How To Make Money To Buy A Car
If you make the median per capita income of about $42,000 a year, for example, you should limit your budget to $4,200. If you make the median household income of about $62,000 a year, don't spend more than $6,200 on a car.
how to make money to buy a car
After I bought the SUV, each car payment was a reminder of how foolish I had been with my money. As time went by, it became clear that I was only getting poorer, not richer. I also regretted not prioritizing more important things, like saving for retirement or for my kid's college tuition.
Knowing that I wasn't making any money off the car was truly an unpleasant feeling. After all, it's a well-known fact that new cars depreciate by 10% to 20% in value as soon as they're driven off the lot.
You've probably heard of flipping houses, but did you know you can also flip cars? For someone with a mind for business and a passion for cars, flipping cars can be a great way to make some extra money while working with something you love.
When flipping cars, you want to make the most profit out of the transaction. You need to buy the car low and sell it high by increasing its value in some way, usually by investing in repairs and modifications to the vehicle.
To resell a used car at a profit, you need to know what the car is worth, what your particular market is like, and what buyers are paying. Online evaluation sites can give you an idea of the average prices of any used vehicles you're considering buying. If there's too small of a difference between what you can buy the used car for and what you think you can sell it for, there might not be enough profit to make it worthwhile.
You don't have to be a mechanic to make a little money on used cars. In fact, most people can buy and flip cars for a few hundred dollars each as they know how to find a good deal, which is easier than you might imagine. The biggest tip to remember is that you make your money when you buy the car, not when you sell it,[1]XResearch source so finding a good deal is your top priority. With a little elbow grease and smart negotiating, you can almost always flip the car quickly and profitably.
It goes without saying that car dealerships can't exist unless they are profitable. That's true for every business, from a neighborhood dry cleaner to a mega-retailer like Walmart. At auto dealerships, the rows of shiny new cars might prompt shoppers to believe that they're where the business makes most of its money.
What makes some shoppers wary as they enter car dealerships is the fact that they don't know what they're going to pay for the product. Shoppers don't expect to negotiate the cost of a quart of milk with a salesperson at the supermarket. But they do expect to negotiate car prices.
Car pricing is a complicated process. To simplify things, consumers learn to look at the invoice price of a car and assume that's what the dealer paid for it. They may then wonder how a dealer is making a profit if it's selling the car for the invoice price. This instance is where two other sources of manufacturer money come into play.
Dealer holdback: This money is from when the manufacturer pays the dealer after a car is sold. It's typically 1% or 2% of either the invoice or the sticker price of the car. On a $20,000 car, a holdback represents $200 to $400. The holdback allows dealers to sell a car at invoice price, or even below invoice, but still receive money to cover the costs of doing business (advertising, sales commissions, etc.). Most manufacturers offer holdbacks to their brands' dealers, but not all. This information is helpful to know, but don't try to build it into your negotiations. Dealers consider this money off-limits for the purposes of price negotiation.
Dealer cash: To help move metal, a manufacturer will sometimes offer a bonus incentive to the dealer to move a vehicle off lots. That's known as dealer cash. Dealer cash can also come into play at the end of a model year when both the dealership and the manufacturer want to clear out even popular cars to make way for incoming new vehicles. Dealer cash is rarely advertised.
Today, dealerships vary in how they structure compensation for the sales staff. Some still hold to traditional commission-based plans for car salespeople. But in a growing number of dealerships, the push is to sell as many vehicles as possible even if it means little or no profit per car. Simply put, the more car deals the car salesperson makes, the more money that salesperson takes in. Car salespeople typically try to hit sales goals to earn a more substantial paycheck by way of bonuses from the dealership or the carmaker.
Bonus programs play a substantial role in the overall picture of how much money a salesperson makes. Bonuses may be based on the number of cars sold or on overall customer satisfaction survey scores. Bonuses based on sales volume, rather than profit per car, have long been the model for dealership internet departments. That's a good reason for car shoppers to work with them.
Now that you know more about where a dealership makes its money, you can move on to picking one that has a good track record in how it deals with customers, both as buyers and as clients of the service department. Visit Edmunds dealer ratings and reviews, where you can read about real consumer experiences.
To save money and get closer to your goal, increase the amount you save every week and lower your spending. If you automate a minimum payment to your savings account with every paycheck, you take out the temptation to spend elsewhere and you can also know exactly when you'll hit your target.
A simple way to build automated savings towards a goal is with Chase Autosave. With easy ways to move money regularly from a Chase checking account into a Chase savings account, Autosave also allows you to build goals for your savings. Applying a goal for a car down payment can keep you focused on your new car, while Autosave makes sure your budget remembers your bigger goals.
Remember that the car you buy will come with a sales tax and fees, and will start up costs for insurance payments, maintenance, and gas money. Account for these extra costs when figuring out how much you need to save up for this big purchase.
You can start saving money automatically with Chase Autosave. Autosave allows you to set goals for how much you want to save over a time period and automatically transfer money from your Chase checking account to your Chase savings account. If you decide you want to save $40 each week, you can set Autosave to transfer that amount into your savings weekly. You can also choose to transfer a portion of each deposit you receive into your savings account.
You should choose the car you want based on what you can afford, your timeline, and your preferences. If you want a brand-new car, you may have to develop a long-term plan to save up for it. And if you have an immediate need for a car, you should adjust your plan and budget. By finding ways to save money and carefully tracking your spending, you can save enough to make your new car payments affordable.
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If you don't make a down payment, these fees get rolled into the amount you're financing. If you're buying a $25,000 car with zero down payment, for example, you might end up financing $28,000 when all the taxes and fees are added in.
What if you don't have any money saved for a down payment? Sometimes you need a new car unexpectedly due to problems with your old car. Good news: Your old car can be part of your down payment as long as you have car equity.
To help reduce your loan costs, start by shopping around for a car loan before you ever visit a dealership. Contact at least three banks and credit unions to see what loan terms you can get. When you find a good offer, get preapproved for a loan. After you fill out a preliminary application, the lender will give you an estimate of how much money they're likely to lend you and the interest rate they will charge. Being preapproved for a car loan does not obligate you to get a loan, but it can give you more negotiating power at the dealership.Alternative Car Financing OptionsMany people default to financing a new car through the dealership just because it's easy. However, third-party financing from a bank or credit union almost always offers better terms than dealer financing. If you've investigated third-party financing options and still can't afford the new car you want, consider these alternatives:
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Leasing to buy is not the right choice if you are the type of driver who always wants the latest model. But if you want to take advantage of lower initial payments before committing to a car loan, leasing with the intent to purchase could save you money.
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