Financially Inclined S1 Ep2: Buying a Car Transcript

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INTRO

(MUSIC: Fun, upbeat music plays)

Yanely: What’s up everybody. I’m Yanely Espinal. Welcome to Financially Inclined, a podcast from Marketplace. We’re sharing money lessons for living life your own way.

(Title card saying “Financially Inclined” appears)

I’ve got a confession to make. I’m over 30 years old and I still don’t have my driver’s license. I know I know. But look, I grew up in New York City and I just took the subway everywhere. But now I’m working on getting one. And while I do that, I’m also trying to figure out how to even buy my first car. There are so many options out there it is actually kind of overwhelming. Now I was curious about what kind of cars some of you would get if you could get any car you wanted.

Listeners: I want to agree on Kia Soul because they’re super cute and very fast and efficient / It would be a Prius because it’s eco-friendly and it has good gas mileage / Porsche Cayenne / King Ranch F 250 2018 / Rolls Royce / 2021 Tesla Model Three / BMW Series 3 / 2011 GMC Sierra truck / Tesla Model three / It’s a Honda CRV / BMW Series 3 / Tesla Model S / My dream car is a Pasola (motorcycle) / An orange McLaren / A Lamborghini veneno / A Lamborghini Urus, a green one specifically.

Yanely: Okay, when it comes to getting your first car, maybe getting a Lamborghini is a little bit out of the budget. But that doesn’t mean you shouldn’t buy something that you really love. So in this episode, we’re getting into the nitty gritty of car buying with Matt Hardigree. Matt is a journalist and a car expert. And I’m pretty sure he loves cars more than anyone I’ve ever met. So let’s get into it.

HOW DO YOU BUY A CAR? 

Yanely: Is there a list of things that you must consider no matter what, when you’re buying your first car? And what would be on that list?

Matt Hardigree: Absolutely. When you love cars, people will ask you all the time, what they should buy. And the questions I always ask are, do you have enough money to buy new or used? Which will definitely tell you what kind of car you should buy. And do you have a very specific need? Like I’m going to deliver pizzas? Or do you just have a specific want, like I’ve always wanted a blue car. And that’s going to really help you decide how you should think about researching and picking your car. So let’s talk about the hardest one of these. Which is you you need a car, you don’t have that much money for a car.

Yanely: Yes, that’s a reality for a lot of young people today who want a car.

Matt Hardigree: Find out what are the kinds of cars that I like, but how do they perform, how reliable are they… This information is easy to find on the internet right now. You can always go to Consumer Reports, you can go to kbb.com. Honestly, the thing I like to do when I’m looking at cars is just look and see what’s for sale and are there high mileage versions of those. You know, if for some reason, no one seem to be selling a car with that that kind of [milage]. How come I can’t find any of these cars over 100,000 miles? What does that mean? Well, maybe it’s because they don’t last over 100,000 miles. Two, if you’re buying something that isn’t crazy, at least put 15% away for repairs. If you’re buying a used car, there’s you know, the second you buy that car, unless it’s a certified pre-owned car, basically you are on the hook for anything that happens. If you drive five feet away out of the driveway from the person you bought it from and it all falls apart, that person doesn’t, in most places, owe you any money. In that situation you want to have a little bit of money set aside for repairs.

Yanely: Somebody who’s never purchased a car? What like what does that mean if you’re buying a car, but it doesn’t have a title for the car. Like why is that a red flag?

Matt Hardigree: The only way in most states that you can prove that you own a car is having the title. It says I have this car. So if you want to get insurance for this car, if you want to sell this car to someone else, you have to have proof that you own it. And that’s the title. There are some exceptions to this in certain states with cars over 20 years. It’s a little complex, but basically understand where this car came from. Understand that this person has the documents and know that you’re actually buying the car, that the person is signing a document that says this car is officially yours in exchange for money and do not give a person money until you see that title. Unless it’s a dealer. A dealer, it’s a little bit different. But if it’s from an individual, definitely do that. I would also say haggle. In life the bigger the purchase, the more you’re going to want to argue and you’re going to want to get someone to give you a better deal. Assume that anyone who is trying to sell you a car has put a 10% premium on the price. Always haggle. The worst they can say is no and it’s important to have a poker face in these situations. If I love the car, I tell them, I like it. If I liked the car, I tell them, maybe I want something else. Always have to argue, always have to haggle. Now let’s say you have a little bit of money, you know whether it’s saved up, you’ve gotten money from your Bar Mitzvah, whatever it is, you’ve worked really hard, you think you can afford maybe with some help from your parents a new car, but you really need a new car. In that situation, I would say, get the most car that you can afford. Because in that situation, you’re not really going to have to worry about a lot of maintenance items. I would also say, you know, there’s sort of a quasi in between for people. There’s certified pre-owned cars. So it’s a car that still has a warranty, and maybe it’s got 20 or 30,000 miles on it, but it’s been looked over by a technician. And they said, this car seems to be fine we’ve addressed the major issues. Do your research. So when you budget, make sure you budget appropriately. If you have enough money to buy a new car, and you don’t really need a car, you just want a car, I don’t really have a lot of advice for you. Because you are in a situation most teenagers are not going to be in and you’re probably, you’re probably pretty set. So you know, get what you want. All I would say is I would never buy a kid, a new car that is worth more than 30 or $35,000. First new cars, you’re going to mess them up, you’re gonna scuff the wheels, you’re gonna get into a small fender bender, and you’re gonna feel a lot better if it’s not a brand new Mercedes

Yanely: Oh that’s for sure.

Matt Hardigree: Now, here’s here’s the my favorite quadrant though. If you don’t really need a car, and you just want a car, put away a lot of extra money. 25%. I would put 25%. If you’ve spent $10,000 and you have $10,000 for a car, and you’re gonna buy something silly, don’t spend more than $7,500 on it. Absolutely.

Yanely: It can be a little overwhelming, because you already mentioned like research you mentioned, like evaluating the car, you mentioned like haggling, like there’s a lot. So give us like the list of the steps in order, like, here’s a nice clean list like first this and that and put it in like order of what you would recommend and suggest

Matt Hardigree: I was trying to buy a car and I do this myself as an adult as well. My first question is, what am I going to use this car for? Well, I know I’m going to take me and I want to take my three friends. I’m gonna pick them up on the way and we’re gonna go to swim practice in the morning, then I’m gonna go off to college, and I’m going to want to take my car with me. Okay, cool. I’m gonna take all my stuff with me. So what I want is probably a crossover, small sedan. Understand where you live. If you are in northern Minnesota and you get a lot of snow, I’m not saying you can’t have a Dodge Challenger rear wheel drive car with a manual transmission. It might be a lot of fun. But if you don’t, if you’re not used to winter driving, you don’t have a lot of experience doing it, you’re not going to want to swap tires often on cars all the time in winter, then maybe that’s not a great choice because you do not live in an environment where you can drive that car 365 days a year. That eliminates 80% of the car’s right there. But there’s still a lot of cars.

What’s next? Okay, well, what can I afford? Alright, I’ve got $15,000. Okay, good. I could I’ve got $15,000 to spend. Let me go on Cars.com, Craigslist, Facebook Marketplace. Let me find out what is in that price range. Let me narrow it down. And let’s see. Okay, I see there’s a lot of cars. There’s, I could get, you know, a Nissan Rogue, a Ford Escape, I could get a Subaru Forester. Cool. Great. Those are all great choices. Which one do I want? Okay, well, let me go to Consumer Reports, KBB, let me talk to somebody who has that car. Odds are you probably know somebody’s mom or somebody’s dad that has that car. And they can tell you, “Oh, this is great. I love this car. It’s been great for me.” Or “oh, you know what, actually, it eats gas. It’s not very efficient, it’s very expensive to run.” Understand that the price of a car is also going to include tax, title licensing, you know. You’re gonna have to get plates for it, you’re gonna have to do all those things that that’s that’s going to add on. If it’s a $25,000 car depending on the state and the region you’re in and the city you’re in, it could be another four or $5,000 on top of that. So when you budget, make sure you budget appropriately. Kind of final important step is finding that specific car then.

Okay, I’ve narrowed it down to maybe I want a Subaru Forester. So I’m going to look and find dealers online. I’m gonna find that Subaru Forester of my dreams and I’m going to compare and see kind of a sense of what the price should be and I’m going to look and see what I can afford, and I’m gonna go test drive it. Like the first good step especially with the car. If you test drive your car doesn’t mean you have to buy it. So if you want to see if you like a car find one, especially a used car, go to a dealer lot who has one just say you’re interested, go for a test drive even if you’re gonna buy it from somebody else. Go for a test drive find out like Okay, I like this. And then you’ve got a baseline to work from. And a good thing about going to a dealer as well if you have that option to test drive is it’s always going to be the highest price for that car. Almost always. Dealerships tend to charge a little bit higher for used cars, because one, they’ve cleaned them up; two, they’ve decided is there something wrong with this car so it has to usually meet a minimum standard. And they’ll also handle all the paperwork for you, which is also really nice. And you have financing options if you want to finance the car. If you want to pay all at once you also have that option. So you can kind of set a high price and say okay, this is the high end of the market. I like this car. This is great and I know it’s going to probably be there and I can come back and buy it later. And then you can go to Craigslist, you can go to Facebook, and you can see, okay, you know, here’s one that’s $4,000 less. Is it just as good of a car? Is it fine? Or do I get into it and it’s making funny noises and there’s a reason why it’s $4,000 less. And you just have to keep narrowing and narrowing until you find the thing that feels like it’s something you want, it seems like compared to everything you’ve seen is a fair price, and you’re not worried it’s going to explode on you. In as much as you can know that. But funny sounds are usually a good indicator. And like that’s the thing, never be afraid to walk away. The ultimate advice in any situation is if it feels wrong, just walk away. You don’t owe anyone anything until you sign that title.

Yanely: Yeah, though, that’s a good point. Because especially if you’ve gone so far, you’re having conversation, you’re asking questions, you test drive it, you… now you feel like you have to buy it. But your point like you don’t. Don’t don’t allow anybody to pressure you to feel like you have to buy anything unless it feels right in your gut. I really like that advice. I think that’s a blanket advice that could apply to a lot of other financial decisions that you’re making. What are the other options if you are the kind of person who’s like, “yeah, I need a car, but I don’t have a lot of money and I can’t find anything that makes me feel good about all the steps you listed it at my budget. So I might need to do something else.” What are all the options for paying for the car, if they can’t use just the cash that they have.

Matt Hardigree: You can consider going either to your bank or credit union and taking out a loan, which you’ll probably have to get cosigedn with a parent. So you’ll be taking out sort of a loan with their parent. They’d also be responsible for it ultimately. And you can pay a down payment, and then small amounts over time to pay off the car. As a young person, you will get a probably not great interest rate, especially now. So a credit union, if you can join a credit union or your family is part of a credit union, is a really good way to start banking anyways, I highly recommend credit unions as banking options. I will say if you’re thinking about going to college, and you’re doing loan applications and things like that, adding another loan on top is probably not a great idea. So, you know, my best advice in that situation is, if you you don’t really have to have the car right now, is get a job, save, wait a year, to hitch a ride. And then at least either finance it when you have a bigger down payment or wait until you can buy something you can afford. And also hit up family. Like there’s often people have an aunt or an uncle, who has that third old Buick. Uncle Pete’s Old Buick isn’t cool but some wheels are better than no wheels for now. And you can always trade that car in for another car in the future.

Yanely: That’s a good point. I think though, there’s also just a lot of confusion around the price of the car. Because like I’ve had teenagers ask me like, what’s this like MSRP. And then it’s a different price when you pay like what? Why is the pricing of the car like so complex? You go to the store and buy anything else, and you see the price, and that’s what you pay. But when it comes to cars, it seems like that’s not, that’s not the way it is.

Matt Hardigree: With new cars teah, there’s MSRP, which is Manufacturer’s Suggested Retail Price. That is the price that the manufacturer says this car should cost. In almost no situation will you ever actually pay the suggested retail price, which is super weird. Because the dealer is going to either want to make more money on that vehicle because it’s very hot, interesting, exciting car. So people will charge more for that car, they will put in a market adjustment, they will do something to make it more expensive. So you end up paying above MSRP. Or you’re in a different situation, it’s a car that’s not very popular, it’s been sitting on the dealer lot for a while, it’s taking up space they want to use for another car, so they’ll actually sell to you below MSRP. So that’s for a new car. For a used car, there are really only three numbers that I would ever really care about. We’re trying to figure out what is this car that I want going to cost? First is the Kelley Blue Book value. Go to kbb.com. You can type in what car it is, how many miles it has on it, its condition, its color, does it have a CD player, or CarPlay or whatever. And it’ll give you what the general range is for the price. So that’s the best way to understand with a used car, what do we think it’s worth? And that’s based on a lot of data they get for car sales. The second level of information that I would look at then is is compare it to like market prices. Just look on Craigslist. Just go to Craigslist, type in the car: 2006 Subaru Forester. Type in 2007, 2005, and you can kind of get sort of a range. The only important price really in this whole conversation, in the whole experience of buying a car is what you can get someone to sell you the car for. Once you do all of your homework, this is the thing, once you do all of your homework, stress about it, think about it before you buy the car, but also give yourself that honeymoon period. Give yourself that first drive in that first week of enjoying it and having fun and ultimately, once you have the keys, you’re going to feel great.

OUTRO

Yanely: Okay! You heard Matt, no matter what your situation is, there’s a lot you can do to prepare for getting your first car. So here’s my challenge to you. Use that needs versus wants matrix that Matt laid out for us. You can even set aside a few minutes to talk it out with your friends. Do you need a car? Or do you just want one? Are you set on a brand new car? Or can it be used? From there, start doing your research to figure out what kind of car would suit your life. You know, my dream car is a Lexus. But after doing my research and looking at my budget, I’ve decided that I want a certified, pre-owned Kia Sorento in teal with brown interior leather seats. Now is your turn. Tell me in the comments what your dream car is, or share the car that you’ve decided on after doing your research. See you next time.

CREDITS

Host – Yanely Espinal

Senior Producer – Hayley Hershman

Video Editor – Mallory Brangan

Sound Engineer – Brian Allison

Producer – Hannah Harris Green

Director of Podcasts – Bridget Bodnar

Executive Director – Francesca Levy

General Manager – Neal Scarbrough

Special thanks – Sy Syms Foundation, All the classrooms that submitted a video

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