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 Posted: Tue Sep 12, 2006 5:19 pm
I have noticed that, currently, we do not have any information regaurding the purchasing/leasing of vehicles, so I thought that I might offer a fairly comprehensive, but basic, guide to purchasing/leasing your first, second, third, or beyond, car.
I am a car enthusiast, so should you have any questions regaurding a specific make or model, feel free to take your questions to me directly or, better yet, ask in this forum so that all may benefit. (Note: Though I am an enthusiast, I am not an expert, by any means. If I am unsure about something I shall be sure to make note of it to prevent confusion.)
On with the topic. biggrin
Guide to my guide:
1. Introduction.
2. Financing -- for many, this will be the most important aspect.
3. How to make your car-buying as easy as possible.
4. Reserved section.
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Posted: Tue Sep 12, 2006 5:21 pm
Throughout your life you are asked to make significant payments -- cars, I am afraid, are generally not an exception to this rule. Like any significant payment (Note: By now you should have noticed that I have not used the term "investment" in this context. This is for good reason -- a car cannot be considered to be an investment. With the exception of collectibles and antiques, you do not stand to gain anything at the end of your purchase -- as such, you should consider your purchase to be an expense and not an investment), it is in your best interest to know the rules of the game -- upfront payments hardly scratch the surface of vehicular ownership. I hope to help save you from some fairly common mistakes that people are apt to make. First things first, then. How Much Can I Spend?Before you begin to consider buying a car, you must ask yourself whether or not you really need a car. If you already have a car and just think it's time to get a new one, be sure that the purchase really makes sense before proceeding (Is there anything else you could do with the money that would provide you with greater benefit?). If you're borrowing in order to pay for the car – as most drivers are apt to do – do you really want to go into debt in order to get a newer vehicle?
Before deciding how much you want to spend on the car, first determine how much you can afford to spend. This calculation will depend on your overall financial condition, which you can determine by putting together a budget (Unfortunately, as every person is unique, I am not able to put such a spreadsheet together for you.). Also factor in the estimated value of your vehicles trade-in value, if you have one (I highly recommend that, if you possess the time, that you try to sell it on the open-market yourself rather than trading it in at the dealership – you will often find that you can get more money for it.).
When calculating the cost of the car, include not just the purchase price, but all of the associated and ongoing costs: property taxes, insurance, repairs, gas, oil changes, parking meters, tolls, registration, and other miscellaneous expenses (Trust me, these expenses will add up significantly, especially if you are driving a gas-guzzler.). Once you know how much you can afford to spend, you should look at this as a maximum; don't feel compelled to buy the most expensive car you can afford, if something significantly less expensive meets your needs – buying a car for prestige is, typically, not something I would recommend. In my personal experience, I have noticed that most people only offer praise because you have a new car – rarely is that praise tied to the price of the vehicle purchased. I recommend that you budgeet no more than ten percent of your annual income on vehicular expenses and, certainly, no more than fifteen percent.Used v. NewOnce you've decided how much you want to spend, the next big decision is whether you desire to buy new or used. The advantage to getting a new car is obvious: you're the first owner, so you know that nothing bad has happened to the car yet. In addition, you gain the full benefit of the manufacturer's warranty.
However, you pay for this piece of mind. Most new cars depreciate a few thousand dollars as soon as you drive them off the lot, and the rapid depreciation continues for the next couple years. In addition, insurance is more expensive for newer cars (Note: This is because more expensive vehicles will cost your insurance company more money to repare them -- this is especially true if the vehicle you have purchased is imported (Upper-level Mercedes, upper-level BMW's, and Bentley's, for example.). Oh, and I shall also be making frequent comments within the text to aid you in your guide -- sometimes the authors of this site are not clear or do not go into enough detail.).
As an alternative, you might want to consider letting someone else foot the bill for most of the depreciation, by buying a car that's one or a few years old. The quality of cars has improved dramatically in the last decade, so a three or four year old car still has a lot of life left in it, and is much less expensive (However, there are a number of new cars that are real lemons -- it is important that you know if the vehicle you want to purchase is one such car.). With a given amount of money to spend, you'll probably get a lot more car if you go with a slightly used car instead of a new one.
Since used cars have more idiosyncrasies than new cars, there are a few additional steps in the process. For starters, you'll need to determine the value of any car you're considering, to make sure you don't pay too much (Kelley's Blue Book and J.D. Power and Associates are websites that I would recommend to American buyers.). The values can be found easily on the internet. Keep in mind that if you buy from a dealer, you should expect to pay more than if you buy an identical car from an individual.
You should also use the Carfax
service to determine the history of the specific vehicle you're interested in. For a small fee, they'll tell you if the odometer has been tampered with, if the car has ever been sent to a junkyard, or if it has records of any other serious problems. This is more important for older cars than newer ones.
Next, have a mechanic conduct a thorough inspection of it. The $100-150 cost will be well worth it if it turns up any serious problems. You might want to agree to a price in advance of the inspection, based on the problems the seller reveals; and if any additional problems are discovered, the price will be adjusted downward appropriately. If the seller won't let you have a mechanic inspect the car, don't buy it; an inspection is a reasonable request, and their refusal might be an indication that they're hiding something. Some dealers don't allow mechanics to inspect their cars, but it's easy to find another dealer who does.
Some dealers offer "certified" used-car programs, backed by the manufacturers, in which they guarantee that the car has passed a series of inspections. These tend to be recent used cars, and they often come with warranties, although they're significantly shorter than new-car warranties.Link.Buying v. LeasingLeasing is growing in popularity, and represents a viable alternative to buying. It costs less, (Note: The author of this site neglects to mention that leasing is only less expensive initially -- over time, you will save money through the purchasing of your vehicle as the total costs will be lower.) because you're basically paying for the estimated depreciation of the car over the lease period, rather than paying for the whole value of the car. Of course, all you're getting is the use of the car during that period, rather than actual ownership of it.
Advantages to leasing:
A lease costs less than a purchase (Note my aforementioned note regarding the difference between initial cost and total cost.).
You don't have to worry about a large down payment. When the lease begins, you'll just have to pay the first month's payment, title, taxes, registration, banking fees, and a security deposit.
You don't have to worry about selling the car when you no longer want it.
Disadvantages to leasing:
You don't actually own the car (This is a significant factor -- at the end of your lease, should you opt to simply refrain from purchasing the vehicle you will not be allowed to reclaim any money or sell the vehicle.).
You aren't able to customize the vehicle or make modifications to it as you could if you bought it (Sorry Fast And The Furious fans -- you cannot, in any way, alter the engine or even add those "hip" rims if you decide to lease your vehicle.).
There are additional charges for excessive mileage (For example: more than 15,000 miles a year) and any damage to the car (Yes, this will, quite often, include dings in the door).
If you have the option to buy the car at the end of the lease (As is often the case), you'll have to make that decision as soon as the lease ends, whereas if you owned the car you could decide exactly when to sell it.
Generally, you will need to have the maximum insurance coverage limits (This means that you will probably require an extended bumper-to-bumper warranty and no-fault insurance coverage).
For these reasons, leasing is generally most attractive for people who want to (And can afford to) drive a new car (I would not recommend leasing a previously used vehicle -- the initial costs are only minimally lower and, should you suffer an accident, you will probably suffer greater loss from accident repair fees.) every three or four years (It is typically recommended that you obtain a three-year lease as many warranties will either need renewing or will simply cease to function at this point).
If you do decide to lease, there are a few things you should know. First, understand the lingo. Capitalized cost is the leasing equivalent of the selling price (Selling price, of course, being the value of the car should you choose to buy it.). This is the total-package cost, which you want to minimize. The residual value is the estimated worth of the car at the end of the lease (Which is why I highly recommend that, should you opt for a lease, that you consider the deprecation of the vehicle you buy.). Your monthly payments will be based on the difference between these two amounts, plus an interest expense called the money factor. But these are just the basics. The world of leasing is complex, and the dealer is an expert at it, so if you don't educate yourself you will be at a distinct disadvantage (This point of view, while a tad cynical, is the mentality you should carry into the dealership. Remember, no matter how nice the dealer may seem, his/her primary goal is to sell you the vehicle at maximum benefit for themselves. A little education goes a long way and could, potentially, save you thousands of dollars in the long run.).
Second, negotiate the capitalized cost of the vehicle. The dealer will want you to lease the car at its sticker price, but you should talk him or her down as far as possible, just as you would if you were buying the car (I highly recommend that you look into the dealerships history -- do they have a history of cut-backs and rebates? If so, bring them up.).
Third, make sure you understand what conditions will end up costing you extra. For example, what is the mileage limit, and how much is the penalty if you exceed that limit? The per-mile charges can be extremely high, so be careful.Link.There are some benefits and drawbacks to leasing that this website did not address and I could not tie into their discussion.
Advantages to leasing:
Should you be involved in an accident, you do not have to wait very long for a new vehicle -- often, within three business days you can be on your way in a brand-new vehicle.
If you are involved in any work that necessitates a clean car to transport clients, a lease will ensure that you are always in possession of a fairly new car.
If your car is a real lemon you are, relatively, financially free to exchange it for another model within a short time. (You do not have to worry about selling the car or completing payments.)
Disadvantages to leasing:
Most dealerships will require that you take all maintenance repairs and routine checkups to the dealership itself -- this can be a problem if you live a long distance from the dealership.
Also, if you are late with any of the routine check-ups (For instance: oil changes every three thousand miles or a tire rotation every five thousand miles.) you will typically be charged exorbitant late fees.
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Posted: Tue Sep 12, 2006 5:27 pm
The following advice is taken from the May 2006 edition of Car and Driver, pages 96-99. I have read numerous automotive magazines, and they have all stated fairly similar practices; but, I feel that this is the most comprehensive and most useful. Some of the information provided below will be a repeat of information I have already provided; but, I feel that it is worth repeating. How to Avoid Getting Screwed1. Do your research before visiting a dealership.Salespeople are experts at sales, not cars. Find out which vehicles fit your needs and budget, then read reviews to learn about the advantages and disadvantages of each. ...Web Sites can give you a good idea of what you should pay for a new vehicle and receive for your trade-in. This website has a current new-vehicle pricing, or try this website to see what dealers are asking for comparable vehicles before trading yours away. Research the financing as well. Ask local banks and credit unions for interest rates, payments, and the balance you would finance on the vehicle. Never accept dealer financing without doing this research. This goes for zero-percent APR programs, too, which always come with a catch, usually forfeiting a rebate, thus negating the value of the special rate. 2. Keep the dealer honest by shopping around.Be ambiguous with the information you give a salesperson. Tell him or her you are shopping other dealers, but not which ones. Say you have found vehicles you like, but don't say the exact sticker or color. This leaves salespeople uncertain and introduces a twinge of fear. If they don't know exactly what they are up against, they will be more likely to put their best offer forward to avoid looking stupid. Many people have long relationships with dealers or salespeople they have grown to trust. In the business, these customers are seen as potential cash cows. So keep the relationship interesting by shopping them against a few other dealers. you may be shocked or angered to find the price significantly lower. But don't be angry -- your friend kept a promise to get a good deal. It was a good deal for him or her! 3. Do not be a payment buyer or insist on zero down.By concentrating on payment, you can forget to negotiate term, interest rate, selling price, and trade value. The dealer can always find a way to get close to your payment, but the contract terms may ensure that you pay too much. On a similar note, don't concentrate on the money down. If they know you don't have it, they fluff the down payment and then get you to pay more each month because you don't have the cash. Fluff is the dealer's equivalent of this juggling of numbers. To us average folks, it is simply dishonest. For example, if the dealer knows you can't put any money down, he or she will tell you that the financing requires $2,000 cash down with a $299 payment. In reality, a calculator would show the car for $299 a month with zero down. 4. Don't make an offer.Much of the selling process is designed to get customers to spit out an offer to buy. When sufficiently frustrated, many customers cave in. Although sometimes unintentional, making an offer is psychologically significant. You have created a realistic situation in which you would actually buy a car. Remember, it is not your job to provide the numers; it is the dealers. 5. Take back what is yours.A simple way dealers excercise control over their customer is by eliminating their escape routes. Most dealers will keep the keys to your trade-in after appraising it. If you have ever felt a dealer was too eager to do an appraisal, this might be why. On a similar note, customers who make an offer will not be accepted. Keeping your credit card means they will have at least one chance to ask you to pay more. Before starting negotiations, ask for your keys and/or credit card. Such awareness and unwillingness to be controlled will flush out their best numbers in a hurry. 6. Do not buy today.The pressure to buy immediately is the result of the sales system, which loses effectiveness when customers walk out and are exposed to a full range of information again. suggesting there is a slight chance that you might buy if the numbers are right may motivate the dealer to give you his or her best offer before you leave. But before you go, get the deal in writing. Any customer who walks out should be given the best offer possible, but because of competition, many dealers are reluctant to make written quotes. If the dealer doesn't trust you enough to give you the numbers in writing, you should not trust the dealer, either. 7. If you trade in, cancel your old warranties.If you bought any insurance or a warranty with the vehicle you traded in, check with the selling dealer to see if you can cancel it. Usually refunds are pro-rated based on time or miles used. This is an often-over-looked cause of reverse equity. 8. Don't buy extras in the finance department.As a general rule, do not buy any of the extras offered in the finance department. Paint-and-fabric protection is explained as being "like" a Teflon coating. But it isn't, and it isn't worth even a fraction of what they charge. Etching and rustproofing have virtually no value at all. Be especially wary of service kits. If it is just a coupon book, never pay more than $20 for it. Warranties and insurance can have benefits, but only buy them after shopping other sources first. 9. If you don't know the selling price, trade-in value, trade-in payoff, interest rate, and term, don't sign.There is no reason you should not know exactly what you are paying when you buy a vehicle. Dealers will make as much money as you let them, so know what you are signing before you sign it. Ignorance is not the dealer's responsibility. If you do not understand the numbers, find someone you can trust who does. 10. If you don't feel in control, you probably aren't.Losing control of the process is why most people fell uncomfortable buying cars. Taking control is why good salespeople "sell" customers who are just looking. Direct the process by insisting on doing things your way. Inform the salesperson that you will only go for a test drive after numbers are served. Alternatively, control the conversation during the test drive by preparing a list of detailed questions aobut the vehicle and competitive models. Insist on the salesperson's serving the numbers on the hood of the car instead of in his or her office. Each of these actions will signal that you are not a person they should be screwing around with. Your experience will be more straightforward and pleasurable as a result.
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Posted: Wed Sep 13, 2006 10:26 am
This section shall be reserved for interesting questions that may arise and any miscellaneous information I may feel like adding later.
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Posted: Sun Dec 10, 2006 1:53 am
Testimony, if you don't mind:
I honestely belive that buying a new car, or as close to new as possible (1 to 3 years old) , is the best way to go.
This is why:
First:
My insurance actually went down when my husband and I got our new car. This is because it has more safety features than our old car. Many new cars will be less in insurance if they have more safety features.
Talk to your insurance company or potential insurance companies about quotes before you buy your car.
Second:
Even though new cars depreciate in value, they are more reliable.
*You can be sure with a new car, that you will almost always be able to find the spare parts you need, should the occasion arise. My parents have actually had such old cars that it was more expensive to buy their parts than the car was actually worth.
*When you buy a used car, you are buying someone else's problems. Our old car, which we bought used, gave us a new problem almost every month. We pumped more money into parts and labor than the car was actually worth.
Oh and be prepared to be at he dealership for a while. At least half a day.
Oh, Oh, Oh and do not be afraid to say "NO!" It's very important that you keep your wits about you and not let the sales person ware you down.
A sexual did a great job.
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