Car Buying: Wheeling & Dealing

So, you’re looking for a new ride and asking yourself:
• New or used?
• Car or truck?
• Options, features?
Whatever you decide, doing your homework FIRST is a must before you go and shell out big bucks. You want to compare the different products and prices out on the market.

NEW vs. USED
According to Autotrader.com, “For most people, we think it makes more sense to buy used, but there are some exceptions. Here are four questions to help you be a smarter consumer and navigate the new-used decision-making process:

Do you have a down payment or a trade-in with equity?
If your credit is good, you may have less problem buying new with little or no down payment than buying used. These are typically in the form of rebates, cash incentives and discounted financing. Financing a used car will almost always require money down, whether in cash or a trade-in with equity.

Is there a good reason you, rather than someone else, should take the huge new-car depreciation hit?
Because a new car loses between 20-30% of its value the moment it rolls off the dealer’s lot, buying used can be smarter. Some cars can depreciate up to 50% in the first three years.

Depreciation has little effect on owners who drive a car until the wheels fall off. After more than a decade or two, that old beater won’t be worth much in terms of trade-in or resale value any way.

Can you afford to maintain and repair a used car?
No matter how well a car has been cared for, at 30,000 plus miles, some bits and parts are going to naturally wear out; consequently, maintenance and replacement costs will be higher for a used car than a new one. Unlike depreciation, repairs and maintenance are hard costs that must be addressed as they arise. These are costs you will need to budget in. Do you have the discipline to do that?

If you buy a nearly new used car, you may inherit some portion of the new-car warranty providing some protection for a few months or even a couple of years. Many car companies now provide powertrain warranties for five, six or even ten years. But be sure to check the automaker’s rules on transferring the warranty before you buy.

Can you cope with the time a used car spends in the shop?
Not only does a used car cost more to keep operating, but it will likely spend more time in the shop. It may only be a day here and there, but could be a week or more for bigger repairs.

On average, new cars spend less time in the shop. Moreover some manufacturers or dealers offer loaner cars during routine maintenance visits while a car is under warranty. [Keep in mind new vehicles have fewer repair problems, so paying extra for an extended warranty is usually unnecessary.]

Once you answer these questions for yourself, you will figure out whether it makes more sense for you to buy a new or used car.”

OTHER CONSIDERATIONS
A used vehicle will usually cost less and you may be able to buy it without financing which would save you in interest charges. And, if you pay cash for the vehicle, you can get by with liability insurance; however, your vehicle will not be covered against damage, loss or theft. If you do finance it, the lender will require you to purchase full coverage insurance (expensive) which drives up the cost.

But, responsibly managing your loan can help you to build your credit history which will help you qualify for other types of credit.

STEP ONE: Needs vs. Wants
Determine what you really need then go on to what you want and prioritize those extra perks.

Time needed: Consider how long you need the vehicle. Are you planning to use this vehicle for a short period, say a year or two, or is this something you plan to use for a long time?

Purpose: Is this vehicle just going to be used locally, to and from school and work? How far is that? Or, are you planning to drive cross-country to visit family and friends on a regular basis?

Type, size, style, features: Do you need a car or truck? 2-door or 4-door? Two-seater or minivan? Identify the features you need vs. what you want – in Houston, A/C is a must but heated seats probably not so much.

Money: Carefully evaluate how much you can spend. Be realistic about what you can afford to pay monthly on your vehicle (don’t forget insurance). Include fuel type and consumption – you don’t want to get stuck with vehicle that only uses premium and gets 8 miles a gallon! And remember, the cost of repairing foreign or antique cars could be high.

Model: Once you have decided on a type of vehicle, you should check out different makes, models (Ford vs. Toyota vs. Nissan vs. Chevy, etc.) and features included.
Some websites like MSN Autos (see below) will allow you to “build” your vehicle using the dealers’ cost for options so you can get a good estimate of what you will pay.

Reviews: Look up information ratings and recalls.
– Natl. Highway Safety & Transportation Agency: http://www.nhtsa.dot.gov
– Edmunds: http://www.edmunds.com
– Kelly Blue Book: http://www.kbb.com
– MSN Autos: http://www.autos.msn.com

STEP TWO: Where to buy?
If you’re not rolling in the dough, you may want to consider a used car. But, where can you find quality used vehicles?

Used Car Superstores: these offer a high-tech, no-haggle way of buying a used car and some will have limited warranties and possibly financing options. BUT, used car financing is usually pretty pricy because of high interest rates.

Car Rental Agencies: often they will offer 1 or 2-year old vehicles with less than 25,000 miles on them. Good records are kept on these vehicles and it is possible to get a limited warranty. Wear and tear varies and can be heavy due to the number of different drivers.

Banks & Loan Companies: in order to collect on unpaid loans, these companies sell repossessed vehicles. The type of vehicles and their condition varies greatly, but it is possible to get a good price.

Private Owners: individuals often sell their vehicles in classified ads. It is possible to get a well-maintained car cheaper than you could at the dealership. If you go to a private owner make sure to get proof of legal ownership before you hand over any money and try to get the maintenance and repair records, too.

Dealerships: Many car dealerships offer “Certified” used vehicles which usually means it is a late model vehicle, usually with low mileage, that passed a dealer inspection. Prices are usually higher because these cars many times come with a limited warranty and can be financed. Be aware, though, used car loans generally charge the highest interest rates.

Auctions: Government, private, and online vehicle auctions are becoming increasingly popular. Some common things to remember about buying vehicles from auctions are:
a. you will need funds for on-the-spot payment,
b. getting a warranty is rare, and
c. it is unlikely that you will be able to take a car to a mechanic for inspection before you purchase it and you may not even get a test drive!

STEP THREE: Check it out!
It is always wise to carefully inspect a used vehicle before any money changes hands.

History: Several companies provide a report of a vehicle’s repair history using the vehicle identification number (VIN) – just go to a search engine like Yahoo or Google and type in “car history.” You can see if the car is a lemon, a salvaged vehicle or if it has been in a major accident BUT some issues may still go undetected. You should also get a copy of the car’s service record, which can help predict whether the car is likely to perform well for another few years.

Exterior: Walk around and check for rust, blisters or mismatched paint, lights, loose bumpers, misaligned body panels. Make sure all the turn signals and headlights are in good working order. Open and close the doors, windows and trunk– if they don’t close tightly, it could mean the car was in an accident. While walking around, pop the trunk and if there’s a spare tire, remove it – if there is rust in the wheel well, chances are it has been underwater (not good).

Interior: Ensure all the following are in good working order:
• Seat belts – try each one out to make sure they buckle and unbuckle properly.
• A/C, heating, radio, mirrors, hand brake
When checking the upholstery, see if there are any horizontal water marks on seat backs – if so, it is another indication the vehicle may have been flooded.

Inspection: Have a mechanic inspect the vehicle. Take it to a reliable repair shop or auto diagnostic center and have the mechanic give it a once-over. You will have to pay for this service, but the money you invest up front may save you many more dollars down the road. Ask for a written estimate of the costs to repair any problems the mechanic finds, and use that estimate as a bargaining chip when you make your offer.

Make sure the vehicle has a current state inspection sticker otherwise you’re responsible for getting that before you can legally hit the road.

STEP FOUR: Before you sign on the dotted line…
• Take your time to read and understand the entire written agreement, it is legal and binding once you’ve signed it. Ask questions and don’t sign unless you are satisfied with the answers.
• Be sure all blank spaces are filled in, any of the salesperson’s verbal promises are included, and any type of warranty is clearly spelled out.
• If you are required to make a deposit, ask whether it is refundable, and under what circumstances, and make sure the information is also included in the contract.
• Be sure to get a signed statement verifying the mileage at the time of sale. Most state laws require dealers of used cars to provide the buyer with this information in writing.
• Before you buy, know what safety requirements are mandatory in Texas. Older vehicles may not have airbags, child safety seats, seat belts, anti-lock brakes or security systems.
• In Texas, unless it’s spelled out in writing, the vehicle is sold “As Is” meaning any verbal promises or warranties do not have to be honored.
• Also, in Texas, the “Lemon Law” helps consumers to get NEW vehicles repaired or replaced if it has a recurring problem. If you buy a used car, the Lemon Law doesn’t apply.

“WOULD I LIE TO YOU?”
Whether you buy new or used, look out for dishonest salespeople who will do their best to squeeze every last penny out of you. Here are some of typical come-on lines they may try to use:

• “We’re losing our shirt on this deal!” You should have done your homework online and know EXACTLY what they’re making on the deal.
• “The website prices are wrong.” Again, doing your research ahead of time will tell you what you should expect.
• “It’s not exactly what you want but…” They may have something on the lot that’s very close to what you want but it probably includes a lot of extras you didn’t bargain for.
• “This car won’t be here tomorrow…” Then, they’ll try to scare you by giving you the old “now or never” routine – always take ample time to consider any offer.

Use the same common sense you would when you’re making any kind of large purchase and always check out the dealer with the BBB: http://www.bbb.org

For more information, check out our “Resources”

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