How to make money buying a car

It’s a mistake I’ve made all too often in my life. You walk onto a dealership lot full of new vehicles and find something that you fall in love with. They ask you if you want to take a test drive and the next thing you know you are checking your bank balance and discussing payment plans and signing the paperwork. After you negotiate, you drive home feeling great about the new car you just purchased. You traded in your old car and just like that you are committed to a payment plan over the next few years. As time goes by you realize that buying that new car probably was not the best idea. At least from a frugal mindset.

Going to dealerships and buying a used car or buying a new car and dealing with a salesman who wants to haggle you into a vehicle with an unfavorable monthly payment may be the normal way to get a vehicle but I don’t believe it’s the best way. Buying a new car from a car dealer will cost you thousands of dollars. Leasing a car will also cost you more money than you may realize. Until you have a million dollars in the bank you probably should just avoid handing thousands of your hard-earned dollars to that car salesman.

Let’s discuss another scenario.

Say goodbye to the car that can only depreciate and find ones that actually cost very little to drive or ones that actually pay you to drive them.

You buy a used car on craigslist or at an auction. You buy it for $4,500.00 and you are fully aware that the private party price is $5,500.00 then drive it for nine months and then sell it for $5,000.00. Wait, What. you just got paid by a stranger to drive a car for nine months?? I accidentally did this on my first car purchase. Back when I was in high school I had a paper route. As I was delivering papers one of the neighbors was having a garage sale and they were selling their car for a crazy price of $500.00. I had $500.00 in cash from delivering papers and ran the idea by my folks. They thought it was a good idea and I had my first car. I drove the car for about five years added 50,000 miles to the odometer and then sold it for 800 bucks after all was said and done. So my first car was actually free. My second car was a similar experience…except I bought it for $2,500 and then sold it for $2,500. Car number 3 was even better I bought it for 2,500, it was stolen and insurance paid me $5,000.00 for it. So how do you do this in real life? {Not get your car stolen…just make money from driving older vehicles.}

here are a few buying tips to help you buy a car {the smart way}

  1. Save up about $5,000.00 cash to cover the purchase price of the vehicle. You don’t want to use a lender and be stuck with a car loan. The goal is no car payment.
  2. Decide on what type of vehicle you need and narrow it down. Decide if you need a car, sedan, truck, minivan, SUV, convertible, etc.
  3. Do your homework. Get to know the car prices of the vehicle you decided that you want. Use Edmunds or other resources.
  4. Find what’s popular and reliable. Use google to help you narrow down your choices. I’m a big fan of the Honda Accord and Toyota Camry. Both are popular cars that are easy to find parts for. Reliable cars lower the financial risks.
  5. If you don’t have mechanical skills, find a good mechanic. The used-vehicle you buy won’t have any warranties so you want to be as confident as possible that it’s not a lemon. If you have the VIN you can also purchase vehicle history reports that will help you know exactly what you are buying.
  6. Look on Craigslist and FB Market place for cars that meet your needs. We won’t be looking for overpriced certified pre-owned cars.
  7. Talk to the car sellers. Meet them in person. Be aware of scams that exist so that you don’t become a victim.
  8. Make sure the Odometer reading matches the ad and the research you have done on pricing.
  9. Do not get emotionally attached to anything you find. Emotions will destroy any chance you have at making a profit. You must be able to walk away for any reason whatsoever. You are looking for a bargain. If it’s not a great deal or a good deal then walk away.
  10. Know the kelly blue book value of the car you are buying and when negotiating try to get as close to the trade-in value of the car.
  11. I don’t recommend using a dealer to find a bargain. Dealers have hidden costs that you may not be aware of. So if you do use a dealer ask what other fees are part of the purchase of the car. One place I went to had a $500.00 doc prep fee which would have killed any chance of making a profit in a few months.
  12. I’ll repeat step 11 no auto dealers. The salespeople working on a car lot are highly trained in the art of haggling they know to sell, close, and take your hard-earned money away from you which will destroy this process.
  13. Make sure you inspect the vehicle. Look underneath the car for any signs of an oil leak, look for rust on the frame, check the mileage, make sure the check engine light is not on if you know a good mechanic ask what they would charge to look it over and if you can afford to have them look the vehicle over.
  14. Take a test drive. look for smoke in the exhaust listen for strange noises from the engine.
  15. Check the condition of the tires. New tires are expensive and you want to make sure you know the condition of the tires before you settle on a price.
  16. Stay away from automobiles with a salvage title.

If everything checks out go ahead and purchase the car, pay with cash, it’s critical that you never finance you don’t want a loan payment.

If you followed all the steps above you have the right car for your situation and purchased you’r car. Your car shopping phase is over and now it’s time to move onto selling your car. Before this, you need to know the car flipping laws in your state. Most states will only allow you to own two or three cars per year. If this is the case you will want to pace yourself. Start by thoroughly cleaning your car. Make sure it’s in tip-top shape. Do your regular maintenance oil/filter changes, etc to minimize the chance of mechanical failure. Find out what you can sell the car for and then list your car for sale and wait for your first paycheck!

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