7 tips for millennials ready to buy a ride — not hail it

Having purchased my first car without moral support (or help negotiating) recently from a dealership in Cool Springs, I know how stressful buying a car can be.

Other than a home, a car is one of the biggest purchases you’ll ever make, and likely one you’ll make several times in your life.

It’s an important financial decision and, unfortunately, my experience didn’t go as well as I would have liked. So I now feel compelled to give my fellow millennials who might be in the market for a new car some warnings and some tips. Hopefully you won’t make the same mistakes that I did! 

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Just a few years ago, car companies were terrified that the debt-laden millennials would never buy cars, preferring to use ride-hailing services such as Uber and Lyft. As millennials pay off their college loans, get settled into careers and move out of city-center apartments in favor of home ownership, I predict that of most of my cohorts will buy cars.
Here are some tips for when you do, millennials. 

1. Budget: Know your income, your fixed expenses and how much you can afford —this is called a budget, people — before taking one step onto a car lot. Your budget for a car should also include car ownership costs — fuel, insurance, maintenance and registration costs. 
2. Do your research: Also before you go, get online and narrow down the cars you’re interested in that fall within your price range. That way, you’ll have more clarity and confidence as you shop in person. Know the invoice price for the new cars you’re interested in, as well as the manufacturer’s suggested retail price (the wholesale price and dealer’s asking price, respectively, if you’re buying used). The invoice and wholesale prices are a rough indicator of what the dealer paid for the car, so it may be a good place to begin negotiation. 
3. Secure financing beforehand. Check interest rates on loans from local banks and credit unions and compare those with what the dealer offers. Dealers typically receive an additional fee or commission from every loan they generate. 
4. Know the dealer’s profit centers. Selling you a new car for more than the invoice figure isn’t how the dealer makes most of his or her profit. According to the National Automobile Dealers Association, they make most of their money on dealer cash and holdbacks (this is money the manufacturer kicks back to dealers for selling a car), by selling your trade-in (often for a much bigger profit than they just made selling you a new car), on dealership financing and insurance, and on the service they hope to provide you post-sale. Knowledge is power. Have plenty of it going into negotiation. 
5. Don’t fall for a false sense of urgency: Unless you’re negotiating on the last day of a special promotion, more likely than not the price you hear today will be also be good tomorrow. Car salespeople have quotas to fill and commissions to earn, so they’re going to pressure you to buy now. Don’t be rushed into anything you’re not ready for. 
6. Don’t fall in love with the latest and greatest: If your heart is set on the newest model of a very popular car, you’re probably not going to get a great deal. The dealerships know they have the upper hand in this scenario — you want it and there’s a line of people behind you that want it, too — and they’ve got zero incentive to give you a better price. 
7. Be prepared to walk. Everything is negotiable. The worst that can happen is they say no. In that case, resolve to walk out and try another dealership. 

"Other than a home, a car is one of the biggest purchases you’ll ever make, and likely one you’ll make several times in your life." Jennifer Pagliara is a financial adviser with CapWealth Advisors.

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