Buying a New Car
Buying a car is a major investment, but it can be exciting and fun, particularly if you feel like you received the car you wanted at a fair price.
How Do I Find the Automobile I Want?
The key to buying a car is being prepared. Before you go to the car
dealership, know what type of car you’re interested in buying and how
much you’re willing to pay. To avoid overpaying, making missteps or
being scammed, be prepared by knowing how to get the best deal.
Consider your needs
Keep in mind these questions when you’re deciding what car you want to buy:
- How many people do you need to transport?
- How many miles do you drive annually?
- Is it important that your car get good gas mileage?
- Do you need four-wheel or all-wheel drive?
- Do you want a manual or automatic transmission?
- Do you need extra cargo or trunk space?
Take a test drive
Before you buy a new or used car, you should “test drive” it. It is
common for people to test drive several cars before making a decision
to buy. When you test drive a car, try to predict what it would be like
to drive the car every day. Drive the car on city streets as well as
the freeway to get a good feel for its performance and comfort. Be
especially aware of how the car turns, how it accelerates and how good
the brakes are. If you plan on carrying passengers, sit in all of the
seats.
Car dealers can be pushy at times, but remember that test driving a car
does not obligate you to buy the car, so feel free to walk away at any
time.
Use Internet resources
Use the Internet to find prices, pictures, reviews, safety ratings and
other information about new and used cars. The most trusted
sitesinclude Kelley Blue Book, Edmund’s and the National Automobile Dealers Association (NADA). The more research you do, the better chance you’ll have to find the car that’s right for you.
Consider automobile safety
Contact the U.S. Department of Transportation to find out any car’s
safety record by calling its Auto Safety Hotline toll-free at (800)
424-9393.
Ordering your car
Finding the car you want is important, so don’t settle for anything
less. If the car dealership doesn’t have the car you want, consider
ordering your car from that dealership or a different one. Don’t feel
pressured to buy a car just because it’s available on the dealership
lot.
How Do I Get the Best Deal?
Keep in mind these keys to get the best deal on the car you want to buy.
Do your research
The more you research, the better price you’ll find on the car you
want. Call several dealerships and ask for price quotes. Make sure to
ask if the price quote you are given includes any rebates or
incentives. Some manufacturer’s and car dealerships have special
consumer incentives on certain cars. Take careful notes and don’t be
afraid the ask questions.
You should also use the Internet to do additional research. Again, popular Internet sites include Kelley Blue Book, Edmund’s and the National Automobile Dealers Association (NADA).
Find out the invoice price
The invoice price
is the price that the car dealership paid the manufacturer for the
car. Find out if the manufacturer offered the dealer rebates or
discounts on the invoice price because it could help you bargain the
price of the car.
Be ready to bargain
At the dealership, be ready to bargain. Be confident and firm.
Dealers are used to negotiating the price of cars—it’s their job. Some
car dealers can make you feel pressured, so always keep in mind that
you are the one in charge of making the decision to buy. You should be
able to bargain the sticker price down 10-20% from the original listed
price. See Know Your Terms for brief glossary on car buying.
Beware of extra costs
A new car contract comes with numerous add-ons, which can add hundreds
or thousands of extra costs. These additional options are your choice,
so don’t pay for anything you don’t want. Ask your dealer about the
costs of:
- Rust proofing
- Scotch guarding
- Paint sealant
- Extra detailing or pin striping
- Car alarm
- Extended warranty
How Can I Pay for a New Car?
There are two primary ways to pay for your new car. You can pay for
the car in full or finance your purchase by making loan payments over a
fixed period of time. Most Americans finance their automobile
purchase. If you decide to finance your car, your payments include the
total cost of the car, as well as the cost of interest.
Most finance agreements are for 3-5 years (36-60 monthly payments), but
longer contracts can be arranged. You don’t officially own the car
until you have made your last monthly payment.
Financing Your Car
Both your car dealership and any major credit lender can finance your
vehicle purchase. Credit lenders include banks, savings and loan
institutions and credit unions. Compare your car dealer’s Annual Percentage Rate
(APR) and total finance charges with the rates and charges of other
credit lenders to find the best terms. Many people like the
convenience of financing their car through the car dealership, but be
sure to shop around before you make your decision.
When you decide on an institution to finance your car, read all the
documents carefully. Do not sign any documents until you’re absolutely
sure you want to buy the car. Double check the following terms to make
sure you agree with everything:
- The price of the vehicle
- The amount of the down payment
- The amount of each monthly payment
- The number of total monthly payments
- The finance fee
- The Annual Percentage Rate (APR)
- The total sales price (the sum of the monthly payments plus the down payment)
Know Your Terms
The language of car buying can be tricky. Below are definitions of
some of the major terms you might hear when you go to a car dealership:
Base price - The base price is the cost of the car without options. It includes the manufacturer’s warranty.
Monroney sticker price
- The Monroney Sticker Price, also known as the Manufacturer’s
Suggested Retail Price (MSRP) is the base price plus the installed
options, the manufacturer's transportation costs, and the fuel economy
of the car. Every car you see at a dealership has this price affixed
to the car window, as required by federal law.
Dealer sticker price - The dealer sticker price
is the Monroney sticker price plus the retail price of extra options
and charges that the dealer has added, such as the additional dealer
mark-up (ADM) or additional dealer profit (ADP), dealer preparation
fees, rust proofing fees and other add-ons (LINK to “Beware of extra
costs”). Typically you will see a separate sticker with the dealer
sticker price affixed to the window of the car.
Invoice price - The invoice price is the price
that the car dealership paid for the vehicle. Most car dealers won’t
show you the invoice price, so be sure to ask. The invoice price
includes the cost of freight. If you are buying a car based on the
invoice price make sure that the freight cost is not added to your
contract.
Extended warranty - An extended warranty is an
extra option that you can purchase to insure the maintenance and repair
warranty on your vehicle beyond the time period of the manufacturer's
original warranty (LINK to “Warranties”).
Annual Percentage Rate (APR) - The APR is the
amount you pay over each year in interest, as part of your finance
contract. Your credit lender, whether it is the dealership or a bank,
determines your APR based on your credit record, among other factors.
Warranties
Every new car comes with a manufacturer’s warranty, which covers
repairs and inspections of the car for a fixed period of time.
Warranties vary with every car. When deciding which car to buy,
carefully read its warranty information.
A typical warranty has two parts: “bumper to bumper” and “powertrain.”
- Bumper to bumper warranties cover everything
except parts of the car that are “worn” during use, such as the brakes
or the tires.
- Powertrain warranties cover the engine and the transmission, and all the other parts of the car that make it move.
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