Car Buying

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					Car Buying

– 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

• Kelley Blue Book

• Edmund’s

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
$ 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?

• 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


• 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



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, 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, 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.

• 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?

$ 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

Car Buying Homework. What can you really afford?


For more help call the Family Support Center 325-654-3893

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