MoneyStuffed

A recent life change required my boyfriend and myself spend the past week insanely car shopping so he would have a vehicle. Previously, we would share my car, which was mainly for my work and my boyfriend would take public transportation to work. Since he is starting a new job out in the Boston suburbs, there is no easy way to get there using public transportation. This gave us two weeks maximum to find him a new car.

For the uninitiated in the way Massachusetts does things, here’s the basics. First you buy a car and either pay in full or set up financing. If you happen to buy from a dealer, they’ll set you up with a form called an RMV-1. Otherwise, you have to take the title to the Massachusetts Registry of Motor Vehicles (RMV) and get the information filled out. Once you have the RMV-1, you have to go to your insurance broker and get them to stamp it. Then you can take it back to the RMV and register the vehicle. The RMV will give you plates and you can then take them to the car you bought and put them on. Once the vehicle is registered, you have seven days to get the car inspected. In most states, they’ll give you a temporary registration and you can drive off the lot and handle all the paperwork later, but not in Massachusetts. This made things more urgent.

A new car is the second largest purchase you’ll ever make; the first being a new home. As such, it’s not something you generally want to make a decision on in a hurry. You want to research it and go to several dealerships and try to get the best bang for your buck. Since we didn’t have this luxury, we put the Internet to work for us. The first thing we did was make a decision. Although we needed to buy a reliable car, we really didn’t need to buy a brand new car. A newer, used car at a good price would suit our immediate needs. We also didn’t have a whole lot of money on hand so we dipped into my savings for the down payment on the car and started to research potential loans.

A trip to CostCo’s website, where I had a membership, determined we could get a discount on the interest rate points if we went through their affiliation with Capital One Auto Finance and took what they call a blank check loan. Considering the fact my credit is immaculate, we decided I’d co-sign on the loan in order to help with a lower rate (essentially allowing him to afford more car). This would also put me on the car’s title for my own security purposes (my boyfriend was told in no uncertain terms there would be dire consequences if he ever missed a payment). The blank check would give us approval up to a certain amount at a given rate, and allow us to walk into a dealership with an interest rate already on hand they’d have to beat in order for us to finance using their bank. This gave me a better feeling about walking into dealerships. It’s sort of like having pre-approval on a mortgage. You know exactly what the bank is willing to give you.

Once we had a loan and interest rate, I went to work with my Excel spreadsheet skills and worked out an amortization chart so we could figure out the monthly payment based on the amount taken out. We figured out what we’d need for tax (5% of purchase price), registration ($36), title fee ($50), and insurance down payment (usually about 20% of your annual rate) and figured the rest would go to the car’s down payment. I figured out the payments based on the rest.

Since figuring out things using Excel is fairly confusing unless you have a full understanding of how to do amortization charts and a strong knowledge of spreadsheet programming, the easiest way to do what I did would be to use an online calculator. Bankrate has several including the auto loan calculator and how much car you can afford calculators. Another useful calculator is the rebate versus lower interest rate calculator. My doing this all in Excel had an added advantage that I could use Documents To Go on my Palm and immediately figure out rates based on what a dealer gave us. Since we were pressed for time, this became an invaluable tool.

Another online tool we used was CarFax.com where we got a 30-day subscription, allowing us to put in as many car vehicle identification numbers (VINs) as we needed. Although the CarFax report isn’t the only item you should rely on about a vehicle, it’s a good tool and useful to determine if the used vehicle you’re looking at has been auctioned as salvage in the past. The government recently issued a warning regarding cars totaled in the aftermath of Hurricanes Katrina, Wilma and Rita. These cars are being sold at auction and then refurbished to hide the water damage. The National Insurance Crime Bureau allows you to enter in VINs into their website to determine if these cars have been previously involved in flood damage claims.

You can click on the following thumbnails to see a full version of these graphics:

Sample CarFax Report

NICB Hurricane Vehicle Fraud Check

We were lucky in one sense. My boyfriend’s father had a dealership he was comfortable with in Portsmouth, NH. He had bought four previous cars there, including a Monte Carlo just last year. My boyfriend went up Wednesday of last week to check out some cars they had in their online inventory and reported back to me which ones caught his eye. He also had the dealer run credit on him alone, without me co-signing. He got a higher interest rate (by .6 percentage points!) than the Capital One loan, so we made plans to use the blank check, unless my co-signing significantly decreased the interest rate. We made plans to go up after he was done working on Saturday.

I am not comfortable with this buying a car fast thing we were doing. When I bought my Acura (used in the sample CarFax report), I took over a month haggling with various dealerships in the area to get the best price and the color package I wanted. I practically lived on Edmunds.com, reading reviews and finding out through the forums what other people were paying for the same model of car. I soaked up their tips & advice section, especially the articles about women buying cars.

I discovered some disturbing facts, like how having my boyfriend tag along with me while test driving and making the deals got me better service. I also learned some tips and tricks about used car shopping, which I was putting to use now. Did you know if you run your finger around the edges of the paint and it’s rough, it’s indicative of body work having been done on a vehicle? This is because the factory coat isn’t put on the car while the car is together so there are no hard edges. This, of course, will also identify custom paint jobs, so it is not always sign of body work.

Since I had Saturday off, I spent the morning going through the car dealer’s inventory list. I ran each car through CarFax and the NADA site to get prices. I looked up each year and model on Edmunds.com to get JD Powers and editor ratings. I put this all in a slick spreadsheet to bring to the dealership so we could immediately identify the car we were driving. My boyfriend also called the dealership and asked him to set aside a Chevy Malibu and a Pontiac Grand Am in our price range so we could test drive them both quickly when we arrived, which would be about 6:30 pm.

We drove up to Portsmouth and took the 2005 Monte Carlo out first. This is a 4-cylinder car. My research indicated one of the problems GM refused to acknowledge was a faulty intake gasket on the engine. This could eventually lead to thousands of dollars of future engine damage. However, the car had low mileage (about 16,000) considering it was a former rental car, and had good ratings through Edmunds, so I wanted to take it out. The lower the mileage, the more factory warranty would be left on the car. This car wasn’t on the inventory list, but a quick call to my boyfriend’s mother had a CarFax report pulled with the information we needed. It also passed our checks for paint tint match and other body work signs, although it’s highly possible we missed something. The next car was a 2005 Grand Am, with significantly more miles (about 29,000) on it. This was also a former rental car, something this dealer seemed to specialize in. This car had a V6 engine and was definitely the sexier of the two cars. My boyfriend was in love and the car was $500 less than the Malibu, so we figured this was the one we were going to purchase. I also was comfortable with the Grand Am and familiar with the potential mechanical problems inherent in the vehicle as my first new car was a 1997 version of the same model. For example, it’s highly likely the motor in the driver’s side window will blow out in the next year or so. It’s about a $500 repair and covered under warranty for the next 7,000 miles. Even so, it’s certainly less of a repair than the potential repair the Malibu had.

We went back and had the dealer run the loan using me as a co-signer. As I suspected, this resulted in a much lower rate for the loan, about 2 full percentage points less than what Capital One offered and about 2.5 less than my boyfriend qualified on his own. So, we went with the dealer’s loan.

It is currently Monday and today my boyfriend will run around and finished the final steps required by the Massachusetts RMV to pick up the plates and after I am done with work, we’ll go up to Portsmouth and pick up his new car. My only hope is my hours of research pay off in the end.

In summary, even when rushed to make a car purchase, you can still mitigate the stress. The Capital One loan, although ultimately not used was a great stress reducer, allowing us to know we had money in hand for the vehicle. Shopping off a dealer referral helped as well. In addition, I received a referral to CarMax, but there were no nearby dealerships. This might be a good resource if a dealership is near you. Many people swear by them. They have locations listed in 22 states (some opening soon) and are growing quickly. Also, doing as much research on our potential purchase helped immensely. The two trips to the dealership, although I couldn’t make the first one, gave us a gauge on how comfortable we were with their sales tactics. It gave us an idea on what they were going to sell us so we could go home and do more research as well. Both Edmunds and various Google searches were very useful in gaining insight behind the models the dealer was selling and about purchasing used rentals in general. Carbuyingtips.com has good resources and was very helpful. It relieved many of my previous rental use fears. Overall, deals can still be had, even if you’re in a hurry. You just have to be careful and do your homework. It’s better to be a cautious shopper than to be a sorry shopper.

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This entry was posted on Tuesday, April 11th, 2006 at 1:00 am by Elana and is filed under Big Purchases, Car Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.