Concept 2: Self Defense is Simple

OK, that's the bad news. The good news is that it's not that hard to protect yourself from severe economic loss. By doing even an hour's worth of research, by keeping in mind several simple concepts, the average person can be reasonably sure they won't be swindled. By doing an additional hour's research, they can get a pretty good deal. It's not that hard. In fact, some people find that they like the process once they learn how to handle it.

Knowledge is power. That's almost a cliche. But it holds this simple truth: if you know the numbers of the deal it will be hard for the salespeople to overcharge you. It's like going to a store and seeing a nice lamp for $30. Then you go to a second store and see the exact same lamp for $50. Now a salesperson approaches you and tries to talk you into buying their lamp at the higher price. Will you do it? Probably not, because you know the exact same lamp is sitting on the other shelf for $20 less. What can the salesman say to you to convince you that their higher price is justified?

Now let's extend this concept to car buying. If you wander onto a car lot without knowing how much the cars should cost, you have no frame of reference. As your reasoning power is reduced by a combination of breathing new car smell and test driving the car, you will begin to believe the car salesperson when he tells you the car is going to cost a lot but it will be worth it. Remember, the salesperson wants you to be excited about the car because then the rational side of your brain will become disabled. Just ask yourself this: if you buy today, how will you feel when you wake up the next morning? Is this a decision you can live with?

What car buying numbers do you need to know? Find out how much the dealer paid for the car you want to buy. Find out what cars like that are actually selling for. Find out what your trade-in is worth (if you want to trade it in to a dealer). And finally, if you decide to finance the car, find out what your monthly payment should be by shopping for a car loan before going to the dealership.