the whole other thing with regards to how much they're going to charge you for the financing. So buying a car with cash offers some advantages. For one thing, you don't have to worry about the monthly loan payment. For another, using cash to buy a car means that it's easier to stick to the original budget. So if you're interested in buying a car in cash, then it's important to know how much you can afford to spend first. Then you'll need to know where the money is coming from. So obviously you're going to have to determine how much cash you got and then you're going to have to pull that cash together because it's likely that you have it in other things, possibly such as investments, stocks and bonds and so forth. You got to tie it, you got to put it together so you can actually spend the cash. For instance, this could be funds you have tucked away in high-yield savings accounts, money you anticipate getting from a tax refund or stimulus check or cash you'll receive by selling something you own. You got to actually realize the cash so that you can spend it. Once you have cash at the ready, the final step is negotiating the purchase of a vehicle and arranging for payment. Paying in actual cash may only be a possibility if you're buying a car from a private dealer and even then using a certified check or cashier's check may be preferable. Official bank checks help to create a paper trail documenting the purchase and are more secure since cash could be lost or stolen. Meaning, you know, if you're writing a check for the car, then the dealership, you know, whoever's receiving the cash, the check might not have as much assurance. So they might ask for a cashier's check or something like that to have more bake assurance to it. You might be able to solve this more and more online with online transfers where they can verify the transfer, you know, easier and faster. So can you buy a car with a credit card? If you don't have cash on hand to buy a car, then you could choose a car loan instead, but you may be wondering if you can use a credit card to make the purchase. The short answer is possibly depending on the card you plan to use, your card limit and what the card issuer allows. So in other words, if you're going through the financing process, how could I finance the financing process? I could talk to the dealership and get a loan through the dealership or maybe I could just use my credit card, which could be good, but you got to make sure that the terms of the credit card are good. You might be paying off the loan, you know, fairly shortly or you want to make sure that the credit card terms are good or you might try to get a third party loan to get a loan from a trusted bank. If you don't trust the dealership so you can get the cash from the bank loan, which you might trust a bit more possibly in some instances and then pay off the car in that way. Those are some options to consider. It's possible that you may be able to charge the down payment or the entire vehicle purchase if you have a high enough credit limit. So what's the advantage of using a credit card to buy a car? You may be able to earn awards on the amount that you charge. So if you use the credit card, that could be a big purchase for the credit card award points. And so, you know, that might be a factor that it could be significant. It could save you money. On that case, it also could impact your credit score in a positive way as long as you're able to pay it back. So for example, say you have a rewards card that pays 1% cashback on purchase. If you were to charge a $10,000 vehicle purchase, then you could earn $100 back in rewards. What you have to consider, however, is the trade off that you might be making when it comes to interest. So clearly credit card payments, you know, can fluctuate greatly. So if you have good credit, then you may be able to qualify for a car loan at a lower interest rate than what you'll pay for the credit card purchase. You know, I mean, you know, you might be able to put on the credit card and then pay it off if you can still pay it off. But, you know, obviously the credit card interest payments you would think over a long period of time would be higher than what you could finance for if you had good credit at the dealership or possibly at a bank. So if the card also has an annual fee, then the cost involved could easily outweigh any benefits that you would get in terms of rewards or convenience. So how to buy a car out of state? It's possible that an online search for a new or used vehicle may take you out of your state. While there's no law against buying a car out of state, you may need to meet some requirements to ensure that the purchase is legal. For example, as the buyer, you'll pay sales tax on the purchase, but it's important to know which state this is paid to. So sales tax note is something in the United States that differs from state to state. So if you're buying something in another state, then the sales tax laws and regulations and rules may differ than the state that you're in. You got to make sure that you're in compliance and paying the right state for the sales tax. So in most instances, you should pay sales tax to the state in which the vehicle will be registered. Depending on where you live, you may also pay local taxes as well. You'll also need to know what's required to register and ensure the vehicle in your home state. So if the car is registered in another state, you're going to have to register it now in your home state, most likely. And you got to go through that process. This can involve paying registration fees to the Department of Motor Vehicles or similarly titled Department or Division, depending on your state, obtaining license plates, completing a safety inspection and getting at least the minimum amount of liability insurance coverage required under state law. All of this happens once you get the vehicle to your home state. One more thing that you'll have to factor in when buying a car out of state is how you'll get it back. So depending on the distance involved, you may be able to pick it up yourself or pay to have it transported to where you live. How to buy a used car from a dealer. So buying a used car from a dealer involves many of the same steps already outlined. For instance, you'll need to decide what type of used car you're interested in, how much you can afford to spend on monthly payments, what you're willing to put down and whether you plan to seek financing to pay for your purchase. If you're interested in financing a used car, then you'll also have to decide whether to use the dealer's financing or find a lender on your own. So again, do the financing, think about the financing, what you can afford with the financing and then think about whether you want to go through the dealership or possibly go somewhere else to get the financing. Dealership financing can be convenient, but it doesn't necessarily guarantee that you'll receive the best terms. So clearly, clearly not, right? The dealership might not have the best terms on the loan. So quote buy here, pay here in quote financing, for instance, is designed for people with poor credit and often can be much more expensive than traditional used vehicle financing. So when buying a used car from a dealership, take time to do a visual inspection and test drive the vehicle. Also, you may want to have a mechanic look it over to determine whether there are any major issues. So if you can find a third-party mechanic or hire a mechanic, then that might be a way to get a third-party check. So if the dealership offers a car fax report, it's also helpful to review that thoroughly so you're aware of whether the car has been in an accident or suffered major damage at some point. So you can get the information on the car fax report that can be, again, valuable information worth checking out and looking over. If you know what type of vehicle you're interested in, then do some research to get an idea of what it's worth. You can then compare that to what a dealer is asking for a used car to get a sense of whether the price is fair. So you're going to do your same comparing and contrast and you're not just going to walk in the dealership and just, you know, depend on the dealership, we're still going to do the comparing and the contrasting with all the various tools, including those online tools. So do dealerships register cars for you? Registering a car, registering a new or used vehicle that you've recently purchased can be time consuming and you may be wondering whether it is a service that the dealer provides for you. This answer is, it depends. So some dealers may offer you a temporary registration and handle the rest of the paperwork filing for you. This means that you can legally drive the car off the lot the same day that you purchased it and your permanent registration will come in the mail later. That would be the convenient way to go if they can take care of it there. Others may require you to register the vehicle yourself before you can leave with your new to you, before you're new to your car. So then if you have to register it yourself, clearly that's going to be a bit more of a hassle, a bit more of a process. Taking that into account may influence where you decide to purchase your car. So clearly, if you want the convenience of being able to handle the registration at the point of purchase from the dealership, for example, you might want to take, you want to ask them if that's how they do it, going into the process. And remember that if you're purchasing a vehicle from a private seller, then handling things like paying sales tax, registering the vehicle and getting taxes entirely your responsibility. So clearly, if you're not going to a dealership or something like that, you're buying from another individual, then all these kind of things that you got to deal with, then are things that you got to deal with.