Wednesday, October 26, 2016

Get the Dealer to Make Your Car Payments! Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Every car dealer has a Referral Program that only infrequently is managed robustly. However, dealers will pay you $100, $200, or even $300 for every referral you send their way who actually buy a car.

And, don’t feel that you are asking a favour of friends or colleagues. In fact, you will be a hero to them if you can help them navigate the car buying process by introducing them to someone you know will take good care of them. And of course dealers love referrals because some of the “selling” has already been done and it builds a strong business relationship with the referrer and referee.

This can be lucrative depending on the size of your circle of friends, family, and colleagues. For example, let’s do the math to see if this is an outrageous idea. At any given point in time 5% of the public is in the market for a vehicle so if you have 300 connections (check your Facebook and LinkedIn account), that means 15 people you know are in the market for a car (or someone they know is in the market). Could you get 2 or 3 of those folks into your favourite dealership this month as part of their shopping process? If so, I can guarantee you that at least one (and likely 2) will buy a car.

Your friends will be grateful and you stand to pocket between $100 and $600. That would cover all or most of the monthly payment on most new cars. Do it every month, and you could have the dealer effectively making your car payments.

Tuesday, October 25, 2016

Warranty Means Peace of Mind - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Every car company provides warranty protection on every new vehicle usually in the form of a comprehensive warranty (meaning that virtually everything on the car is covered against defect - not against wear & tear) for three years (and sometimes longer). Also provided is a limited powertrain warranty for at least 5 years that covers the engine, transmission, and connecting assemblies.

If you plan to keep the vehicle longer than the comprehensive warranty period, consider buying the manufacturer’s extended warranty protection so you eliminate the cost of repairs during your ownership period.

Car warranties are not like those electronics store warranties that you are offered when you buy a computer, TV, or cell phone. In the case of cars, the cost is very small relative to the value of the vehicle. Consider that an average compact car has about 15,000 parts and a lot of those parts are computer modules that can be extremely costly if they go down just after your warranty expires.

And only buy warranty coverage issued by the manufacturer. Some third party providers may be hard to locate if you have a claim. By the way, do not buy, expensive insurance policies such as loss of employment, disability, etc. Your current life, auto, or health insurance provider can usually do the same thing cheaper. All car manufacturer programs and pricing are published on the manufacturer’s website which protects you against being over-charged.

Monday, October 24, 2016

What Fees Must I Pay on a New Car? Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

The fees and charges that make up the total amount you will pay for a new car include:
  • The MSRP (Manufacturer's Suggested Retail Price) is normally readily available on the manufacturer's website for every vehicle.  For example, a basic compact sedan with automatic transmission could be priced at $18,995.  However, you will also see a charge for Freight and PDE that totals about $1,695 and which must be added to the MSRP.
  • The PDE (Pre-Delivery Expense) represents the amount that the manufacturer has allowed the dealer to charge for setting up the vehicle for delivery (including all pre-delivery inspections, mechanical set ups, gas fill up, and detailing).
  • Air Conditioner Tax charged by the federal government and totalling $100 (if your vehicle has air conditioning).
  • Ontario Tire Stewardship (OTS) fee is charged on all tires to cover the eventual disposal cost for the tires on your car.  For passenger vehicles and light trucks, the fee is $3.55 per tire.  With four tires and a spare on your new car, the fee works out to be $17.75.
  • The Ontario Motor Vehicle Industry Council (OMVIC) is the governing body for car dealerships and car salespeople.  OMVIC collects a $10 transaction fee to support its dispute resolution activities.
  • Harmonized Sales Tax (HST) is charged on most goods and services in Ontario and is currently 13% HST.  (The rate differs by province).
If you are trading in a vehicle, you only pay HST (sales tax) on the difference between the new car price and the value of you trade-in.

You will normally be asked to pay the cost of licensing your vehicle (which can vary depending on whether you are transferring plates) and if you are leasing or financing the car, the bank will charge a fee to register the lien.

Friday, October 21, 2016

Just Wrote Off Your Car? Now What? Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Just wrote off your car? It’s important to talk to the car dealership where you purchased the vehicle to understand what is the current "equivalent vehicle".

Whether you have Replacement Value Insurance or not, it will probably be important to know what changes in equipment and features have taken place for the Make, Model, and Trim level that you purchased. Certainly, if you have replacement value insurance, you will want to make sure that the insurance company is providing the funds necessary to get you the vehicle that matches what you lost. But don’t count on them knowing.

They will likely offer base level compensation unless you bring to their attention that it was a GT model you were driving. Also, depending on the timing of your collision, you may find that the financing terms on your replacement vehicle are considerably different, e.g., interest rates may be higher (or lower) and cash incentives could be quite different as well.

You might get “lucky”, however, in most cases, you will end up with a different payment and/or a somewhat different car. In a collision that was not your fault, it is sad and frustrating to see that hard bargaining on your part may still leave you in a worse situation than before the incident.

Thursday, October 20, 2016

Time to Sell That Clunker? Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Have you dropped hundreds (or thousands) of dollars to keep your clunker on the road in some dream that it will be good for another year?

Did you just get one major repair done last month only to be hit another unexpected costly repair this month?

It’s time to face the facts! That $2,500 you spent over the past 6 months to repair your clunker will never be earned back. Time to trade it! And don’t fret over the money you already spent to keep it on the road. The money you sunk into that clunker is irrelevant.  It's gone; not coming back. 

Any financial expert will tell you to ignore sunk costs when deciding whether to buy or sell. When buying or selling a car, you should only be considering your future cash flows. That clunker is going to be nothing but unpredictable cash outflows.  A new or newer vehicle will be much more predictable. Time to cut your losses!

Wednesday, October 19, 2016

Paying Cash for Your Next Car? Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Paying cash is a great way to buy a car and save some real dollars if the manufacturer or dealer has a cash purchase incentive or discount. Otherwise, the subsidized interest rates available on most cars (as low as 0%) are hard to ignore.

If you are paying cash for a car you are tying up a lot of capital that might be used more productively in an appreciating asset. With finance and lease rates at historic lows, is the cash purchase incentive big enough to justify taking money out of the bank or (worse) cashing in investments to buy a depreciating asset like a car?

Ask your dealer to lay out the two options and show you the total out-of-pocket cost of financing versus paying cash and getting an available cash purchase discount. For example, if you can finance a $25,000 car at 0% for 60 months versus buying it for cash for $22,500, which would you choose? You save $2,500 plus tax but if you then arrange you own financing, it must be less than 2.25% to still be saving money. Consider what you could earn by investing the cash versus the cost of financing the discounted purchase price.

Tuesday, October 18, 2016

Reasons to Finance Your Next Car: Car Buying Tips and Advice

Video Series: Car Buying Tips and Advice

Financing makes sense if you are ready to make a longer term commitment and plan to keep your vehicle for a long time. But make sure the car gets paid for before you start encountering significant maintenance costs. Most warranties drop off after 5 years which is precisely when maintenance costs start to accelerate.

So, even though you can now finance a car at historically low finance rates and terms being offered are longer than at any time in the past, you would be wise to look for ways to pay off the car in 5 or 6 years.

You see, despite the fact that you may be able to buy your dream car at 0% interest for 84 months (that’s 7 years), you would be wise to budget to pay it off much sooner. If properly maintained, your new car will easily last for 10+ years. But with 5+ years of no car payments, you may be able to save a large down payment on your next new car. In the worst case scenario, you eventually pay off you car at little or no interest.