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Car Buying Guide – Detailed Strategies and Tips

Due to a car accident totaling one of our vehicles, my husband and I were forced to go on the hunt for a new car. Using many of the same strategies from past experiences, we found the perfect truck. I have compiled the strategies and tips that we have used to create the Ultimate Car Buying Guide. The Car Buying Guide is broken into 3 sections – Know Your Budget, Do Your Research and Finalize Your Finances. Happy Hunting!


Know Your Budget

Car Buying Guide - Know Your Budget

The first step in the Ultimate Car Buying Guide starts well before you actually see a car in person. So let’s begin!

Before going out to a dealership, it’s important to decide on your budget. This is the first and most important step to make sure a smooth car-buying experience.

You need to have a good idea of the total amount of money you can spend (the vehicle cost) and what it will equal monthly (monthly payment).

Consider the following questions:

  • How long do you want to pay for the car? Finance terms range from 3-8 years
  • How much money will you put down? Remember, whatever you can put down upfront will cut your monthly payment.
  • How much can you afford monthly? Review monthly expenses to determine the amount of money that remains after paying all bills, and necessary purchases such as groceries. If you don’t have a budget, then it’s time to create one!
  • Have you looked up rates for auto loans? Online resources such as bankrate.com provide current interest rates from various lenders.

Use a Loan Calculator

Loan calculators are great resources to better understand how much you can afford to spend.

 

Utilize the Bank Rate or State Farm Credit Union calculators to input various vehicle cost to see the monthly payments that result. We will revisit the loan calculator later on.

Do Your Research

Car Buying Guide - Do Your Research

The goal in this step of the Ultimate Car Buying Guide is to narrow down your choices to one make and model. Also, it will be critical to figuring out must-have features versus nice-to-haves.

Not sure how to get started?

Think about cars you have admired in the past – make, model and body style.

Use available online resources (such as AutoTrader) to gain a better understanding of different models. Also, you will learn which features are standard for certain vehicles.

The awesome part is you can do all your research at home without the pressure of a salesperson.

 

When you think about features, consider your lifestyle. Will your vehicle be used primarily for daily commutes? Do you need something rugged for off-road adventures? Is this a work vehicle requiring high fuel efficiency? The key takeaway here is that you want a vehicle that fits your lifestyle or it may not serve its purpose.

Here are some common things to consider:

 

Car Buying Guide - Checklist

What’s Better – New or Used?

There are pros and cons to purchasing any car – whether it’s new or used. Ultimately, the decision will be a compromise between what you like and what you can afford.

New Cars

Pros:

  • Low miles
  • Reduced risk of breakdowns and repairs
  • Eligibility for zero-interest loan or manufacturer rebates
  • New car smell

Cons:

  • Higher price tags
  • Depreciates once driven off the lot
  • Increased insurance coverage, if financed

Used Cars

Pros:

  • Lower price
  • Little or no insurance requirements

Cons:

  • More mileage
  • Wear and tear
  • Previous owners
  • Limited to no warranty protection

*Don’t forget to get a free CarFax report when considering a used car.

What about certified pre-owned (CPO) vehicles?

CPO vehicles are a great option to give you peace of mind when purchasing a used car. Most are late models that have undergone inspections, repairs and certification by the dealership. CPO also retains some benefits of a new car, such as having an extended warranty and special financing.

Finalize the Finances

Car Buying Guide - Finalize Your Finances

Reassess the Budget

Now with your research completed, you should have a more realistic idea of how much your vehicle costs. This is an excellent time to pull out the loan calculator to confirm the car price still aligns with your monthly budget.

Let’s input some information in the loan calculator and see what we find out.

  • Down payment: $10,000
  • Interest rate: 1.99%
  • Monthly payment goal: $470 approximately
  • Term: 60 months/ 5 years*

To keep payments around $470 per month, the vehicle cost cannot exceed $37,000 (with 10,000 down).

Car Buying Guide - Loan Calculator

What is an Out-the-Door (OTD) price?

The OTD price represents the most you are willing to pay including all fees and taxes. This approach prevents surprises for all parties involved. In the example above, the OTD price is $37,000.

Be a little bit flexible with your OTD as you don’t want to lose a deal over a few hundred dollars. With that note, it might be a good idea to calculate your OTD and subtract $500-1000. Then, share the adjusted figure with the salesperson.

Paying Cash?

This one is pretty simple. You arrive at the dealership with no plans to borrow any money to buy your vehicle. Instead, you have the funds available. No lienholder for you!

Think about the following when paying cash:

  • Complete ownership. You will own your vehicle outright as you drive off the lot.
  • No monthly payments and no interest. Remember, you are paying the principal (cost of the car less any down payments) and the interest when you undertake financing.
  • Depleted savings. In the event of an emergency, paying cash can leave you vulnerable.
  • There is an opportunity cost. You can lose the chance to earn a higher return from an alternative source because you used available cash to buy a car.
  • Know your situation. The bottom line is there are good reasons for and against paying cash. The key to this decision is to know your situation – including savings, credit history, and investment options.

Need a Lien Holder to Finance the Loan?

If you are not purchasing your car with cash, then you are borrowing from a lender. You can finance using a dealer or bank/credit unions. Make sure to shop around before committing to any creditor. Also, don’t have anyone run your credit unless you are certain you will use that lender.

  • No extra discounts. Unfortunately, saying you are paying cash will not bring any added discounts. Boo!
  • Credit score matters. The higher your credit score, the lower your interest rate. By sharing your score with the bank or dealer finance department, you can get a ballpark interest rate.

TIP: If you don’t know your credit score, you can use resources such as Credit Karma.

Want Some Info on Down Payments?

Your down payment is a lump sum paid to the dealership reducing the amount financed.

The most common way to make a down payment is via check. However, many dealerships will allow you to use a credit card up to a certain amount. All dealerships are not the same when it comes to credit card limits, so be sure to ask directly.

Many buyers today are using credit cards for down payments as a way to maximize benefits offered by cards. It is more common than you think.

CAUTION: Don’t use a credit card if you don’t have the money to pay it off in your next billing cycle. Your down payment should cut the amount being financed. If you put your down payment on a card and cannot pay it off soon, then you are still borrowing – and most likely at a higher rate.

Seal the Deal

Car Buying Guide - Seal the Deal

As a result of doing your homework, you can now hit the road and get the perfect car for the right price!

You have arrived at the last section in the Ultimate Car Buying Guide. Check out these final tips to help with planning and visiting dealerships:

1.  Keep Your Search in a Tight Time Frame

Too much time between searches might result in changes in rebates or interest rates.

2. Let Them Compete for Your Business

Sales reps will fight for a deal. So don’t hesitate to contact a previously visited dealership to see if they will beat the offer.

3. Express Your Options and OTD Upfront

You should be able to recite your list of features without hesitation and end with your OTD price. BOOM!

4. Your Needs and Wants May Change

You might get a new perspective on your ideal car while talking with a salesperson. They are, after all, the experts. We left the dealership without the leather seats, and larger engine we thought were must-haves.

5. Don’t Phone a Friend Bring a Friend (or Relative)

It’s a good idea bring someone with you who can reel you in if the salesperson is leading you down a different path. And, of course, make sure this person is financially responsible. You might need some backup with negotiations.

6. Feeling Pressured?

 If you feel pressured, it’s because you probably are. Remember there is nothing wrong with leaving if you are uncomfortable. Also, you don’t want a costly case of buyer’s’ remorse.

Yay!! Finally, you have made it to the end of the Ultimate Car Buying Guide, which means you are more than equipped to seal the deal.


I hope this Ultimate Car Buying Guide helps you to have a great purchasing experience. The key is being prepared so no one can take advantage of you. Good Luck and Enjoy your New Ride!

What tips or strategies have you used to find the perfect car?

Finance

Southwest Companion Pass – 9 Tips to get your pass

Do you love to travel AND have someone you want to take on all your trips? Then the Southwest Companion Pass is just what you need. In this post, I share 9 tips to help you get a Southwest Companion Pass using the Chase Rapid Rewards credit card.


1. UNDERSTAND YOUR PRIMARY STRATEGY

Southwest Companion Pass

There are two ways to qualify for the Southwest Companion Pass – flying 100 one-way flights or earning 110,000 points.

 

Even though I travel frequently compared to the average person, I knew I wouldn’t book 50 round trips flights in one calendar year. It was clear I needed another strategy. 

 

With that in mind, I went about earning my companion pass by applying for the Chase Rapid Rewards card to get sign-up points. I will tell you more about the sign-on points later in bullet 3.

2. DECIDE ON ONE CARD OR TWO

You can apply for two cards -personal and business- to get the most sign-up points. Something to keep in mind, getting two cards will result in two hard inquiries possibly affecting your credit score. I decided on one card to avoid any impacts to my credit score. Plus one of the cards is technically for a business which requires some verification. 

With the two-card strategy, you not only get two cards, but you also can get up to 100,000 sign-up points from both cards combined– just 10,000 points shy of the target.

If this approach piques your interest, check out Extra Pack of Peanuts or Wallet Hacks.

NOTE: There are two card levels available – premier and plus. Premier is ideal as you get more sign-on points. Let’s get to those sign-up offers. 

3.TAKE ADVANTAGE OF SIGN-UP OFFERS

There are various sign-up offers available after spending a specific dollar amount within three months or as quickly as one month. For example, I have seen offers for 50,000 bonus points after spending $3,000 within three months.

With several available sign-on offers, it is important to do a quick search to confirm you are getting the best offer. In fact, the two cards – premier and plus- both come with different sign-up offers so read the details carefully. 

4. APPLY LATE OR EARLY IN THE YEAR

To maximize the length of time to earn points, you should either apply early in the year or later.  In others words, January/February or November/December.

I applied in January 2016 which gave me almost a full year to accumulate points and also I didn’t have to worry about hitting the spending amount too early. On the flip side, waiting until July leaves less than six months to get 110,000 points. 

CAUTION: If applying late in the year be careful not to hit the spending amount too soon. For example, if I apply in November and immediately spent $3,000, then the sign-up points could register in the same calendar year. If this happens, then I go into the following year still needing 110,000 points. I have had a couple friends who made this critial mistake. Can we say #majorbummer!

 

5. TRAVEL WITH SOUTHWEST

 

Southwest Companion Pass

This is a given, but I thought I would mention just in case. Make sure you book flights with Southwest, when possible. By book with Southwest, you earn more points per dollar.

Also, don’t miss out on earning extra points when booking Southwest Vacation packages. The packages include airfare, hotel and ground transportation.

6. PILE ON BILLS AND PURCHASES

As noted earlier, I was pretty sure I would not get the Southwest Companion pass based solely on flights. This made it necessary to use the Chase Rapid Reward card for as many purchases as possible.

Pile all your bills and purchases on the card. Think electric, cable, internet to groceries, gas, clothing and the list goes on and on.

Also, if you have a big-ticket purchase to make, then delay the purchase so you can use your Chase Rapid Reward card. That is of course only if your purchase can wait. I would hate to hear you waited to buy a much-needed refrigerator. 

NOTE: Your mortgage and car payment probably won’t make the cut so don’t bank on these bills to get points. 

7. ADD AUTHORIZED USERS

Adding an authorized user is an excellent way to gain points, but make sure to proceed with caution.

When thinking about aurthorized users for any credit card, you only want responsible people having access to your card. Remember, you are ultimately responsible for all purchases made.

Consider very carefully who you want to add as a user.I added my husband, so his everyday purchases help with earning points. I felt he was pretty safe (wink).

8. TAKE ADVANTAGE OF Southwest PARTNERS

Now, let’s take a look at  Southwest Partners:

TRAVEL
Southwest partners with various hotels, rental car agencies, and ground transportation companies.

SHOP
Rapid Rewards Shopping allows you to earn 1 – 10x points per dollar when you shop brands listed. I bought my MacBook Air on the site and gained over 1200 bonus points. It’s also great for other purchases and occasions such as Mother’s Day.

DINING
By linking the Chase Rapid Rewards to the Southwest Dining Club, I earned points automatically when dining at some local restaurants.

Home and Lifestyle
This is a limited area, but if you are shopping around for electric companies, then it’s definitely worth checking out. I have seen offers to earn up to 27,000 points by signing a 2-year contract with Reliant Energy.  

SPECIALTY
I get impatient with surveys, so I haven’t taken advantage of this category, but you can get points for completing surveys through various vendors.

9. DON’T JEOPARDIZE YOUR CREDIT HISTORY/SCORE

Finally, we have arrived at the last and most important tip.

As you consider tips 1-8, only make purchases you can afford to pay them off by the end of the billing cycle. Also, be mindful of purchasing tickets for friends and family.

A strong credit score is vital in securing loans, leases, and low deposits/payments. Yes, you will get free travel, but the consequences and cost to repair your credit may be far greater.


My pass brought my husband and I to many awesome destinations in 2016 which included Denver, Jamaica, The Bahamas and a few more. It also saved us tons of money by using points and the companion pass during travel. Stayed for a post on our savings. 

Do you have a Southwest Companion Pass?
How did you earn points and where have your travels taken you?

Finance, Travel