A New Car Without Breaking Your Budget (Podcast)

Kasey Radney 00:31
Hi Amy, thanks for having me on today. It's a pleasure to be here.

Amy Laburda
So returning listeners will know that I live in New York City. So like a lot of New Yorkers, I don't have a car myself. So I apologize in advance if any of the questions I ask seem obvious to you or our listeners. But you're in Atlanta, so I think it's fair to say that, like a lot of people, you need a car to get around.

Kasey Radney
Oh, absolutely. I absolutely agree with that. Atlanta is especially a city where a car is pretty much a necessity for most, definitely for me.

01:01
It's just so spread out compared to a city like New York, where there's just accessible-to-walk distances. And it also kind of falls in line with most metro areas in America. Recent stats actually show that 85% of Americans are licensed drivers, which… I did not believe it was that high. So I think it's pretty safe to say that the majority of Americans actually need a car to get around day to day. And for me personally, like I said, I use it every single day, mostly to commute to work. But

01:31
to go to the gym, the grocery store, if I want to go out and grab dinner with friends: I have to get in my car and get on the highway to get there. That's just the truth of it. Nothing is walking distance in Atlanta. It may be controversial, but I really enjoy the time I get in my car coming home from work. I know a lot of people hate it, especially in Atlanta. There's traffic, road rage. I think they've been doing construction on [Interstate] 285 for

01:55
at least 20 years at this point. But for me, it's a good chance to catch up on music, audio books. I also get to keep in touch with family. It's a great time to make a quick phone call. So yeah, again, for me, it's a necessity, a daily necessity.

Amy Laburda
Yeah, I definitely now and then miss the sing-alongs in my car, those kind of, like, moments of zen that you don't really get on the subway quite the same way, as much as I do love having public transit here.

02:21
So I didn't grow up in New York, which is part of why I know the joy of being in a car. I also remember the excitement when I was a teenager of getting my first license, and suddenly having that independence and freedom to go wherever without having to get my parents to take me or bumming a ride off of friends. So if you don't mind going into it, do you remember the first car you owned in sort of those early days as a driver?

Kasey Radney
I do. And it's partly an embarrassing story for me as well. So my first vehicle was a two-door six-speed

02:50
Jeep Wrangler. It was the greatest thing ever. I was in high school. It was the coolest thing. I could take the top off and ride around in the summer. I loved that thing. But it was a manual. At that point, when we got it at the dealership, I didn't know how to drive stick shift. Once we got the car and drove off the lot, [my dad] made me drive all through town the entire day until I was good enough to drive that Jeep. Needless to say, there were many, many, many red lights that I stalled out at and had a line

03:19
miles long behind me, just waiting for me to get it going. And if you've ever been in a stick shift and you stall out in front of people, it's the most embarrassing thing you can possibly do.

Amy Laburda
Yeah, especially in a world of automatics where people are like, “What's this guy's problem? What's happening?”

Kasey Radney
Yeah, and I just can't move at all.

Amy Laburda
But you made it eventually. You're not still stuck at a red light.

Kasey Radney
Right, finally.

Amy Laburda
I think it's a cool skill to have these days. Not everyone even knows how to drive sticks. So, you know

03:48
your dad was showing some tough love, but it got you a new place where you can have a bigger variety of cars to choose from when you're shopping now.

Kasey Radney
Absolutely.

Amy Laburda
So I think for a lot of younger adults, that first car is either a gift from your parents or another generous adult in your life, or it's really constrained by the resources you can throw at it. So you're kind of dealing with the hand you're dealt for that first car. But eventually,

04:13
everyone's going to hit a point in their life where that first car calls it quits, either because it's just reached the end of its life or unfortunately there was an accident or who knows what. Cars don't last forever. So once you're in a position to afford something with better gas mileage, maybe some better amenities, you're sitting down as an adult and making the decision “Hey, I'm going to get a new car. Do I want to buy it or do I want to lease it?” Based on other episodes of this podcast with our colleagues, I'm going to take a wild guess

04:43
and say, the answer is: It depends. But do you want to go into a little more detail about why someone might go “buy” or “lease”?

Kasey Radney
Sure. Yeah, like the majority of most things in our lives, one size does not fit all most of the time. It really may sound cliche, but in this case, it really does depend on each person's unique situation. There are many reasons, like you mentioned, that people could be looking for a new vehicle. It could have been totaled. It could just be old and [have] too many miles on it.

05:12
It could not be worth repairing it and getting a new vehicle is a better decision going forward. But mainly the price tag and a person's own financial budget is most times a significant factor in their decision to get a new car. Most times you're not going to go out looking for a new vehicle if you don't have the money to pay for it. Another thing is some people have a strong desire to have a car that they're personally proud of. And so their personal

05:40
preferences play a major role in their decision as well. But ultimately, it's super important to consider the decision to either buy or lease from all different angles to make sure that you get a car that suits what you need in your day-to-day life, but you also have a car that you enjoy and care for. And then you don't want a vehicle that's going to put you in a financial hole for the long term. So failing to consider these things and really taking a deep dive into your own personal situation —

06:10
it could end up hurting you in the long term. So it really does depend on your personal situation, whether you should buy or lease.

Amy Laburda
I think a lot of people sort of peg “normal” as to what their family did when they were growing up. I can say for myself, we were a “buy a used car” family pretty much my entire life. And so I think, you know, that's my first instinct when thinking about a car. It's like, “Oh, obviously that's what you do.” I hear more often now pre-owned, I think there's been a

06:38
slight rebrand. When I was younger, “buy a used car” had its own set of associations. But as a financial planner, is buying used or pre-owned, as the case may be, an option that most people should consider?

Kasey Radney
So I'll start by answering that question by saying, yeah, we tend to follow how we are raised. When we see our parents do it, we think that's the way it should be done, or that's the way we just know. My family was very much the same as yours. We

07:06
mainly bought cheaper, pre-owned cars rather than buying new, or we bought a used car. I do think that is what most people tend to lean towards. Myself, for instance, when I was younger, I didn't know leasing was an option. I just thought it was buy or finance, pre-owned or used or new. But I think to really answer your question fully, I do think that taking buying a used or pre-owned car completely off the table could potentially cause you to miss out on a good financial opportunity.

07:34
Used cars, they do tend to get a bad rap. They honestly do. But in reality, used cars accounted for over twice the amount of new car sales. So a lot of people are buying used and pre-owned cars, clearly. Now granted, buying a car outright, or a new car, is typically less expensive over the long term than financing it or buying a used car. That's because you're avoiding a lot of interest and a lot of finance charges that come along with that. But buying used has its advantages as well. For one,

08:04
dealer-certified pre-owned vehicles usually come with a very strong warranty. So the good thing about that is that you won't have to worry about any huge unexpected repair bills in the first few years that may cost you an arm and a leg. Also, most modern cars typically go tens of thousands of miles before there's any significant problems or big maintenance that comes up. So a like-new car and a new car will typically feel about the same for the first couple of years.

08:33
Estimates also vary on this, but cars depreciate around 20 to 30% in [their] first year. The good thing about buying used is that the previous owners, they're the ones shouldering that heavy burden of depreciation. You're kind of missing out on having to shoulder that cost. Lastly, since you're looking for a cost-efficient option, used cars are typically discounted. They can be a good option for people who don't have a lot of savings built up to buy a car outright,

09:00
or if they don't want to finance, they can typically find a used car at a lower price.

Amy Laburda
All that makes a lot of sense. So I think you mentioned, and it's pretty intuitive, that whether it's new or pre-owned, if you're in a financial position to buy outright, that's going to have some advantages. You're not going to have to pay interest and a lot of the financing expenses. But I do think for many, if not most people, buying a car means financing it, whether it's new or pre-owned, just because it's such a big purchase for most people. So

09:29
once you're financing, that brings us back to the question of leasing, which we kind of touched on briefly at the beginning of this discussion. When you're thinking about financing, whether new or used, versus leasing, what kind of things are on your mind?

Kasey Radney
Right. Yeah, you're correct. If you buy a new or pre-owned car outright, it may seem like the overall best option. But like you mentioned, for most people, especially younger individuals, they don't have the savings built up to buy a car outright. So that does bring us back to the question: Buy or lease?

09:58
It really depends on what you need the car for and how it best suits your individual intentions with the car. At the top level, it really comes down to your level of commitment to the vehicle. We'll get into it in a moment, but buying is a much longer commitment than a lease is. And then another thing is, what do you need the car for? Buying could be a better option if you want to customize your vehicle over the long term. Leasing might not fit that profile quite as much. And then I think it is

10:25
good to mention — So leasing is when you're paying a monthly payment to the dealer or to the leaseholder, and you pay that monthly amount to have the right to use the car with certain restrictions, and then you return the car at the end of lease period, usually a few years. And then of course, buying outright, you're paying if you're financing

10:45
using a loan, through a bank or a third party lender, you're making that monthly payment to them, but you're building equity in the vehicle, and that vehicle becomes yours slowly by each payment. And at the end of the loan period, you own the car outright and it's yours to resell, to use for the rest of your life. That's up to you. Both options are viable options for financing a car. It really just depends on what you want personally. If you really look to buy outright,

11:11
the best thing about that is that you own the vehicle. You're building equity in it that can be used if you want to trade it in, down the road, or if you want to resell it for its resale value. There's also no mileage restrictions. If you buy outright, you can drive that car cross-country. That's your prerogative. However, on the other side, leasing, you don't have ownership of the vehicle. The leaseholder owns the vehicle. You're just

11:33
essentially borrowing it for a few years. With the lease, there's also mileage restrictions. For newer vehicles nowadays, that mileage restriction is around 10,000 miles. And if you go over that, you start running into more and more fees for going over the mileage. So it's important that you're not driving long distances throughout the years. So that's one kind of option to weigh. And then a big thing as well for both options is the repairs and maintenance.

11:59
If you own the vehicle and buy it outright, you're responsible, you're liable if it breaks down. So those can be hidden costs that you're not considering at first. If you decide to lease, on the other hand, the leaseholder is responsible for all the repairs and maintenance. So that could be a more beneficial opportunity for you, if that is what you're looking for. If you don't want to have to deal with the headache of oil changes, and getting new tires, and if you have a fender bender on the highway: the leaseholder takes care of that.

12:28
So these are just a few things that you should consider in your decision to look at buying or leasing. And then we talked about the financial aspect of it. You wouldn't buy a car that's outside of your budget. If you do, that's not a great decision, honestly. If you look to buy outright, typically you're going to have a higher payment than leasing. So if your financial budget is your main deciding factor,

12:52
that could very well be what decides that question for you. And then, one fun fact about leasing, or one additional thing to think about, is that experts claim that if you want a better deal rather than planning to buy, when you negotiate, you can tell the dealer that you are looking to buy outright and then at the very end, let them know that you're looking for a lease. This isn't as prevalent nowadays, but it's still a good negotiation tactic.

Amy Laburda
So it sounds like if you're sitting down,

13:18
either for yourself or with a client, and you're trying to think about this by versus least question, it's not only the finances though, obviously that's going to be a big component of the decision. But also just knowing yourself and your lifestyle, right? Are you the kind of person who hangs onto the same car until it can't go anymore? Or do you always want sort of the newest, latest model? Are you a person who wants to customize your car? Do you often take long road trips? That kind of thing. So it sounds like you really need to sort of like stop and think about things even just beyond the numbers on

13:48
your budget.

Kasey Radney
Right. Everyone thinks about buying a car as the dollar sign. What does it come down to at the end of the day, my monthly payment, my interest rate? But that's not it at all. There are so many different aspects you should really take the time to look inward and see what you truly want to decide where to go. I mentioned earlier that I didn't know what leasing was when I was younger. And when I was in my early 20s, that might've actually been a better option for me. Just like most young people, I wanted to have a nice new car every couple of years, and I would look to trade in

14:18
my current vehicle, when a lease probably could have saved me a lot of hassle. Now, though, personally, I'm at the place where I love my truck. I take it on long trips. My dog can get in and out of the back very easily. This is a truck that I'm going to hold on to for a while. So I made the decision to finance it to buy it outright. So again, I had to take those factors into consideration about what I needed for my life, what fits my needs, more than just a monthly payment.

Amy Laburda
Yeah. I will say, since you brought up your dog, I think also

14:46
dogs and maybe young kids also are notoriously not the cleanest additions to your life, even though they bring so much joy. So for a leaseholder, that could be a source of stress versus if you own your own car, you're like, “Ah, I'll clean that up later.” And it's not as big a deal.

Kasey Radney
Right. Because when you lease, you could be held accountable for certain damages to the car. You have to keep the car in good shape if you're leasing it. And like you said, kids and dogs,

15:14
they're not the easiest on back seats. I'll just say that.

Amy Laburda
So I've heard the comparison before that buying versus leasing a car is sort of similar to considering whether to rent or buy the home you live in. Obviously, it's not a perfect analogy. There's different factors in those two situations. But one of the big differences, in my understanding, is that a home serves as a good store of value over time. You did mention you do build equity in a car. But since they depreciate, does that sort of change the math in that comparison?

Kasey Radney 15:44
It definitely does. Yes. I'm sure everyone's heard the age-old saying that a car depreciates 10% when you drive it off the lot, or some other percentage. It can feel that way. Buying a car can sometimes feel like you're gambling a little bit, because you may not know the eventual resale value of the car due to that depreciation year-over-year. Leasing, on the other hand, it's a little bit different. The dealer has to take the car back at the end of the agreement, regardless of the depreciation.

16:14
So if you are concerned about the eventual resale of the car, leasing may be a better option for you. You don't have to think about it at all. You just hand the keys back at the end of the agreement and walk away. Leasing also means that you really have no risk of going “upside down” on an auto loan. Going upside down means that the value of the car is actually less than what you still owe on the vehicle.

16:36
So if the car doesn't hold its value as well over the long term, but your loan is still very high, trying to trade that in or sell that vehicle is going to be very difficult to do. Leasing takes that out of the equation completely. So if you think that you're not able to get a good interest rate or a car financed at a good loan term, then leasing may be a better option for you.

Amy Laburda
And it seems like one of the things in play that is not in your control as a person, either buying or leasing, is sort of market conditions.

17:04
We're recording this in the fall of 2024. And I think the last few years have shown a lot of people that general advice for buying and leasing cars may need a little tweaking depending on the market conditions in front of you. Obviously, if your car dies and you need to get around, you may not have a lot of choice in when to get a new vehicle. But it seems like we're coming out of an unusual period for car stock and car supply.

17:30
If you're advising a client who wants a new car but maybe doesn't need one urgently, is timing it to the sort of market conditions a thing that you would encourage them to consider? Or is it more that you'll just sort of advise them to suit their approach to whatever market conditions they find themselves facing, and they may need to make some adjustments, but they don't necessarily need to wait?

Kasey Radney
Right. Sometimes we can't help the times we live in. The past few years have been different, I'll say, for most everything.

17:59
But outside of the immediate needs to replace or buy a car, if I were advising a client on the timing of a purchase, I'd say it's important to take account of both the market trends at the time. But again, you cannot neglect your own personal financial situation to determine when to buy a car. For instance, the past five years, the U.S. car market has experienced a lot of volatility. Back in 2020, the U.S. car market had a shortage of vehicles, and prices increased for used vehicles. Sometimes these vehicles

18:29
were higher-cost than newer vehicles during that year. But now, in today's time, the U.S. car supply is returning to that somewhat normal level. Some dealers even have a surplus of inventory that they're trying to get rid of. So car prices are starting to come down, which is good news for buyers looking today. And then if you're looking to finance, we also can take into consideration the interest rates. As we know, the Federal Reserve just reduced the interest rate recently by 50 basis points.

18:57
So that'll affect the interest rates for car loans as well. So nowadays, the supply is starting to strengthen. Prices are coming down. So it reasonably would be said that it's a good time to buy a vehicle, if you're looking. However, you still need to look at it from your own personal financial perspective. You wouldn't buy or purchase a car, or get a lease on a car, if you knew you couldn't afford it overall. That just doesn't make logical sense. If you can't afford the payments, the upkeep,

19:26
or even the gas to put in it. So it's just as important to look at the market trends and see, “Is it a good time to buy?”, as well as weighing that with your own personal strength to buy a vehicle.

Amy Laburda
So it seems like we've talked a little bit about market conditions. We've talked about sort of your own lifestyle that might push you towards “buy” or “lease.” But say you're a person who's kind of on the fence, right? You don't have any strong pushing towards a lease or a financed purchase necessarily. Maybe you're just sitting down and being like, “All right, let's come back,

19:55
come back to the dollar figures, sit down and figure out the money.” If you're that person, or advising that person, how can you figure out what's the better deal for you?
Kasey Radney
Right, well, first off, it starts with having a budget. I think everyone should have a budget in their daily life. This not only considers the purchase of the vehicle, but it will help you in your overall life as well. So once you have that budget set in place, and you've determined the price range of the car you're looking for,

20:22
whether you purchase or lease, then you can actually begin to compare the deals. We all know someone who has rushed into a car deal and has gotten taken advantage of, myself included, earlier in my life. So it does take a good amount of work that you'll have to put in, to put in the research beforehand so it pays off in the car deal long-term. One of the most popular tools that most people are familiar with to research, compare vehicles, is Kelley Blue Book.

20:47
It's an online website that uses a lot of different real-world factors and algorithms that can provide valuations of the cars that you're looking for that will fit your budget. Of course, it should be said these valuations aren't perfect. They're estimates, most times. But it's a good starting off point for you. You can take that and kind of know what range you're looking for. Thankfully though, the internet has virtually unlimited resources. And so there's

21:10
very many other review comparison websites: J.D. Power for one, Consumer Reports is another website that will help you supplement your research. And that way you can really drill down into your price range to know what you need to look for in a vehicle. Once you kind of have a few options that you're looking at and that you're tossing around, you can start looking at the physical numbers, start crunching those numbers. There are very many websites that also include calculators that can help you with this. One good one is Bankrate.

21:40
Bankrate has many different calculators that you can compare different types of loans and leases to each other, and look at the overall cost of those as well. Once you've done the research, you know what kind of car you're looking for, plug in those numbers into the calculators and you can compare, let's say, a six-year auto loan versus two three-year leases. And then you can physically see, “OK, the lease option is less expensive for me.”

22:04
“The auto loan option is a better option for me.” Make sure, though, that when you're doing this research, you're brutally honest with yourself and take account for such factors and preferences that you really consider important for your vehicle. Don't limit your research to just the monthly payment or the total cost of lease and loans. You really need to consider: “Do I want certain features of the vehicle?” “How long do I need the vehicle for?” These are all questions you should ask yourself and hold fast to when you're doing your research.

Amy Laburda
Thanks for a really thorough answer.

22:33
I want to circle back a little bit to your early point about budgets. First, I'll give a little plug. Our colleague Rebecca Pavese and I sat down and talked about budgets earlier this season. If you're a listener who hasn't been listening in order, I'll link that in the show notes. Do commend it to you as sort of an overview of why budgets matter more generally. But when we're talking about a car, it's been a while since I was a regular driver, but I do remember that my car always ended up being a bigger part of my budget than I initially expected it to be.

23:02
There's not only, as you mentioned, the actual car payment and the gas, but there are other expenses that go along with having a car, whether you're leasing or owning. What other kinds of expenses would you advise people to actually build into their budget?

Kasey Radney
There's many. And if you're not aware of them, it can catch you off-guard and surprise you when you look at the final cost. And like you said, a lot of people get hung up on the monthly payment. That's a big one. There's a lot of other long-term costs that can be a nasty surprise.

23:32
Initially, when you purchased a vehicle, there were other costs wrapped up in the purchase of the vehicle itself, such as a down payment, if you're adding that. Or there may be cash that's due at signing if you're upside down on a vehicle, for instance. And then at the end of the actual deal itself, you have to pay taxes. And there's also other registration fees that are accounted for. So these are things you need to consider as well when you're looking to buy a vehicle and when you walk onto that dealership.

23:59
And then if you have your loan, for instance, that's an interest rate that you're going to be paying over the long term. So there's a total interest at the end of that loan period that is a cost for the vehicle that you need to think of. And we've mentioned and talked on — there's hidden repairs that you may have to do, put onto the car. There's routine maintenance when the vehicles get to a certain point in their lifetime. And then everyone has to have insurance to drive. I believe

24:24
almost all states require insurance for a vehicle. And so regardless, you're going to have to put insurance on it to drive it. And so that's another cost of owning that vehicle that you have to be prepared for. And then, whether you're buying or leasing, insurance is there. But for leasing specifically, the insurance that is required may be more comprehensive. So that could also play into your decision of whether you want to buy a car outright or decide to lease it, is the insurance requirement. If you had the type of car you want in your mind,

24:53
you can sometimes even call your insurance company and have them provide you with an estimate of what your monthly insurance premium will be, based on the type of coverage that you need. So that could play another role into the research for you.

Amy Laburda
So circling back very slightly, you mentioned that if you're leasing, there might be other concerns with your insurance. What kind of insurance concerns do people who lease need to know about that are sort of above and beyond what other people do?

Kasey Radney
Yeah. So if you choose to lease, you have to obtain gap insurance. It's a requirement for leasing.

25:23
“Gap” stands for “guaranteed asset protection,” and you can get this through the dealership or even directly through your auto insurance company. What this is for is, if your car is stolen or totaled in an accident before the loan is paid off in full or the lease ends, you may be liable for any of those additional costs that your auto insurance doesn't cover. So hence “gap” — it covers that gap. It's designed to protect against that risk, and so it's going to pay that difference of the car's value

25:52
at the time it's either stolen or it's totaled. As with any sort of insurance, it can be hard to understand. So you should really take the time to understand and familiarize yourself with the specifics of what you're paying before you commit to that policy. Gap insurance is typically most helpful if you purchase a newer car with a relatively small down payment, or if the term of your loan is longer than average. So 60 months is

26:20
typically around the average length for a car loan, anything further than that, gap insurance is going to be more helpful for you as well.

Amy Laburda
So given what we said, and honestly for most people in their life, I assume they have experience with this: Cars aren't cheap, regardless of whether you buy or lease or finance in some way. I'm lucky enough to live in a city with an unusually robust public transit system, so I can say that,

26:44
generally, I don't miss having a car in my day-to-day life, though I certainly do use Uber and Lyft to supplement the public transit system from time to time. Are there other situations, other than just living in a city that has a robust public transit system, where people might consider: “Do I even really need a car?”
Kasey Radney
Yes, there are. Now, granted, the majority of our country leans towards owning a car.

27:08
Recently, Forbes estimated that 92% of US households own at least one vehicle. Kind of blew me away. 92% percent is very, very high. But sure, in today's age, there's increased public transportation, as you mentioned. There's also alternatives like ride-sharing. Uber and Lyft are huge in most metro cities. And there are many other cases where a person doesn't necessarily need to own a personal vehicle. So, it is worth the time to, again,

27:37
account for yourself, crunch the numbers, do the research to see if you truly need to own a car. Some of the cases may be: A person's spouse may drop them off at work and they might not need a car just for that one spouse. It could be someone who doesn't travel very far distances and can use Uber or Lyft because they don't, one, they don't travel far distances, but also they don't travel often. They could be retirees or other people who work entirely at home and may be able to get around by walking. So there are many different

28:06
alternatives to owning a vehicle, it just, again, depends on your own personal situation. I do think, though, that these alternatives are really, truly viable only if you don't plan to travel far distances or very often. If there's adequate transportation around, this could be a good option for you. Otherwise, I think these alternatives may be more expensive than owning a vehicle.

Amy Laburda
Yeah, it seems like a lot of the ones you mentioned are actually sort of a more practical consideration for

28:36
“Do you need a second car in a family with multiple adults?” I think getting rid of any car at all is a choice, for most people in the country, that would be very limiting and very challenging.

Kasey Radney
Agreed.

Amy Laburda
So someone's run all the numbers, they've done some soul-searching about what they really want in a car, about their lifestyle, what they need. They've decided on the buy or lease question, and they're ready to sit down and shop.

28:59
You mentioned earlier that research was a really key step. Is that the place you'd advise people to generally begin with the actual car buying or leasing process?

Kasey Radney
So yes, I would say that starting shopping online is probably the easiest for most people. Online shopping has revolutionized the car-buying experience these days, but it's very easy. Anyone can log onto a website. They could find values for vehicles, estimates for loans. There's just

29:27
so much you could do without ever stepping a foot into a dealership first. There's even companies, such as Carvana, that allow you to find, finance, and buy a car entirely online. The only thing you have to do is pick it up in person, and then sometimes, you don't even have to do that. Carvana will even deliver a vehicle to you on a flatbed. Shopping online can be nice for some people, because it involves less time,

29:52
and it makes it easier to ignore and avoid those attempts from salesmen at the hard sell. For myself, I can say I don't look forward to going to a dealership and spending hours of my weekend trying to navigate the salesmen and some of the tactics that are used there. I'm sure a few people listening have experienced this. They've waited hours just for a dealership to “run it by the manager” a couple different times. However, shopping in person at a dealer is beneficial in some ways.

30:21
An experienced salesman can sometimes guide you through the process easier and [make it] more understandable for you. They will have a lot more knowledge than you looking online, where you don't have those resources. And for some people, they're just more comfortable seeing the car physically in real life, rather than looking at a picture online. I do believe the best approach, though, is a hybrid method of the two. In this case, you would do your part of your shopping online, begin the process there, but then you would also go in person and finish the process.

30:51
For example, you should arrange a test drive before you buy, even if you start your shopping online. Ultimately, though, there is no right or wrong choice when it comes to shopping online versus in person. It is really up to the individual.

Amy Laburda
Speaking of going to the dealership in person, I think historically it's been understood that negotiation is a part of buying a car, in a way that it often isn't in other American financial transactions. Is that still true these days, in your experience?

31:19
Or is it true if you're shopping totally online?

Kasey Radney
I think it is true, still, even if it is less capacity of negotiation. With the increase in online shopping, you don't negotiate with an online website. The first thing you’ve got to know is: What do you want to spend? Not only in your monthly payment, but again, we talked about the total cost of a vehicle, all the hidden costs. Once you have that in mind, it's good to look at the manufacturer's suggested retail price, but keep in mind that it's just a suggestion.

31:49
Don't take that as the hard facts. It is a good starting point for your negotiation. Don't assume that that is the amount you should actually pay. It's also handy for you to make a physical list of the features that you like or dislike about a car. This will help you narrow down your search when you're going to buy and negotiate, and hold fast and steady to this list. It will really help you avoid certain sales tactics that may point you to a car that you don't really need. If you are trading in your car — a lot of people do that

32:18
when they look to buy a new car, they trade in their old one — make sure you know that vehicle's value, the trade-in value. This will help you set up your car budget, and you may be able to roll that into a new vehicle as well. When you're looking at that, you can look at a used car retailer such as CarMax that will make you an offer, and then you can ask the dealership to match or beat that offer. If the dealer declines, you're still OK. You can just sell the car to that third party for cash instead. If the dealer still offers you less

32:47
for your trade-in the third party, you may still go with the dealer depending on the deal because the dealer may offer potential tax savings from the trade-in, or there may be tax exemptions on the new vehicle that you get. So do the math before you commit to a deal.

Amy Laburda
Speaking of committing to a deal, is it usually a good idea to have a pre-approved auto loan in hand from a bank or some other lender if you know you're going to buy, when you

33:12
head on to the lot, when you start talking to a dealer. Is that a thing you would suggest people have in their pocket?

Kasey Radney
So it's really not absolutely necessary for everyone. It really comes down to the amount of leverage that you want in the negotiation. Some people may prefer to be pre-approved for a loan from a third-party lender, such as a bank, before even beginning a discussion with the salesperson. Doing this gives them a good idea of what they can afford, and it gives them a comparison for the interest rates that the dealer may offer [them].

33:40
So this may give you some needed leverage when you go to negotiate with the dealer, having that already in hand. Be very aware, though, if you plan to go this route with a pre-approved auto loan, that you make sure that you shop for your vehicle about two weeks of the pre-approval, within that range. This will reduce the effect of multiple “hard pulls” on your credit history that can really damage your credit score if you don't land on a deal.

Amy Laburda
Yes, and if you need a little more information on hard pulls on your credit, and what that actually means,

34:08
that is also in our episode with Rebecca. So one-stop shop for you there, if you want to check our show notes. But to circle back slightly, you mentioned that it's still really important to schedule a test drive, even if you're doing the process entirely online. Why does that matter so much?

Kasey Radney
So when you've narrowed down your top options, putting in a test drive should be a guarantee. Everyone should do a test drive before confirming a deal. Don't feel the pressure to speed through the step.

34:34
Actually take the time to see how the car drives and handles in different road conditions. Test out the features that you'll be using daily, like Bluetooth, or make sure that a car seat will fit in the back of it. These are all very important things to think about when you take a test drive. Really try to resist the excitement of that new car feeling, getting giddy of being inside of it, and really focus on how the car functions and drives, both inside and out. Make sure that at the end you're satisfied that the car fits your parameters that you've chosen for yourself. And then

35:03
finally, after you've done your test drives, be brutally honest about each one. It should help you narrow down to your final choice and ultimately, it'll help you prevent any nasty surprises down the road. When the car has something go wrong with it, you'll be aware of it from the get-go. Considering the amount of money that you plan to spend on a vehicle and the amount of time that you will be in it once you buy it, it should be a no-brainer that you need to make sure that you're pleased with what you're buying and you take test drives to ensure that.

Amy Laburda
Makes sense.

35:33
So circling back to the beginning of our conversation, we talked about both of us coming from a used-car-heavy family. These days, the certified part of “certified pre-owned” means that you're getting a car that meets a certain standard, gives you some extra confidence, I think, as a buyer. But say you're just buying a plain old used car, without the certification, either through a third party or from someone you know. These kind of deals still happen.

36:00
Are there any other steps you should take to make sure that you're getting the car you think you're getting?

Kasey Radney
Yes, there are a few that you can take. Because when you buy a used car instead of a certified pre-owned vehicle, you may expose yourself to more risk if you're not careful. One thing that you can do when buying a used car is to pull a vehicle history report on the car that you're looking at. You can do this using the car's vehicle identification number, the VIN number, or even the license plate number.

36:27
There are services online such as — Carfax is a very popular one — that will let you run a search based on your vehicle that you're looking at. And this can alert you to things such as if the odometer has been rolled back, if the vehicle has been in any kind of wrecks, or if it has been deemed a total loss before. Most of the times when you do this, you don't need to worry, the checks will typically come back with nothing to worry about.

36:51
But there are instances where the Carfax and the vehicle history report will show that something has been wrong with the vehicle that the seller may not have disclosed to you. Doing your research beforehand and taking these extra steps will really protect you. It's also a really good idea, if you're able to, is to ask a third-party mechanic to inspect the car for you. Going this extra step or two for these will really prevent you from being burned on a bad used car purchase.

Amy Laburda 37:19
So you've done your due diligence. You've done the research. You've gotten the numbers lined up. You've taken your test drive. It went great. You're jazzed about this new car. I think a lot of places I've seen advise that you get multiple quotes from different sellers on the particular car you want. That is obviously extra time, a bit of extra hassle. Is it a step that you think is really important?

Kasey Radney
Yes, you mentioned it is extra time. It absolutely is. But it's another scenario where going that extra mile could really be beneficial for you.

37:48
Again, you're spending a lot of money on this vehicle. Take the time to do the research and remember that you're spending your hard-earned money for this. So taking the extra little bit of time is going to be helpful overall. It really does pay to get quotes from more than one dealer when you're car shopping, whether you're buying outright, if you're financing or leasing.

38:07
Especially now that online car shopping is accessible, we've talked about that quite so much today, there's no reason for you to settle on your first offer, even if sometimes that first dealer that you look at is the car that you end up buying. Online forms are also available, and that you're able to contact multiple salespeople. Most dealerships now have online forms that you can complete, and they'll reach out to you via email with estimates. So don't be shy in getting multiple quotes and even mentioning them in the negotiation.

38:36
The salesperson that you're talking to at the time may be able to beat the other quotes that you've gotten. So just make sure that you're understanding that, because it could potentially save you thousands of dollars by having multiple quotes.

Amy Laburda
I think that's a note that is a pretty exciting one to end a potential car purchase on: saving thousands of dollars.

Kasey Radney
It absolutely is.

Amy Laburda
Before we wrap up, I always like to give my guests a chance at the last word. So as a financial professional, do you have any last sort of wrap up advice or anything else we didn't touch on

39:05
for someone who's in the market to lease or buy a car?

Kasey Radney
Sure, I think it's just more general advice, than very specific. I would say whether you're looking to buy or lease a vehicle, it's very important to slow yourself down and take the time to do your homework. It's going to ensure that you end up with a vehicle that fits your budget, but also one that you're proud to be in and you're excited about. Once you find the car that is best for you and you say yes to an offer, really make sure that when you're going through you read everything thoroughly when you sign the paperwork.

39:35
Not only should you make sure that the numbers line up that you were told, but keep an eye out for any additional fees or terms that may be wrapped up in the contract. Again, you don't want any nasty surprise on the back end. And lastly, if you're feeling pressured during the process of buying or leasing a vehicle, don't be afraid to walk away. You can always take your business elsewhere or look at it another day. Really take the time to slow yourself down so you find the car that fits you best.

Amy Laburda 40:00
Kasey, thank you so much for sitting down with me today. I can't speak for our listeners, but I can say for myself, I feel way more prepared if I ever move back to car country one of these days.

Kasey Radney
Absolutely, thank you for having me. We'd be happy to have you down here in Georgia.

Amy Laburda
“Something Personal” is a production of Palisades Hudson Financial Group, a financial planning and investment firm headquartered in South Florida. Our other offices are in Atlanta; Austin; the Portland, Oregon metropolitan area;

40:29
and the New York City metro area. “Something Personal” is hosted by me, Amy Laburda. Our producers are Ali Elkin and Joseph Ranghelli. Joseph Ranghelli is also our director, editor and mixer. Our firm has written two books: Looking Ahead: Life, Family, Wealth and Business After 55 and The High Achiever's Guide to Wealth, which offers advice for younger professionals, entrepreneurs, athletes and performers.

40:55
Both books are available on Amazon, in paperback and as e-books.