Your Money_ The Missing Manual Part 13

TipFor more info, download the PDF "Understanding Your FICO Score" from myFICO.com: http://tinyurl.com/FICO-pdf.

How to Get Your Credit Score While it's easy to get your credit report for free, learning your credit score takes a bit more work. Sometimes banks or lenders will let you see your score when you apply for credit, but you generally have to pay to get that info. Here are a few sites that can help you get a sense of your score: - myFICO (www.myfico.com) is the official site of the company that developed FICO scores. It's jam-packed with useful info and offers several different services that let you monitor your credit score (for a fee). You can get free trials of some of these services, so you can check your score once and then cancel before you get billed anything. You can also pay a one-time fee of $16 to see your score.

- Credit Karma (www.creditkarma.com) lets you see your TransUnion credit score for free. Using the data in your credit report, Credit Karma anonymously compares you to other folks who use the site and offers tips on how to improve your credit rating.

- Quizzle (www.quizzle.com) gives you free access to your Experian credit score. This site doesn't have Credit Karma's cool credit-comparison features, but it offers a variety of other financial tools and tips.

- Credit Report Card (http://tinyurl.com/CRCtool) gives you a quick, free snapshot of your credit health. It doesn't provide an actual credit score, but instead gives you a grade (A+, C, F, or whatever) based on how the different parts of your credit score (described on The Anatomy of a Credit Score The Anatomy of a Credit Score) compare to the general public.

Keep in mind that there's no such thing as a single, absolute credit score. Your score will vary depending on where you get it. For example, a FICO score based on your TransUnion credit record may be 755, while your Equifax score is 787. That's because each credit bureau has different info about you and score providers may tweak the formulas to emphasize different things.

Boosting Your Score Simply knowing your credit score doesn't do you a lot of good. But if you're not happy with your score, you can take steps to improve it: - Pay off your debt. According to credit expert Liz Pulliam Weston, "The most powerful thing you can do to improve your credit score is to reduce your credit utilization." FICO reports that about one in seven people who carry credit cards are using over 80% of their credit limit. "Below 30% is good," says Weston. "Below 10% is better." Repaying your debt helps your pocketbook and your credit score. (See Chapter4 Chapter4 for more on reducing debt.) for more on reducing debt.) - Pay on time. According to Weston, if your FICO score is 780, a single late payment can drop it 100 points. If your score is 680, a late payment can cut it 70 points. (For more info, see http://tinyurl.com/kill-scores.) If you miss a payment, don't panic: Do what you can to get current and stay current.

- Only open new accounts you need. Don't open a store charge account just for kicks. New accounts are only a small part of your total score, but they do have an effect. So keep new accounts to a minimum, especially if you're planning a big purchase like buying a house.

- Don't close old accounts. It's okay to cut up your cards or to freeze them in a block of ice, but to maximize your score, keep the accounts open. If you have to close an account or two, close newer accounts before older ones. For more on the pros and cons of canceling credit cards, see How and When to Cancel a Card How and When to Cancel a Card.TipIf you don't use a credit card for several months, your card issuer can close your account, which can ding your credit score. To avoid this, make an occasional purchase with the card so the account seems active. One way to do this without risking temptation is to autopay your utility bills (see The electric company The electric company).

- Keep tabs on your credit report. Even if you do everything right, your credit score can take a hit from ident.i.ty theft and other forms of fraud. Even simple errors can hurt your score. So check your credit report regularly (Getting a Free Credit Report) and correct any problems you find.

A word of advice: Don't obsess over your credit score. Sure, it's important, but ultimately it's a number for lenders, not for you. A less-than-perfect credit score isn't the end of the world. If you struggle with compulsive spending, it's far better to cancel your accounts and take the hit to your credit score than to risk getting buried deeper in debt. The bottom line: Be smart with money and your score will be fine.

Final Thoughts on Credit The credit card industry earns billions of dollars every year because they've made it easy for folks to spend more than they should and because people don't understand the rules of the game. Remember: Your credit card company is not your friend; they're hoping you screw up-that's how they make their money! In fact, the industry's term for somebody who pays bills on time is "deadbeat." (Nice, huh?) But millions of people have found that if they play by the rules, credit cards make their lives a little easier. Your cards will never make you rich, but used wisely they can free you to focus on the things that matter most in your life, and earn you a few rewards in the process.

Here are the things to take away from this chapter: Use your credit card as a tool, not a toy; keep tabs on your credit report; and don't obsess over your credit score. And remember: If using credit cards gives you a negative cash flow (The Power of Positive Cash Flow), they're hurting you, not helping you.

Chapter9.Sweating the Big Stuff.

"Count the dollars, not the pennies."-Elizabeth Warren While it's important to save money on everyday stuff (see Chapter5 Chapter5), it's even more important to save on big purchases. By making smart choices on big-ticket items, you can save thousands of dollars in one blow.

In the next few chapters, you'll learn how to save on big stuff like insurance, housing, and transportation. This chapter gets you started by looking at money-saving tactics for buying a new or used car and booking vacations.

Counting the Dollars In Chapter1 Chapter1, you learned that to be happy, you should focus on the most important things in your life before you worry about the little stuff (see the box on Living a Rich Life Living a Rich Life). Turns out the same is true of your finances.

In All Your Worth, Elizabeth Warren and Amelia Tyagi write, "Savvy money managers don't spend a lot of time looking for ways to save a few pennies. They charge right ahead to the big-ticket items, looking to make high-impact changes in the shortest period of time. They don't sweat the small stuff."

As I mentioned in Chapter5 Chapter5, by making a few small changes to my daily habits, I reduced my spending-and boosted my cash flow-by almost $200 a month. But as powerful as frugality can be, it's saving on the big stuff that'll really improve your cash flow.

You want to make sure you don't negate your daily scrimping and saving by making silly choices on big things that'll burden you for years. It's great that you fuel up at the cheapest gas station in town, say-but if you're driving a $63,000 Hummer H2 that gets 10 miles to the gallon, that small economy doesn't make much of a difference.

Obviously, you only get a few chances in life to save big on stuff like a home or a car. Because you so rarely make financial decisions involving tens (or hundreds) of thousands of dollars, it's extra important to be smart when these choices come along. The next chapter looks at ways to save money on housing. In this chapter, we'll focus on other big-ticket items like cars and travel.

TipTo learn ways to save money on furniture and appliances, head to this book's Missing CD page at www.missingmanuals.com.

Buying a Car First things first: A car is not an investment. In fact, it may be one of the dumbest purchases you'll ever make. Many financial experts say this, but almost n.o.body listens because Americans love their cars.

The average new car loses 20% of its value in the first year you own it, 15% in the second year, 13% in the third year, and 12% in the fourth. So a brand-new $30,000 Ford Mustang will only be worth $24,000 next year-and in 5 years, it'll be worth just $10,500. By the fifth year, the average car has lost a whopping 65% of its value. Can you think of anything else you'd buy new for $30,000 that loses value that quickly?

TipTo see how much your car is likely to lose in value, check out this vehicle depreciation calculator: http://tinyurl.com/depreciation-calc.

Financially, the best car-buying decision is almost always not to buy one. If you made your decision purely based on depreciation, it'd make more sense to walk, take the bus, or try to coax a little more life out of your current car than buying a new one. Basically, you're better off doing whatever you can to put off buying a new car. (As you'll see on Sell your old car separately Sell your old car separately, buying a decent used car can take some of the bite out of depreciation.) But even knowing all that, most of us aren't ready to give up our vehicles. For better or worse, we live in a car-centric culture: We want to be able to drive where we want, when we want. If you can't shake the new-car itch, you can at least save money at the dealership by being smart.

TipIn Stop Acting Rich (Wiley, 2009), Thomas Stanley writes, "There is no significant correlation between the make of motor vehicle you drive and your level of happiness with life." So buy a car for transportation-not as a status symbol.

While many honest, hard-working car salespeople do their best to provide their customers with great service at a fair price, there are also plenty who use slimy high-pressure tactics to make you part with as much money as possible. The next few pages will arm you with the info you need to resist such tactics and get yourself a great deal on your new ride.

The Wrong Way to Buy a Car Recently, I saw that a local dealer had a used Mini Cooper on the lot, so I stopped to take a look. I took a test drive and told the salesman how much I liked the car's sportiness and handling. I admitted that I'd been saving for 2 years to buy a Mini, and now had enough to pay this car's sticker price ($17,000).

When we got back to the showroom, we negotiated. I talked the salesman down to $15,000. I was patting myself on the back when the "closer"-a more experienced, higher-pressure salesman-sat down at the table. Armed with the info I'd told the first guy-that I had $17,000 to spend, was willing to pay at least $15,000, and really liked the car-he spent an hour talking me up to $15,600. I could (and should) have walked away, but I'd become emotionally invested: I wanted to drive that car home.

In the end, I paid $15,600-and I traded in my old car for much less than it was worth. That's exactly the wrong way to buy a car, yet nearly everyone does the same thing. We get emotionally attached to a vehicle and convince ourselves we have to buy today, so the dealer gets to call the shots. Fortunately, there are smarter ways to buy.

TipIt's important to keep your emotions out of a negotiation. In his book You Can Negotiate Anything (Bantam, 1982), Herb Cohen writes, "When you feel you have to have something, you always pay top dollar. You put yourself in a position where the other party can manipulate you with ease."

The Right Way to Buy a Car Over a decade ago, my wife decided to buy a new car. She wanted a Honda Civic but didn't care much about anything else. Together, we drafted a letter that read something like this: Dear Car Dealer: We're in the market for a new Honda Civic. We don't care what color it is, but it needs to have features X, Y, and Z. We have $5,000 for a down payment and would like to drive the car home on Sat.u.r.day afternoon. We're sending this letter to all the Honda dealers in the area. If you give us the lowest price, we'll buy from you.

We faxed the letter to a dozen Honda dealers in nearby cities. Half of them didn't bother to reply, and three tried to convince us to visit them today because they couldn't quote a price over the phone. But three of the dealers gave us prices, and two actually bid for our business.

TipSee the box on Take delivery Take delivery for more on compet.i.tive bidding. for more on compet.i.tive bidding.

In the end, my wife got the car she wanted for a little more than dealer invoice (how much the dealer paid for the car-in theory, anyway). Rather than trade in her old car, we sold it ourselves for a bit more than we thought it was worth. Nearly 15 years later, my wife is still driving that Civic, which she paid off long ago.

That was smart car shopping. Even if a fax blitz isn't your style, the next few sections are chock full of advice that can help you stay in control of the car-buying process, whether you're in the market for a new or used vehicle.

NoteThere's nothing in this book about leasing a car because, financially, leasing is almost always a bad idea. You're probably better off buying a new car than leasing-and that's saying something! The only advantage to a lease is lower monthly payments, but your overall long-term costs are greater-and you have nothing to show for it at the end of the lease. For more on leasing vs. buying, check out http://tinyurl.com/buy-vs-lease.

Buying New Most people dread buying a new car: They hate the games, the high-pressure sales tactics, and the confusing pricing. But with a little bit of research and a whole lot of patience, you can put yourself in the driver's seat during negotiations.

Money matters The first step in buying a car is to figure out the finances. It's best to pay cash if you can. If you can afford to do that, have the money in your bank account ready to go before you head to the dealership.

Most people, however, have to take out a loan. If you're one of these folks, be smart about how much you borrow. When you know how much room you have in your budget for a car payment (see Chapter3 Chapter3), it's easier to manage your expectations so you don't drive off with a car you can't afford. If you need to take out a loan, take care of that in advance through your bank or credit union so you don't put yourself at the mercy of dealer financing, which is almost never a good deal.

On The Money: Saying Goodbye to Car PaymentsDespite what you might think, you're not doomed to have a car payment for the rest of your life. In Chapter7 Chapter7, you learned the importance of paying yourself first to save for retirement (Get in the game). You can apply the same principle to saving for a car.According to the National Automobile Dealers a.s.sociation, the average price of a new car is just over $28,000. Let's say you put $8,000 down to buy a car at that price, and you finance the remaining $20,000 for 4 years at 9% interest, meaning your payments will be just under $500 per month. At the end of those 4 years, you'll have paid almost $32,000 for a car that's now worth $14,000. That's $18,000 vanished into thin air!There is is a better way, one recommended by financial gurus like Dave Ramsey and Suze Orman. Instead of financing a new car, take that $8,000 and use it to buy a high-quality used car. Then, instead of paying $500 a month to the finance company, set the money aside in a named bank account specifically for your next car (see a better way, one recommended by financial gurus like Dave Ramsey and Suze Orman. Instead of financing a new car, take that $8,000 and use it to buy a high-quality used car. Then, instead of paying $500 a month to the finance company, set the money aside in a named bank account specifically for your next car (see Targeted Savings Accounts Targeted Savings Accounts). That way you're paying yourself rather than the car company.At the end of a year, your used car will have lost 15% or so of its value, making it worth around $6,800. You can keep driving it and saving for a new car, or take the $6,000 you now have in the bank, combine it with the used car's value, and trade in for a car worth $12,800. And if you keep saving, the next year you can trade in that second car for one worth $17,000. In theory, after 4 years of this you'll have paid out $32,000-just as if you'd bought that new car at 9% interest-but you'll be driving a car worth $23,000 instead of $14,000.Pretty cool, yeah? Instead of paying interest to a finance company for a vehicle that's losing value, you're paying yourself and gradually upgrading your car every year. For more about this clever way of budgeting your way to a new vehicle without a car payment, watch Dave Ramsey's "Drive Free, Retire Rich" presentation: http://tinyurl.com/drivefree.

Do your homework Before you set foot on a car lot, figure out which makes and models you're interested in. It's best to give yourself at least three options, because if you set your heart on just one vehicle, you're more likely to become emotionally involved with the deal, which puts you at a huge disadvantage.

TipOnce you've narrowed your choices down to a handful of models, you can thin the field further by using Edmunds.com's true-cost-to-own calculator: http://tinyurl.com/edmundsTCO. It lets you compare the ownership costs of new and used vehicles. Enter a car's make, model, year, and trim style, and it tells you how much it costs to run that vehicle for a year.

Know exactly which cars you're considering and why, and be familiar with the packages and options. The more info you have, the more bargaining leverage you've got. (And doing your homework may reveal that buying used is a better option for you. If that's the case, flip to Sell your old car separately Sell your old car separately.) Take your time The more time you have to shop, the better deal you can get. If you need a car today, the dealer has no reason to lower the price. A whole weekend is good; two weekends are better. And with an entire month, you should be able to get a great deal.

If you feel rushed at any time, the best thing you can do is stop. Leave the lot. Go home. Take a breather. When you feel hurried, the dealer gains the advantage.

Go for a test drive Okay, so this tip is a no-brainer. But it's easy to get excited when you're shopping for a new car and forget that the point of a test drive is to do more than just find out whether you feel cool behind the wheel of a particular model. You want to see how the car does under normal conditions. If you do mostly freeway driving, be sure to take the car on the interstate. If you live in a hilly area, take it up some hills.

Here are some other things to keep in mind: How does the car handle? Is it comfortable? Do you feel safe? Trust your gut. If something bugs you about the car in the first few minutes, it'll just get worse with time. And ask the salesperson any questions that come up during the drive.

To keep all your ducks in a row, you may want to print out the Consumer Reports test-drive checklist (http://tinyurl.com/CR-testdrive) and have a friend help you fill it out while you drive.

NoteThe test drive is a double-edged sword. First, you need to make sure you're driving the model you want; if you drive a model with options that aren't important, you may fall in love with those features. Also, many dealers consider the test drive the salesperson's best friend: It gives them time to build rapport with you, to learn your strengths and weaknesses. Test drives are important, but don't let them distract you from your mission: getting a great deal.

Research prices After you've taken a few test drives, you'll probably find a car that's a good fit, but don't buy it yet. Go home and research how much you should pay. Here are some sites to try: - Edmunds.com lets you compare the suggested retail price with the dealer invoice price and what other people in your area are actually paying.

- Autobytel.com offers info similar to Edmunds.com and gives you a chance to get compet.i.tive bids from dealers near you.

- Consumer Reports has a popular new-car pricing service (http://tinyurl.com/CR-carprice). For $14, you can get a report that includes the dealer invoice price and all possible options, a list of dealer rebates, a theoretical rock-bottom price, and negotiating tips.

You can also find out if the manufacturer is offering any rebates or incentives to lower the cost of the car by hopping onto Autopedia.com: http://tinyurl.com/AP-rebates. Armed with your pricing info, it's time to make a deal.

TipIf a dealer doesn't have a car with the exact package you're looking for, don't be talked into paying extra for the things you don't want or need. Find a car that has the right options, even if it means waiting a little longer.

Make a deal Find a dealer who has the car you want with the options you want. (And if you expect to have an ongoing relationship with the dealership-for service, maybe-make sure you trust the dealer overall.) After you test-drive the car, it's time to start haggling. Here are some things to keep in mind while you're discussing the price: - Don't start negotiations from the sticker price. Because you've done your research, you know roughly what the dealer paid for the car, so use that as your starting point.

- Be sure you're talking about the drive-it-off-the-lot price. The salespeople will try hard to negotiate around a monthly payment amount; ignore that. Because you took care of the money beforehand (Money matters), you don't care about the monthly payment. All that matters is the price you're going to pay to drive the car home. (Seriously, this is a huge trap to avoid: Whatever you do, don't get caught up in discussing monthly payments.) - Don't negotiate more than one thing at once. Dealers love to negotiate lots of things at the same time-purchase price, monthly payments, trade-in value, and so on-because that gives them a chance to give a little in one area while making a killing in another. Insist on taking care of one thing at a time.

- Stay in control. Remember that you're in charge. You're the one buying the car-don't let somebody sell one to you. The salesman will do everything he can to get you to buy this car today. He wants you to feel pressured. But because you're not emotionally attached to this car and because you've given yourself plenty of time, you don't have to buy today. Don't let the dealer make you feel like a jerk for taking time to think things over.TipIt can help to go car shopping with a partner so that, if you get too wrapped up in the situation, the other person can play the "bad cop" and pull you away.

- Be willing to walk away. Salespeople can be sneaky snakes, and are apt to introduce new fees or terms into the deal anytime. The most powerful weapon you have in your car-buying a.r.s.enal is your legs; don't be afraid to use them to head for the door.

On The Money: Negotiate EverythingAmericans generally don't like to haggle, but negotiating is an important skill-that can have a huge impact on your financial life.In Chapter6 Chapter6, you learned how negotiating your salary could have a lasting effect on your income. In You Can Negotiate Anything You Can Negotiate Anything, Herb Cohen argues that, to negotiate effectively, you need to control three crucial variables: - Power is the ability to get things done. You can gain power in a negotiation by generating compet.i.tion (having three contractors bid to re-roof your house, for example). Other tactics are to use persistence, precedence ("This is how I've always done it"), empathy (understanding the other side), perceived legitimacy ("Consumer Reports says this model isn't as good as others"), and silence (not saying anything at all will often cause the other side to continue negotiating, as if you'd made a counter-offer). says this model isn't as good as others"), and silence (not saying anything at all will often cause the other side to continue negotiating, as if you'd made a counter-offer).

- Time also plays a role-the side with the most time has the advantage. No matter how rushed you are, keep your cool. Don't ignore deadlines, but don't follow them blindly either.

- Information is the final variable: The more you know, the better off you are, so do your research before before you start haggling. And during negotiations, act on whatever new info comes to light: Has this model been discontinued? Does it have a scratch? Did the store order too many? Use this knowledge to adjust your offer. you start haggling. And during negotiations, act on whatever new info comes to light: Has this model been discontinued? Does it have a scratch? Did the store order too many? Use this knowledge to adjust your offer.

For more about how everyday people use negotiation skills in real life, check out this article from the Washington Post Washington Post: http://tinyurl.com/wp-haggle.

Close the deal Now that you've agreed on a sales price, the final step is to sign the paperwork. But before you do, the dealer will try to sell you a few more things. Ignore anything they offer after you agree on the sales price. Sure, you could buy a service contract or floor mats or underbody coating or an extended warranty from the dealer. But these are almost always a bad deal.

If you really want underbody coating, buy it somewhere else for less. If you want an extended warranty, buy it online at places like WarrantyDirect.com, or from your bank or credit union. Better yet, open a new named bank account called "car repairs" (see Targeted Savings Accounts Targeted Savings Accounts) and pay yourself instead of lining somebody else's pockets.

Whatever you do, don't sign anything until the very end. And don't sign anything you don't understand: If it seems strange, it probably is. Ask questions and don't be afraid to pull out at the last minute.

NoteFor an entertaining look at what goes on behind the scenes at dealerships, set aside a couple hours to read "Confessions of a Car Salesman" at Edmunds.com: http://tinyurl.com/car-confessions. It's funny and will help you get a better deal.On The Money: Compet.i.tive BiddingThe tips in this chapter can help you get a good price on a new car, but you can do even better without visiting a dealership at all!In his presentation "How to Buy a New Car Without Getting Screwed" (http://tinyurl.com/newcar-howto), Rob Gruhl argues that the way to get the best price on a new car is compet.i.tive bidding, pitting dealerships against each other: "Call eight to 10 dealerships and tell them, 'I'm really interested in buying this car today. Can you give me a price? I'm doing compet.i.tive bidding.' They'll say, 'We don't do compet.i.tive bidding.' And you'll say, 'If you give me the best price, I'll come down and buy it from you today today'." At that point, most dealers will give you a price.When you're getting bids from dealers, make sure they're quoting you the price for the same car with the same options, and that you're getting the drive-it-off-the-lot price. Once you have bids from as many dealers as possible, contact them again to share the best offer you received and see if they can match it. When you have the best price, ask the winning dealership to put it in writing, and then go down and pick up your car. (If anything goes wrong during the process, leave.)If you like the idea of compet.i.tive bidding, but need a little help, check out FightingChance.com, where you can pay $40 to get pricing info for the car you're looking at, car-buying tips, and instructions for executing a "fax attack" similar to the one my wife and I used when buying her Civic (see The Right Way to Buy a Car The Right Way to Buy a Car). Or check out this free car-buying guide at The Motley Fool: http://tinyurl.com/MF-carfax.

Take delivery Congratulations! You got yourself a great deal on a new car. Now all that's left is to get the keys and drive it home.

In all the excitement, it's easy to forget things like double-checking that the owner's manual is in the glove box or that there's gas in the tank. To make sure you don't miss anything, download this free new-car checklist from Consumer Reports: http://tinyurl.com/CR-newcar.

Sell your old car separately If you want to get the most for your old car, don't trade it in. By the time you've spent hours negotiating the price of your new car, you're ready to be finished. The dealer knows this and will try to take advantage of your exhaustion to give you a raw deal on your trade-in.

Even though it takes more time and effort, you're far better off selling your old car yourself (see Selling a Car Selling a Car). At the very least, don't mention that you have a car to trade in while you're negotiating the price of the new car.

Buying Used You can save thousands of dollars by choosing a car that's just 2 or 3 years old instead of buying a new one. Though they continue to lose about 1215% of their value every year, used cars have already taken their biggest depreciation hit (the one that happens when they leave the dealership-see Buying a Car Buying a Car), and they cost less to insure.

Some people aren't willing to buy used because they're afraid of getting stuck with a lemon. This concern is understandable (it's happened to both me and my wife), but you can reduce the risk by being a smart shopper. If you feel more comfortable buying from a dealer than a private party, consider a certified used car. These may cost a little more than other used vehicles, but they come with a warranty (and possibly other features) that can give you peace of mind. But be careful: "certified" has become a marketing buzzword. Make sure the car is certified by the manufacturer-anything else is meaningless.

In many ways, the process of buying a used car (especially from a dealer) is the same as buying a new car, but there are a few extra things to keep in mind: - Research reliability. In addition to figuring out how you're going to pay (Money matters), do some research to find out whether the models you're interested in are dependable. Consumer Reports publishes reliability records every year. (Your public library should have a copy of the most recent car-buying issue.)NoteTo get official, government advice on the legal ins and outs of buying a used car, check out this FTC guide: http://tinyurl.com/FTC-usedcar.

- Know the vehicle's value. Check prices at Kelley Blue Book (www.kbb.com), Edmunds.com, NADA Guides (www.nadaguides.com), and the Consumer Reports Used Car Service (http://tinyurl.com/CR-usedcar).

- Ask questions. Whether you're buying from a dealer or a private party, find out as much as you can about the car. How many owners has it had? Has it ever been in an accident? Are all the maintenance records available? What sort of gas mileage does it get? Why is it for sale?TipFor $35, you can get the Carfax (www.carfax.com) vehicle history report, which tells you if the car has been in any accidents, how many owners it's had, and so on. (Better yet, if you're buying from a dealer, ask them to pull the report for you-there's a good chance they already have it on file.) - Inspect the car thoroughly. Check the interior, exterior, tires, tailpipe, and engine. When you test drive it, pay attention to the handling and acceleration, and listen for strange noises.

- Take the vehicle to an independent mechanic. For $100$150, a mechanic can tell you if the car has any major problems.

- Make an offer. Start below what you think the car is worth (minus the cost of any repairs it needs) and work up from there.

- Trust your gut. If something bugs you about the deal, call it off.

TipIf you really want to save money, consider owning a beater-an older used car that's near the end of its life. Beater Review (www.beaterreview.com) can help you find great cars for under $5,000.

Selling a Car To avoid ha.s.sle and haggling, many folks simply trade in their old vehicles at the dealership. It's quick and easy-but costly. Dealers often make significantly more on your trade-in than they do selling you a new car! To get a fair price for your old car, you're better off selling it yourself. Before you do, remember to: - Prep your vehicle. Make sure everything works. Consider having a mechanic check the car and issue a report about its condition. And clean the car (inside and out) until it shines.

- Research the market. Spend a few weeks reading used-car ads in the newspaper and on Craigslist.org to see what people are asking for similar vehicles. And use the Kelley Blue Book or NADA Guides sites (Selling a Car) to get more info.

- Set a compet.i.tive price. Figure out what you think your car is worth-being honest about its condition and value-then add a little to the price for wiggle room during negotiations. Decide what your rock-bottom price is.

- Gather your records. Put together a folder with all your car's maintenance records. If you had a mechanic inspect the car, include his report. Consider getting a vehicle report from Carfax.com to help set the buyer's mind at ease. And have a bill-of-sale doc.u.ment ready to go. (What you need for a bill of sale depends on where you live, so check your state's DMV website for details.) - Write an ad that sells. Mention features, improvements, and any recent upgrades, like new tires or battery. Have you always parked it in a garage? Say so. Do you have all the maintenance records? Mention that, too. And if you're posting an ad online, include as many photos as you can.

- Spread the word. Get as much exposure for your ad as possible. The more demand you can generate, the more money you'll make. Online, try Craigslist.org, Autotrader.com, and Cars.com. Run your ad in a newspaper over the weekend when it'll reach the largest audience.

- Be prepared to answer questions. People will call or email to ask for detailed info. Be ready to provide it by keeping a list of key facts near the phone.

- Show your car to interested buyers. If you're nervous about dealing with people, get a friend to help. You're selling yourself as well as the car, so make a good impression. Let the buyer test-drive it, but be sure to ask for a valid driver's license first. Go along for the ride, or ask for some sort of collateral (their car keys or wallet, say). If your car has any major defects, be honest about them. Offer to let the buyer take the car to a mechanic of their choice, even if you've already taken it to yours.

- Negotiate a price. A good price is fair to both parties. Having done your research, you know what your car is worth, so be confident and stand strong when somebody tries to lowball you. Remember your rock-bottom price, but if you get an offer that's only a couple hundred dollars below this figure, consider accepting it.

- Make the sale. Get cash or a cashier's check, and then complete the bill of sale to transfer ownership. Be certain that the paperwork includes a statement to this effect: "This vehicle is sold as is. Buyer a.s.sumes all liability and guarantees the vehicle will be registered in their name immediately."

- Take care of the details. After the sale, cancel your insurance policy for the car and complete any necessary DMV paperwork.

Most buyers are honest people who are happy to work with a private party instead of a dealership. But there are scammers out there, so if anything about the transaction makes you nervous, call it off. For advice on spotting fraud, check out this article: www.carbuyingtips.com/fraud.htm.

Your Money And Your Life: Finding a Trustworthy MechanicThere are a lot of greaseball auto mechanics out there who try to fleece the unsuspecting, but there are plenty of good guys, too. It's best to find a good mechanic before before your car needs a major repair. You can save a lot of money (and gain peace of mind) by finding a mechanic you trust. your car needs a major repair. You can save a lot of money (and gain peace of mind) by finding a mechanic you trust.Though price is important, don't make it the only factor in your choice. Ask your friends and family for recommendations. When you meet somebody who has a car similar to yours, ask her where she gets it serviced.Many Get Rich Slowly readers swear by the Car Talk Car Talk Mechanics Files ( Mechanics Files (http://tinyurl.com/cartalk-mechanic), a database of over 16,000 mechanics recommended by folks around the country. Just enter your Zip code and the type of car you own to see a list of shops in your area that includes ratings and reviews.Before you take your car to a shop, check with the Better Business Bureau (www.bbb.org) to see if it has any complaints on file. Also be sure the mechanic is certified by the National Inst.i.tute for Automotive Service Excellence (www.ase.com). Once you find a candidate, take your car in for its next oil change. If you get a good vibe, use the shop for future service and repairs. If something bugs you about the shop, go elsewhere.Even after you find a good shop, always check your bill and be willing to ask questions. It's your right to know what you were charged and why. If a mechanic knows you're going to watch the bill, he's less likely to try pulling a fast one.Once you have a mechanic you like, go out of your way to let him know you appreciate his services: Send him a thank-you note, take him donuts, and recommend him to your friends.

Reducing Your Cost of Ownership Buying a car is one thing, but it also costs a pretty penny to use and maintain your vehicle. The American Automobile a.s.sociation (AAA) estimates that the average car costs just over 54 cents per mile to operate; that includes fuel, routine maintenance, insurance, registration, and the cost of buying the vehicle (with finance charges).

You already learned how to pay less for a car in the first place, but there are other tricks you can use to keep your costs down. The simplest one is to drive the car longer. Here's a real-life example: As I was writing this chapter, I got an email from a Get Rich Slowly reader named Chris, who wrote, "I have a 1997 Geo Metro. I bought it 10 years ago with 60,000 miles. It now has 180,000 miles. I paid $1,800 for it, and pay $220 a year in insurance. This has been the best investment of my life! I even have a b.u.mper sticker that says 'My other car is a Roth IRA.'" By milking more miles from his car, Chris can use the money he saves for more important things.

The next two sections cover the other main expenses you can save on: maintenance and gas.