Car Buying

Car Buying FOR CAR BUYING, DETERMINE PURPOSE FOR PURCHASE – Spending money for an automobile is the same as with other purchases, we either need or want something. We should decide whether the item is a necessary purchase or an item we would like to purchase for pleasure. Finding the Car for You • • • • What do you want? What do you need? Is economy important? Where do you find consumer information? Car Buying Precautions • • • • • • • Have at least 2-3 models in mind Do your research Check Insurance Rates Shop around Visit your Credit Union for Cost Quotes Get a Pre-approved Loan Ask about “First-Time Buyers” Program Choose options Carefully What you need: • 2 or 4 door • Automatic or standard • Power Steering • Air conditioning What you want: • CD player • Leather upholstery • Sun roof • Power windows/seats Financing Your New Vehicle Think consumerism Factoring Car Buying Costs • Fixed Costs – Loan Payments – Insurance – Fees and Taxes • Flexible Costs – Operating (gas) – Maintenance – Depreciation (highest during first year) Pre-Approved Loans • You will know ahead of time what your payment will be • You will be less tempted to buy more car than you can afford • Banks or credit unions offer the best financing rates How Long and How Much You Finance Impacts Total Price • $18,000 at 6.9% – for 5 years = $356 per month, total interest $3,360 – for 4 years = $431 per month, total interest $2,670 – for 3 years= $555 per month, total interest $1,994 • $12,000 at 6.9% – for 5 years=$237 per month, total interest $2,240 – for 4 years=$287 per month, total interest $1,780 – for 3 years=$371 per month, total interest $1,329 Dealer Financing vs Bank/Credit Union Financing • Dealers use Rule of 78 financing where the interest is paid first and then you begin to pay on the vehicle • Banks/Credit Unions usually use declining balance financing, interest is re-figured each month on the current balance owed New Vehicle Homework • Resources Sources of Information • NADA Official Used Car Guide – http://www.nada.com • Kelley Blue Book – http://www.kbb.com • Edmund’s – http://www.edmunds.com Shopping for your New Vehicle Think consumerism What’s in a Price? • Sticker Price • Manufacturer’s Suggested Retail Price (MSRP) • Total Price • List Price • Invoice Price Dealer Rebates • Be Careful! • Often you can negotiate a better deal without the rebate • Sometimes you have a choice of low-rate financing or rebate • The BEST deals can be made by you and your car buying knowledge DEAL #3 YOUR TRADE $ Trading Vs Selling outright $ What is your car worth? $ What is dealer willing to pay? $ Setting your price $ What if you owe more than it’s worth? Beware… • Special Promotions – Guaranteed financing E-1’s and above! – Think you can’t buy that new car because you’re still paying off the old one? – We’ll pay off your old car in full – no matter how much you owe! • Advertising – Bait & Switch: advertised item is not available but something more expensive is Tricks Of The Trade • • • • Put to Riding Low/High Balling Bait and Switch Padding • Mutt and Jeff • Name-dropping • Ownership • Fixed Price Negotiating What to DO • • • • • • • Create checklists of what you want Take someone with you Outline needs and concerns Test drive at least 3 cars Negotiate as long as it takes Sleep on it Establish price of car before talking trade-in Negotiating What NOT to Do • Let salesperson know how much you want a particular vehicle • Tell salesperson your top price • Look only at monthly payment • Expect a better deal from management • Sign anything until you read it thoroughly • Feel obligated to buy New Car Warranties • • • • • • Factory – certain costs or repairs Basic – the entire car Extended – applies to major components Corrosion – damage by rust Roadside – when you need assistance Transfers – to another owner More Buyers Guide • Warranties – ―As is‖ (What you see…) – ―Implied‖ (Product will perform as intended) – Full • • • • Service provided to anyone who owns the vehicle Free Will provide replacement or refund if car cannot be repaired No limit on duration of implied warranty – Limited • Dealer will not assume some costs or responsibilities Service Contracts • Apply to new and used cars • They are not warranties • Compare to car’s warranties • Who makes decision about repairs? – Dealer or separate company Consider ―Nearly New‖ Cars • Company Cars • Program Cars • Special Cars Buying a Used Car • Know how much you want to pay • Use Kelley Blue Book and NADA monthly guides • Check frequency of repair records Used Car Rule Buyers Guide • Applies to used cars bought from dealer • Becomes part of sales contract • Must be in window on all autos, light-duty vans, and light-duty trucks • Does not apply to: – Motorcycles – Sales by private owners More About Used Cars • Shop in daylight • Test drive • Have a mechanic check it – Automotive Skills Center: $5 Inspection Homework if considering a USED CAR purchase • Let the buyer BEWARE! • What you buy is what you get, usually without any guarantees Lease or Purchase • Lease - long term rental, at the end of a specified period you either pay more or return the vehicle • Purchase - at the end of the payments you own something you can either sell or trade-in on a newer vehicle PURCHASE? LEASE? Leasing Advantages • Up-front costs are low • Lower monthly payments • No selling, trading, financing • You’re driving a new car Leasing Disadvantages • • • • • • Often costs more in the long run May have extra charges at end of lease You own nothing Monthly payments never end Contracts are complex A leased vehicle will not leave the United States Car Insurance Rates Single Male, 19 years old Sporty Car/6 month policy 2000 Mitsubishi Eclipse GT Good Driving Record: $2,476 $413 mo 1 Accident: $2,707 $451 mo 1 Accident/1 Ticket No Prior Ins: $3,328 $555 mo On-Line Quote, www.Progressive.com Insurance, October 2001 Car Insurance Rates Single Male, 19 years old Pick up Truck 2001 Ford Ranger Pick Up Good Driving Record: $1,805 1 Accident: $1,965 1 Accident/1 Ticket No Prior Ins: $2,179 $301 mo $328 mo $363 mo On-Line Quote, www.Progressive.com Insurance, October 2001 Stop & think about it Car Payment: Insurance: Total: $ +$ $$ The more your expenses are each month for transportation, the less income you will have for other things. MOTORCYCLES • Beware of special financing – 3.9% financing can turn into 24.9% • Can you afford the insurance? • Do you know the rules for driving on base? • Is it practical? SUMMARY $ Create Budget $ Get financing in order $ Know Invoice Price/incentives/rebates $ Find the amount the dealer will sell the vehicle for $ Go back home and do more research/verify amounts/know what your payments will be SUMMARY (con’t.) $ Sell or Trade-In $ Safety in Numbers, never shop alone $ KEEP ALL 3 DEALS SEPARATE—IF YOU COMBINE ANY OR ALL OF THEM—THE DEALER WILL WIN BIG! Car Buying Homework. What can you really afford? Or For more help call the Family Support Center 325-654-3893