We last looked at 10 personal finance basics to help us get financially fit. This next topic can actually be an extension of that.  Another important money concept to consider is exercising care when buying new vehicles.

     Our car companies have been really good at convincing us that we need a new car every couple of years.  On top of that, we have become infatuated with not only having the latest model, but also having all of the new gizmos and high-tech features in our cars.

     We dress up our cars with rims, TVs, DVD players, video game consoles, you name it.  Having nice things is fine, but it needs to fit into the budget.  We cannot let our eyes become too jaded that we cannot see the big picture.  Here are a few tips to save money on your next car.

The sales process

     Buying a car is really just a matter of perspective.  When many of us go to a car lot, we briefly look at the sticker price, and then we start planning our negotiation skills for “the man behind the glass.”  Isn’t it funny that we never talk directly with the finance team?  We always deal with the salesperson in the middle.

     So, we pick a vehicle and go into the office so that we can go through the drill that leads to our first offer.  The man behind the glass then scribbles all over our offer, adding his terms, as well as the monthly payment.  Our salesperson comes back minutes later with a monthly payment that’s as high as our mortgage payment.  We then go back and forth several times until both sides feel that they are comfortable with the terms.

     However, just because the car dealership makes you feel like they’ve given in to make their customer happy, that could not be further from the truth.  Most financed cars are purchased with a dealer advantage because they are able to make us lose our focus.  Car salespeople are pretty good at their jobs.  They are able to make an awful situation look like a bed of roses.  The bad part about it is that so many of us bite the bait without fully understanding what we are getting into.

Beware during the negotiation

     When we walk into that office to start negotiating, they take our minds off of the sticker price and onto the monthly payment.  They know that our main concern is whether or not we can make the payment each month.  When the first offer comes back, the monthly payment is usually high because the financing term is short.  It may only be a three or four year loan.  If the payment is too high, they stretch out the term, sometimes to six or seven years.

     While this may make your monthly payment more affordable, it almost doubles the price of the car.  For example, if we were buying a car that costs $20,000, and we were being financed at 10% interest, a three-year loan would have a monthly payment of $646.  If we asked for a smaller monthly payment, the dealership may come back with a six-year loan with a monthly payment of $371.  While it looks like we are saving almost $300 a month, it adds over $3,000 to the total price of the car.

     We should never finance a vehicle for a long term.  Since many of us have no plans of keeping a car for six years, we shouldn’t finance it for that long.  In actuality, we should aim at keeping our vehicle for 3 or 4 years longer than the outstanding loan.

Pay yourself

     By keeping our vehicle beyond the life of the loan, we are able to continue to make that monthly car payment to ourselves.  If we save that money in an interest-bearing account for several years, we can have a substantial amount of money available for a good down payment on the next car.  If we are able to save a little longer, we may have enough money to purchase the next car for cash.  Either way, we walk into the dealership with stronger negotiating power.

     The holidays can turn happy seasons into times of stress and anguish, especially if you already have more debt than you’d like.  So, here are a few money saving techniques to help you keep your finances in order.

1.)         Create a budget.  Although budget seems to be a bad word these days, it is actually the best way to keep you on track.  Knowing how much you can really afford to spend will help you figure out how many presents you can buy.  Make sure your budget includes everything you normally buy during the holidays, such as decorations, cards, and postage.

2.)         Make a list.  There are two more questions you should ask yourself before you hit the mall:  Who am I shopping for? and How much do I want to spend on each person?  Keep the list within the budget, and if it’s not working out, try reducing the names or the amount you are spending on each person.

3.)         Organize a gift exchange.  If you have a big family, it may not be practical to buy presents for everyone.  Talk to your family about organizing a gift exchange, where each family member buys only one gift for someone else.  This reduces the pressure of having to stretch the money too thin.  Since you’re only buying one gift, you’re also able to spend a little more to get something better.

4.)         Plan ahead.  If you start early, you can take advantage of the best sales and have a better chance of finding exactly what you’re looking for.  There’s nothing worse than trying to find the ideal gift in all of the chaos that is guaranteed to be at any given store you go in on Christmas Eve.

5.)         Just say no.  The stores have almost perfected the skill of luring you in during the holiday season.  The colorful decorations and Christmas music make those sales all the more tempting, and it is easy to buy things that no one will ever use.  Don’t buy things on impulse.  Also, set boundaries for your children’s wish list so they don’t expect more than you can reasonably accomplish.

6.)         Give priceless gifts.  If money is running low, find other ways to give gifts.  Organize an inexpensive outing or make a special dinner or dessert.  Get creative.  There’s nothing wrong with making presents on your own.  Try finding new uses for old things.  Don’t forget that it’s the thought that counts.

7.)         Stick to cash.  If you have trouble with budgeting, then only spend cash.  Once it’s gone, your shopping is done.

8.)         Stay away from credit cards.  While charging everything can be fun and easy, it’s easy to lose track of your spending when using credit cards.  If you end up spending more than you can afford to pay off at one time, you could end up paying for those gifts for the next 30 years.

9.)         Start planning for next year.  Take advantage of the after-Christmas sales to get things for next year.  You can not only find holiday decorations at unbelievably low prices, but also get a head start on basic items for next year’s gift giving.

10.)      Don’t forget the true meaning of the holiday.  This time hasn’t always been about buying lots of presents and racking up debt.  Spend time with your family and reflect on your own spiritual or cultural beliefs.