Buying a New Car

Although buying a new car is usually the second most expensive purchase many consumers make, (a house tops the list), many people do not research their purchase. Considering how expensive making the wrong choice could be, there are some aspects of new car buying that you should consider.

Before making a trip to the nearest dealership, you should establish a base of specific information. Know what model of car you are looking for, what options you want, and how much you are willing to spend. Once you have established this base you are less likely to be persuaded into buying a car that you cannot afford. You will not be pressured into making any hasty decisions, and you will be more likely to get a better deal.

Check out vehicle publications at your local library or bookstore. You will learn about all of the latest features and prices. They may also provide you with information on the dealer's costs for specific models and options.

Do not settle for the first dealership that makes you an offer. Shop around. You may also want to consider contacting car-buying services, broker-buying services, and the Internet. There are several sites on the Internet that offer information on new vehicles, from performance reviews to price lists.

Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, which is generally between 10 to 20 percent. This is usually the difference between the manufacturer's suggested retail price and the invoice price. Also, consider ordering your new car if you do not see the one that you want on the dealer's lot. This may involve a delay, but the cars on the lot frequently have options you not only do not want, but which also add to the cost.

The Terms

Invoice Price: The manufacturer's initial price to the dealer. This price includes freight, (destination and delivery), so if you are buying a car based on the invoice price (2% above invoice, for example), be sure that freight is not added to the sales contract.

Base Price: The cost of the car without options, it does however, include standard equipment and factory warranty.

Monroney Sticker Price: This label is affixed to the car window and is required by federal law. It may not be removed by anyone other than the purchaser, and shows the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and the fuel economy (mileage).

Dealer Sticker Price: This supplemental sticker shows the Monroney sticker price, plus the suggested retail price of the dealer-installed options, such as additional dealer mark-up (ADM), or additional dealer profit (ADP), dealer preparation, and undercoating.

Trading in your current vehicle

Once you have negotiated for the best possible price on a new vehicle, then you can bring up the possibility of a trade-in. If you have already done your research to find out the value of your old car, you will be ready to negotiate a better price from the dealer. You may also want to consider that you may receive a better price for the vehicle by selling it yourself.

Financing

It is important to remember that although your dealer may offer you a great interest rate, one of the local lending institutions (banks, credit unions, savings and loans), might offer you a better rate. Be sure to compare the annual percentage rates (APRs). At times, dealers offer very low financing rates on specific cars or models; however, they may not be willing to negotiate on the price of these cars. In addition, you may be required to make a rather substantial down payment in order to qualify for the special interest rate. As a result, it may be more affordable for you to purchase a car at a lower price with higher financing charges.

Some things to consider:

Even though some dealers may offer you credit insurance, which pays off your loan if you should die or become disabled, you may already be covered by the benefits of policies that you already have. Plus, credit insurance is not required for a loan.

Service contracts are available upon purchase of a new car. Although the warranty is included in the price of the car, a service contract costs extra. Manufacturers, dealers, and independent companies offer them.

Before you purchase a service contract, consider:

• What is the difference between the coverage under the warranty and the coverage under the service contract?
• What repairs are covered?
• Who pays for the labor? The parts?
• Who performs the repairs? Can repairs be made elsewhere?
• How long does the service contract last?
• What is the cancellation and refund policy?