81 of 100 people found the following review helpful
Do not follow his advice on how to buy a new car...,
This review is from: I Will Teach You To Be Rich (Paperback)Ramit says he bought a car by faxing car dealers the best offer he could find and then asked them for counter offers (a "bidding war"). He writes that one car dealer sent him an offer for a new Honda with $2000 of list price "an unheard price discount for a new Honda". When he walked in the car dealer the conditions of the deal changed (as it always does when you walk into a car dealer) and although the price stayed the same, the interest rate was much higher for financing the car as it should have been (the car dealer said he did not have enough credit history, although his credit was "excellent" as Ramit states). Ramit foolishly agreed to pay a higher interest rate than he should have because "the price was so good".
That is a common mistake made by "beginners" who do not understand that car dealers often make more money through financing than through the car sale itself.
Ramit did a few things right to be fair. What he failed to do was either to get a loan from a nearby credit union right away and finance the car through them or to make a significant down payment at the car dealer. The latter is important to later refinance your car at a local credit union since otherwise the value of the car would be lower than the loan itself. Local credit unions almost always have 2-4% lower interest rates than the car dealer (if you have good or "excellent" credit as Ramit)...
I cannot believe Ramit failed to mention this and tells people to make the same mistake he did... (unless he is getting paid by the car industry to write this). A Honda with $2000 off, but with a 2-4% higher interest of a 5 year loan can easily mean he only "saved" $500 of MSRP. Not too good, actually pretty bad.
I purchased a Hyundai $6000 under list price just when the new model came out and the car dealer told me the same thing Ramit was told "that I would only qualify for a higher percentage loan because of lack of credit history"... I made a $2000 down payment at the car dealer and 3 months later I refinanced the car for just 2.99% at a local credit union which saved me another $1500.
Two years later the Kelly Blue Book value of my used car with 20,000 miles on the car is still higher than what I paid for it new at the car dealer...
My tips for buying a new car for a great price:
- Buy the old model when the new model already stands on the car dealer lot (happens every 4-5 years)
- Buy a "show car / demo car" that people test drive before buying the car at the dealer. The show car I bought had ZERO (!) miles on it (was never driven) but could be sold even cheaper because the car dealer also gets it for less from the car manufacturer. Also, show cars have full warranty because the car is considered new even if it has a few hundred miles on it.
- Do not fall for the financing trick at the car dealer! Did you know that General Motors in the last years made more money from car financing than from selling cars?
I had to share this because I feel like Ramit does not really understand how car dealers make you believe you got a good deal and you still paid too much for it...
In general, his book has some good advice. but if you have already read one or two financing books before you will find no new information in his book (maybe his writing style makes it a little bit more fun to read).
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Showing 1-8 of 8 posts in this discussion
Initial post: Aug 26, 2012 3:05:43 PM PDT
Thank you for your excellent advice and insights!
In reply to an earlier post on Oct 21, 2012 12:34:27 PM PDT
Life Student says:
Just wanted to thank you for some great insight into car purchases - appreciate the great info.
Posted on Oct 23, 2012 7:20:17 PM PDT
[Deleted by the author on Apr 5, 2013 4:42:42 PM PDT]
Posted on Apr 5, 2013 4:06:16 PM PDT
Last edited by the author on Apr 7, 2013 7:02:12 PM PDT
In fairness to Ramit, he gives advice on how to buy a car in the last chapter of the book, which is a less detailed, miscellaneous chapter. You should judge the book by the first eight chapters, which were great for people like me, who wanted basic financial advice explained in plain language.
In reply to an earlier post on Apr 5, 2013 4:26:27 PM PDT
I agree the first chapters are better, however there is not much different financial advice than in any other personal finance book. It would have been better not to mention the car buying advice, especially if he didnt do enough research to write about it. It questions the thoroughness of his research on other chapters written in this book.
In reply to an earlier post on Jun 20, 2013 12:34:13 AM PDT
M. Vasquez says:
Do you have any book recommendations on how to buy a car the smart way?
Posted on Jul 15, 2013 9:36:12 AM PDT
S. Lawrence says:
Great advice....I saved a copy for the next time I have to enter the fray to buy a car. I joined the local credit union a couple of years ago and wish I had done it a lot sooner. Thanks again for the great information!
In reply to an earlier post on Aug 18, 2013 12:24:32 PM PDT
A Reader from Chicago says:
Book recommendation for buying a car the smart way: Don't Get Taken Every Time : The Ultimate Guide to Buying or Leasing a Car in the Showroom or on the Internet
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