What You NEED to KNOW Before Buying a Car (PREPARATION)

What You NEED to KNOW Before Buying a Car (PREPARATION)


if you’d dread the process of buying a
car and want to avoid countless wasted hours dealing with pushy car salesmen
when you buy your next car keep listening I’m going to show you how
to avoid the hassle and the haggling when you have to buy your next car I
have tons of cars over a lifetime and helped family friends and acquaintances
do the same and in this four video series if I can fit it all in anyway
I’ll give you the knowledge and the skill to do the same welcome to the
money growth Academy where we multiply your opportunities for financial success
I know you’re thinking I thought this channel was about making money keeping
more of my money and growing that money into financial independence and retiring
early yes that’s right but what we found out is that a lot of people don’t have
the money to actually invest whether it’s in 401ks an IRA or just a basic
savings account heck according to the report on the economic well-being of US
households in 2017 49 percent of Americans don’t even have four hundred
dollars in cash in their savings account to take care of family emergencies so
we’re going to give you real knowledge and skill to keep more of your
hard-earned dollars to pay off debt and have more money to invest and become
financially independent and retire early we call it the fire drill instead of the
alternative financial dependents and working the 40/40 plan you know I spent
well over 17 years in the car industry successfully selling buying trading
financing and managing car dealerships and although I’m no longer in that
industry you know what I’ve been able to successfully apply those same skills to
get the best deals on cars and now I’m going to show you how to use the same
information to save you thousands of dollars on your next car purchase so
that you can take that money and then invest the difference so let’s get
started this first video will be short and fast so if you need to pause and
rewind that’s okay the important thing is that you understand it Confucius said
success depends on previous preparation and without such preparation the
sure to be failure preparation is true in sports is true in business is true in
life and is certainly true in buying a car the better prepared you are the
better chance you have of driving away with a deal you can easily live with
some of what I’ll share with you will seem simple and common sensical but
you’ll be surprised how many people actually skip this very valuable
preparation step so step one preparation know your credit score and credit
history your credit score will determine the rate the bank will charge you for
your loan the better the credit the lower the rate the lower your score the
higher risk your credit score is not the only factor that determines if a bank
will lend you money the other factor is your credit history this is on your
credit report your credit history tells a lender how well you have managed the
credit you’ve been extended for example how many 60 or 90 day late payments you
might have had how many loans you’ve written off in the past if you filed
bankruptcy in the past or if you have child support payments or that are in
arrears so you’ll want to go in and review your credit report you’re
entitled to pull your credit report once a year from each of the three nationwide
credit companies without the worry or lowering your credit score you can go to
either of two government recommended websites to request your free credit
report there’s the FTC consumer protection
website and there’s also one called annual credit report.com now we’ll have
these linked for these websites down below in our show notes the information
you’ll need is your well obviously you’re gonna need your name your address
you’re gonna need your social security number and a date of birth to verify
your identity you could also use websites like Credit Karma
Credit Karma it’s free and it helps with credit monitoring so you can monitor
your credit specifically you can monitor those changes that might occur in your
credit provide it provides insights as to what is negatively impacting your
credit score and really provide some helpful recommendations to help you
improve your credit credit Karma’s considered a soft credit pool has less
impact on a low your overall credit score and we’ll have
a link below if you want to check it out lenders often see people in terms of
credit buckets a B C or D a credit is golden this is someone that has proven
themselves to be a solid credit risk and will usually be given access to the best
rates available the closer you get to see indeed credit rating the higher the
risk that’s the higher the rate all credit scores are not treated the same
so 575 score for one person may dictate a higher or lower interest rate on the
loan than another person with the exact same score so this has to do with the
makeup of your debt in credit history and you know we’ll tackle more of that
in an upcoming video another factor that will influence the lenders decision is
your DTI or your debt to income ratio this is a measure of how much debt
you’re carrying compared to how much actual net income you have available
lenders typically feel comfortable with a DTI of about 40% or less unless is
better so as an example so to determine your debt to income ratio divide your
debt expenses by your net income so if you had two thousand dollars let’s say
twenty two hundred dollars in monthly debt expenses and fifty five hundred and
that income you would simply divide about twenty two hundred by the fifty
five hundred if these numbers are out of whack meeting your debt ratio is too
high you may need to reset and work to bring this back in line before applying
for a car loan the second step is to run your finances through the fifty thirty
twenty money balance plan and then apply the twenty-four ten rule so you can
actually see our video it’s called how much car can you afford to get a full
explanation of how to apply these two elements to come up with a real monthly
car budget that will align with rather than demolish your financial goals the
fifty thirty twenty money balance plan helps you proactively allocate your net
income by helping you set aside fifty percent of your net income to take care
of needs thirty percent towards once twenty percent towards savings so why is
this important because more people are financially devastated by car loans than
almost any other purchase using the 50 30 20 money balance plan
we’ll make sure you don’t overspend for your next car step 3 apply the 24 10
rule to determining what you can actually afford as I said a moment ago
you can see our video how much car can you know 10 year Ford for a full
explanation of the 24 10 rule it’s a 50 30 20 money balance plan is about
getting to the right monthly payment the 24 10 rule is about getting into the car
loan correctly it recommends when buying a car to put 20% down finance the car
for no more than four years which is 48 months and keeping the monthly car
payments plus insurance to 10% of your net income or less now when you combine
the 24 10 rule with a 50 30 20 money balance plan you’ll come to a much more
realistic monthly budget for your car and keep you on track financially and
step forward now that you know what a reasonable monthly budget is for a car
and you’ve saved sufficiently for your 20% down it’s time to get yourself
pre-approved and a local credit union for the amount of the monthly payment
dictated by applying the 50 30 20 ma need balance plan and a 24 10 rule as
you’re looking at credit unions I would recommend checking rates and cost of
extended warranties of at least I would say at least 3 credit unions for the
best rates before committing I recommend credit unions because they
typically carry lower rates of interest in banks or dealerships and again if you
must finance make sure to keep your loan to 48 months this is another reason why
I always recommend buying use if you’re one of those people that need new all
the time or you work from home and drive very little but you’d like to have
something even nicer you might consider leasing make sure they hit the
notification bell so you’re notified of our upcoming video release comparing
leasing versus buying when it comes to credit unions you might consider if
you’re military or you have a parent or grandparent brother or sister that is
military or served in some capacity in the military of becoming a member of USA
a credit union they typically have great car loan rates
there’s also pen fed also known as Pentagon Federal Credit
Union it’s another great credit union that serves active military veterans
government employees with great car loan rates there are other ways to belong to
these credit unions if you’re not military through some affiliate
relationships you’ll want to contact the credit unions directly for specifics
don’t worry if none of these applied you can still get great rates at one of your
local credit unions you may hear two terms while shopping for a credit union
chartered or non chartered if they are chartered you’ll need some type of
affiliation to join the credit union through it could be an association or an
employee group if there are non chartered anyone could become a member
whether they’re charter or not you know what just call them on the phone and ask
and they’ll let you know either way as I mentioned before if you’re going to buy
by use let someone else take that first beg year depreciation hit remember a car
is a depreciating asset and it’s tough to build wealth investing in an asset
that reduces in value each month that you hold it don’t let the value of the
car exceed the value of your total investment portfolio I know I was that
guy before right so I was young I didn’t have that financial intelligence that I
gathered over the years and I was just starting out and I made those mistakes
well you know what your credit score is and you know your actual monthly car
budget you have your DTI in order and you’re pre-approved by your credit union
you’re now ready to start your search

About the Author: Michael Flood

10 Comments

  1. The “10” in 20/4/10 has saved so many of my clients. I tell them the exact same thing and the ones that don’t listen often struggle quite a bit when hit with unforeseen expenses.

  2. I needed this video! We are planning to buy a new car hopefully by the end of the new year. Last time I bought one I felt so taken advantage of so I’m trying to be more prepared. Thanks for these ideas!!

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