Buying A Car

The first major purchase most of us make is a car.  It is usually a necessity, often a source of pride, and sometimes an object of affection.  But, owning and operating a car can also be very costly, taking more and more of the family budget each year.  As a result, many of us are keeping our cars longer or buying a used car to reduce its initial cost.

    The following information should be useful to you when purchasing a new or used car.

    First decide what you want and need.  Determine:

1. Size—There are many choices, but be realistic.  You may want a sports car but need a station wagon.  Each has advantages and disadvantages.  Analyze the things you like and dislike about your present car.  This will help you identify what you want in a car.
2. Use—Do you intend to use the car to run errands around town, drive long distances, or commute?  Also, make sure the car will physically “fit” you and your family now and in t he future.  Will you need room for a child’s car seat, a wheel chair, or extra luggage?  Find out if these needs can be met before you buy a car, not afterwards.
3. Features—Besides size and use, also consider the features of the car, including size and type of engine, automatic or standard transmission, to name just a few.  Given that many decisions that need to be made, you will need all the help you can find.  For starters, consult consumer publications, such as NADA that publish yearly updates on repair costs, handling, performance, safety, and cost.  Ask dealers for factual information about the models you are considering and talk to mechanics about the frequency and cost of their repair.  Talk to friends who own similar cars, and ask insurance agents about the costs of insurance for models you are considering buying.  If you sign a contact and find out later that the insurance is outrageous, you are still obliged to fulfill the contract.
4. Gas Mileage–The price of gas continues to fluctuate and rise. The smart bet is to assume gas prices will go up and buy a car that gets good mileage.
   
5. Price—How much can you afford to pay?  Before you go shopping, visit your credit union to determine how much money you can afford to spend and the loan amount you can qualify for. 

Test Drive

    Whether you are buying a new or used car, test-drive the one you are considering buying.  Do not settle for a drive in a demonstrator or just sitting in a car to “see how it feels.”  If you are ordering a car to your specifications, at least give the demonstrator a thorough drive.  A thorough test drive should include driving the car over the types of roads you usually travel.  Test the car on hills, bumpy roads, highways, and in slow traffic.  Can you reach the controls comfortably?  Do you have clear vision?  The test drive will give vital information regarding the comfort, handling and safety of the car you really cannot get in any other way.

New or Used Car

    This decision will probably be based on what you want in a car and what you can afford.  You can save on the purchase price as well as the insurance by buying a used car.  However, your maintenance costs and the interest rate on your loan may be higher on a used car than a new one.  Regardless of what type of car you buy, keep in mind that you buy more than transportation when you choose a car.  You also get a relationship with maintenance, fuel, and insurance costs; future resale value; varying degrees of occupant safety; and in the case of new cars, a dealer and a warranty.  Force yourself to be objective even though buying a car can be an affair of the heart.

Buying a New Car

    If you decide to buy a new car, you will have a choice of models as well as options.  There are many choices of options or “ extras” available with most cars. 

Comparing the prices of cars from different manufacturers and between models from the same manufacturer often is difficult because standard equipment varies.  Specific features such as automatic transmission may be standard equipment on some cars and “option” on others.  Standard equipment means that the items already are included in the base sticker price of the car while “ options” are extras you pay for in addition to the base price of the car.  The dealer may offer you a “package” of options at a bargain price.  The price may indeed be lower than all the options purchased separately, but it will not be a bargain unless you need and want all the individual items.

    Shopping for the right dealer is as important as shopping for the right car.  Consult several sources to find out who is a “fair” dealer. 

    When evaluating dealers, consider:

1.    The salespeople—are they knowledgeable and helpful?

2.    The location—is it convenient?

3.    The service department—does it have a good reputation?

4.    Size—is the dealership so big that it may be difficult to get personal service?

Salespeople

    Salespeople can often be a source of anxiety when buying a car.  However, if you have done your homework, you will be better informed and prepared to work with salespeople to obtain the car you want at the lowest price.  Remember negotiating with a salesperson starts with the initial handshake.  He or she will be analyzing you to determine what will make you buy.

    Salespeople work on a commission—no sale, no income, and the higher the selling price, the higher their income.  They make their money from the amount you agree to pay for a car.  Do not feel sorry for a salesperson when you negotiate the price of a car; it is business.  You worked hard for your money to buy your car—make your dollar go as far as possible.

    Tell the salespersons about your car needs, but do not give him or her a lot of personal information, especially financial.  Let him or her know only that you are qualified to buy so they will be willing to work with you.  Concentrate on getting the best price for the car, not getting a car for “so much per month.”  Since you already know how much you can afford to pay, this temptation should be reduced.  One of the most techniques used to try to force a sale is,  “ What will it take for you to buy this car from me today?”  Impulsively, you give the salesperson some dollar amount.  Questions such as these are designed to get you to commit yourself to buying the car even if all the important details have not been discussed or negotiated.  In such a setting, you may feel guilty if the salesperson complies with some or all of your requests and you do not buy the car.

    You also need to be aware of the advertising techniques that are used.  These include:

1. Bait and switch—The advertised special is not as nice as the ad described, but a higher priced car that is much nicer is available.  The ad brings you to the car lot, but once there, a salesperson attempts to interest you in the higher priced car.  Bait and switch advertising is illegal.
2. Incentive advertising—A technique that has become popular recently, incentive advertising offers you something special such as a free gift, rebates, discounts, or low-interest rate financing.  These offers can be misleading if you think you are getting something free.  The incentive often is paid for in an inflated sales price.  Before rushing out to take advantage of a sales incentive, evaluate the offer carefully to be sure you are the best deal and car for you.

What is In the Price?

    Determining a fair price to pay for a new car can be difficult and confusing.  Taking a little time to estimate the dealer’s cost will help you arrive at a fair purchase price and allow you to compare different cars and even different dealerships.

    Cars often sell below their window  “sticker” prices.  The sticker price is the same as the manufacturer’s idea of what the dealer’s profit should be.  The “manufacturer’s suggested total price” usually is the same as the “manufacturer’s suggested retail price” and may or may not include the cost of the options that have been added.

    To add to the confusion, you may also find the “dealer’s suggested retail price.”  This price may not be the same as the  “manufacturer’s suggested retail price”, the  “sticker price”, or the “manufacturer’s suggested total price”.  The dealer may start with the manufacturer’s suggested price as a base and add some additional amount or include some extra options to the price.  This higher price allows the dealership to negotiate a lower price, and still sell the car above the “manufacturer’s suggested retail price.”  Be alert to this sales tactic—you are not necessarily getting a “deal”.

    To get the lowest price for a car, determine the approximate invoice price (not he sticker price) of the car.  This is usually between 83 and 90 percent of the sticker price.  The invoice price is often, but not always, the dealer’s cost.  Dealers may also add items they want to the invoice and call them costs.  Some of the dealer’s true costs include destination charges, service of the car and the dealer’s overhead costs.

    When negotiating the price of the car, try to keep the discussion of price simple.  Know your figures.  Remember, the first thing to negotiate is the lowest total price not he lowest price per month.  Determine how much you can afford to spend before you go shopping and do not get talked into something you really cannot afford—even if you think, “the car is for you”.

    If you know the invoice price and have allowed for the minimum dealer profit, make your offer at that price.  The salesperson may try to explain why all of your figures are either incorrect or incomplete, but he worst that can happen is that the dealership will not sell you a car at your price.  If this happens, you must decide whether or not you are willing to pay more for the car at this dealership or be willing to continue shopping for a better deal.  In some instances, the extra hassle to save $100 or $200 may not be worth it for you.  Or, you may decide you think it is worth it to keep looking.  Regardless of what you decide; remember to be happy with your new car you also need to be comfortable with the price you pay.

    There are other costs associated with a new car besides the purchase price.  Generally, the more you pay for the car, the higher your costs will be for insurance and car maintenance.

Buying a Used Car

    Used cars can be real bargains if you know what to look for.  The average used car costs half of what a new car costs, so it is not surprising that three out of four car buyers purchase used cars.  Sometimes people trade in or sell their car just before it is ready to fall apart.  Other individuals get rid of their car when it is in perfectly good condition because they want a change, to avoid any problems, or enjoy the prestige of owning a new model car.  The trick is finding a used car in your price range that is in good running condition.

    When you shop for a used car, do so in the daylight.  That way any dents, rust, or cover-ups will be easier to see.  Do not shop in the rain.  Rain tends to cover up dings and dents and makes everything look shiny and new.  Once you have visually inspected the car, take it for a test drive.  As you start the engine all the warning lights should come on.  These lights will turn off as soon as the engine starts.  Any lights that do not come on may be disconnected.

    Drive the car over several different kinds of terrain. Does the engine run smoothly—no knocking or unusual noises?  Is the steering too loose or too tight?  Does the steering wheel vibrate?  Do the brakes grab or lock, causing the car to veer to one side?  Are the brakes too soft—must push them all the way to the floor to stop?  Make a note of anything that appears wrong or that you question.

    If the car passes your inspection, ask if you can have your mechanic look it over.  In this way, you will have a chance to find out about the mechanical condition of the car before you buy it.  Ask the mechanic to check for any major problems the car should have.  Discuss with the mechanic anything you had questions about from your initial inspection.  If your mechanic finds no major problems with the car and feels it would provide you with good service, ask him/her to make a list of any repair work s/he recommends.  You can use this information as bargaining power to get lower price from the seller.

Read the classified ads carefully and analyze what is sated in the ad.  For example, if an ad states “20,000 miles.  It could mean that the odometer has been tampered with or there are structural problems with the car.  The following table lists some of the commonly used abbreviations found in newspaper car ads.

Car Ad Abbreviations

A/C                     air conditioner
cond. or cd         condition
conv.                  convertible
dr.                      door
elec. wind.         electric windows
hdtp.                  hard top
hp.                     horse power
lo mi                  low mileage
obo                     or best offer
p.s.                     power steering
pri. Pty. Or pp    private party
R/H                    radio and heater
WSW                  white sidewalls
xlnt                     excellent

Buyer Beware

    Many used cars are sold “as is”, without a written warranty.  This means that if you have problems with the car after you buy it, you must pay for any needed repairs yourself.  The seller has no further responsibility for the car once the sale is completed and you drive away with it.  This is true of cars purchased from private individuals (through newspaper ads) and used car dealers as well.

A Federal Trade Commission rule (referred to as the “Used Car Sticker Rule”) requires all used car dealers (this includes new and used car dealers and rental companies) to place a large sticker, called a “Buyer’s Guide”, in the window of each used car they offer for sale.  The Buyer’s Guide informs a buyer whether the car comes with a written warranty or is being sold “as is”.

    The Buyer’s Guide also lists 14 major automotive systems and some of the more serious problems that may occur with the systems.  This information should help you to identify the automotive systems that need to be checked before you buy.  But do not rely solely on the information on the sticker.  Always have a trusted mechanic or auto diagnostic center examine the car before you buy.

    The Buyer’s Guide also tells you:

1. That the dealer assumes no responsibility for repairs and that you will pay all costs for any needed repairs if there is no warranty;
2. That the dealer assumes no responsibility for anything that is said about the car.  Since spoken promises are difficult to enforce, the dealer should be asked to put any promises in writing.

Related Pages:
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