In August 2007, shortly before we found and bought our house, my husband's beater car from the early 90s came to a sad end--he rear-ended another car in order to avoid an antsy semi-truck driver and the airbags activated. (Note to husbands out there. Don't send your wife a cell phone pic of a crushed car with deployed airbags without explanation. You will scare her.)
The damage wasn't too terrible, but body shops would not even accept the car to fix it. We finally admitted it was time to buy him a new car, which we had been putting off for years by this point. I know there is a lot of opinion about new v. used cars in the personal finance community. We fall into the camp of buying new and driving into the ground. He had always driven cars shabby enough that he was either disliked valeting the car when we went to nice places, or required a significant amount of expensive repairs due to age and wear and tear. Many of our friends drive very nice cars, and I was always proud that he didn't let that embarrassment keep him from doing the responsible thing and driving what we could afford.
We ended up purchasing a new Civic, spending more than we probably should, but he needed a car to get to work and we wanted reliability, low maintenance cost and good gas mileage. Since we had been planning on a new car for him for quite some time, we were a little better prepared than we might have been, although it did make our mortgage a little more complicated to close on since we had just financed part of his car two months prior. The timing was bad on that one, but sometimes there is only so much you can do. Here's what we did to be prepared for a new car.
Work on credit score
My husband's credit is affected by some past events, and although he has been working really hard to improve it over the past 7 years, some negative notes and a simple lack of long credit history and low credit limits has affected him. When we were married in 2006, I added him as an authorized user on my highest-limit card, which has helped his score. We've also periodically requested credit limit increases for the card in his name only--probably about every six months, which took him from a limit of $500 to north of $6,000 over a couple of years.
Of course, we didn't use that credit, because that wouldn't have helped. We always made sure that any CC debt that we've carried has not resulted in high utilization of available credit, which is I believe about a third of your score. We also check all three credit reports for errors at least twice a year (our state allows for two free in addition to the federal free report). That said, I would try to not request limit increases within about two or three months of applying for a loan to keep from a lender being too suspicious.
Find a good loan
That brings me to something we didn't do: find a good loan in advance. We were so preoccupied with finding a house, that we didn't take some steps to figure out financing before he actually needed a car.
About a month before you’re planning to buy, start looking for good rates for your loan so you’re not at the mercy of the dealership when you get to the financing stage.
One important thing—do NOT try to qualify for a loan with a whole bunch of lenders. Every time a new lender hard checks your credit report, it’s considered a credit inquiry and dings your FICO score a little bit. I would narrow down to one lender that seems to be offering the best rate, and find out what they can give you for X amount of financing. Credit unions are a good idea, and my insurance company could have given me a very decent rate, which was a surprise to me.
Have down payment
Even if it just ends up covering taxes and title fees, save money for down payment. We saved up a significant amount (for us) by delaying the purchase as long as possible, giving us extra time to save. We just saved whatever we could, and for at least two years we were saying, well, in six months we’ll get him a new car. Add up $20 here and there, plus a portion of gift checks and the change jar, and we at least didn't have to finance every penny. It helped us to have separate savings accounts, which we did for both of our cars.
Do your research
Spend some time on Consumer Reports, think about who you know with reliable cars. Know what you want before you need it. Also know how you'll get rid of your old car--research selling it used if you are able to take that route. Find out what kind of trade-in value it might have. Get recommendations for a good salvage yard. When my car died in 2005, there was no fixing it, and I was particularly busy at work and had no idea where to start when it came to disposing of the vehicle. Sure I knew I could donate it or sell it to a salvage yard, but actually doing so was daunting. My mom found a good salvage yard and I had such a good experience with them that we knew exactly who to call when it was time to send his car into the sunset. This helped with keeping the stress down, and gave us a little extra money for the down payment.
Any other suggestions for preparing to buy a vehicle?
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