Tips on Buying a New Car
OTHER THAN PURCHASING a home, buying a new car is the largest purchase that any of us will ever make. But unlike a house which generally increases in value, a car begins to lose value immediately after it's purchase. It is a guaranteed money loser. So it's imperative that you get the best deal, and a vehicle that will last you a good long time. Knowing the best way to go about making this important purchase will help you and your family be better stewards of God's resources.
Buy within your Budget
Your car needs to fit into your financial priorities. If you have credit card debt, still paying off student loans, don't have an emergency cash fund, or haven't been able to save up enough for a down payment on a home, then you may not be in the best position to drive an expensive car. You're going to win by spending less on your car so you have more money to use for other financial goals. And a more expensive, luxury car, will hit you up even harder when it comes to buying auto insurance.
Think about what car model and options you want and how much you're willing to spend. Do some research. You'll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal.
It pays to do some homework before your big purchase. According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400. That's why it's important to know how to make a smart deal.
Always negotiate on price. When negotiating, do not make financing part of the deal. Your first job is to nail down the price. Only then should you talk financing. Keep in mind one basic truth - everything about buying a car is negotiable.
Here's a few terms that it wouldn't hurt to know:
Invoice Price is the manufacturer's initial charge to the dealer. This usually is higher than the dealer's final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you're buying a car based on the invoice price (for example, "at invoice," "$100 below invoice," "two percent above invoice") and if freight is already included, make sure freight isn't added again to the sales contract.
Base Price is the cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker.
Monroney Sticker Price (MSRP) shows the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and the fuel economy (mileage). Affixed to the car window, this label is required by federal law, and may be removed only by the purchaser.
Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer - installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.
Don't think that the invoice price is as low as you can go, as the dealer may be getting a deal from the manufacturer for selling you the car - an additional 1% to 3% discount from the factory - taken off the invoice price they may show you. Being aware of this may help you negotiate a better deal. This is known as a "holdback" in dealer lingo.
You may find that the dealer will be easier to negotiate with in the closing days of a month to put that final sale on the books. Remember, the best time to buy a car is when the salesman wants to sell it worse than you want to buy it. Or if the car dealer is dying to get rid of a backlog of cars, he's going to be more willing to negotiate with you. Also dealers often want to sell their current inventory quickly, so you may be able to negotiate a good deal if an in-stock car meets your needs.
If you don't have the cash to buy the car outright, a straightforward car loan is your best financing option. While dealer financing can be a great option, especially if you qualify for a zero-rate deal, it always pays to shop around at other lenders before you head to the dealer. Check out loan rates offered by banks first. Be aware that the financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get.
When negotiating to finance a car, be wary of focusing only on the monthly payment. The total amount you will pay depends on the price of the car you negotiate, the APR, and the length of the loan.
It is not unusual for a dealer to make more money on a car's financing than on the actual sale of that car. That's often why a salesman may push his financing plans even after you have told him that you're going to pay with cash.
What about Options?
Be careful with options. When you buy a car. Little things like extended warranties, rust proofing, credit life insurance, and dealer-added accessories should be bought with caution, and a full awareness of what they do to the total price. The car you see in the showroom may not be the car you are buying. It may already be loaded with extras, but dealers know that once you see that fully loaded car, it's hard to step back and remove some of those wonderful options.
Trading in Your Old Car
Discuss the possibility of a trade-in only after you've negotiated the best possible price for your new car and after you've researched the value of your old car. Check the library for reference books or magazines that can tell you how much it is worth. This information may help you get a better price from the dealer. Though it may take longer to sell your car yourself, you generally will get more money than if you trade it in.
Take a thorough test drive. Operate the vehicle as you would in normal use.
Get all promises in writing. Read and understand every document you sign. Don't sign anything with blank spaces. Once you sign the contract, you own the car and are obligated to make all payments. If a contract has terms substantially different from what the salesperson promised, do not sign the contract unless you accept the new terms.
Make buying your new car, selling your old car and financing your new car three separate transactions.
Take someone with you. Two people are less likely to miss something.
Do not assume salespeople are your friends. It's their job to make you think that they are on your side in the negotiating process. Most are paid on a commission basis, so the more you spend, the more they make.
Remember, everything is negotiable - no matter what the salesperson says.
When buying a car, you are most likely to get a fair deal and have a positive experience if you've done your research, understand your rights as a buyer and your financing options, and get all promises in writing.
Be willing to walk away if a seller rejects what you consider is a reasonable offer. Chances are that he will follow you to the door with another offer, or even meet your price.
To File a Complaint
The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
For further reading:
• How To Buy A Used Car
Before you start shopping for a safe and reliable car at the right price, spending some time now doing your homework may save you serious money later.
• Leasing a Vehicle vs Buying
This information will help you compare lease offers vs. vehicle buying, and negotiate a lease that best fits your needs, budget, and driving patterns.
• Buying A Safer Car
Tips on buying a safer vehicle, and keeping your family safe. Safety is one of the most important considerations when buying a family vehicle.