February 06 Topic - "Auto Buying 101"

Buying a car is probably the second biggest financial decision that an individual will make. There are so many questions to ponder and so many options to choose from. It's important to take a step back and do a lot of research. Financially you need to figure out what is affordable. At that point you must figure out if leasing or buying is best for you. You want to make sure that you think about your specific needs and situations. Next, decide what kind of car will best suit your needs. Gas mileage, four-wheel drive, and safety features are all things that should be considered when making this decision.

01.  Buying or Leasing a Car
02.  Things to know before buying or leasing a car
03.  9 Steps To Buying A New Car
04.  Mistakes You Do Not Want To Make When Buying A Used Car
05.  Questions and Answers

Purchasing a vehicle

Once you have decided what kind of car you are interested in call and set up an appointment for a test drive. The goal of the test drive is to see if this is a car that you would be comfortable in. Test the brakes, listen to the outside noise while driving and be sure to sit in the backseat. After the test drive leave the dealership. Many people read that and wonder why. You need to leave and go to other dealerships and test drive other cars. It is a good idea to drive all the cars back to back. This gives you a chance to compare them when it is still fresh in your mind. A mistake among many consumers is lack of research. People tend to decide that they want a specific kind of car and do not do any research. With the Internet available, it is so much easier to research your options. Many dealerships offer incentives, cash back and rebates for going through their dealership. Researching this information could save you a lot of money.

1. Buying or Leasing a Car

Now that you have decided that you need a new car there is the decision to buy or lease. There are definitely pros and cons to both buying and leasing. Depending on your specific situation you must decide which would suit you better. It is predicted by some automakers that within twenty years most people will be forced to lease their cars because of the increase of new cars. Some of us who have never leased may feel that prediction to be a little scary. To many people leasing seems confusing, constricting and even a bit pointless. It used to be that leases were geared more toward businesses. Now more and more people are beginning to lease for financial and personal reasons. Most people view the greatest benefit of buying a car is that you will own it one day. This is enticing to many people because when you are the owner of the car you have no payments and are free to sell it at any time. Another great benefit of buying a car is that there is no mileage limits and generally your insurance requirements are less than when leasing a car. On the flip side, when buying a car you usually are required to make a down payment and your monthly payments are higher than when leasing.

Unfortunately, cars usually depreciate over time. It is often said that once you drive off the lot take twenty percent off the total price. Of course this is not the case for all cars, but in the majority of cases a car is not something you buy as an investment.

Leasing is the alternative to buying a car. It also has advantages and disadvantages. A great advantage of leasing a car is that you do not have to put down a lot of money. All the out of pocket costs for leasing are less than when buying a car. The other advantage is that you get a new car every few years. On the other hand, you never own a car. Plus, you are restricted to the amount of miles that you can put on the car. If you go over the mileage expected you would be charged per mile. After a couple hundred miles that can really add up and end up costing you hundreds or even thousands of dollars.

There are two types of leasing. The first is known as a closed-end lease. This lease allows you to use the car for a predetermined time and at the end you give it back. If you went over the mileage you pay for it and any other damage that you may have caused. The second lease is referred to as an open-end or equity lease. This lease states that at the end of the lease you must purchase the car for a predetermined price. Individuals who use a lot of mileage often enter into these leases.

In conclusion, buying or leasing a car both have benefits and drawbacks. Everyone has different personal expectations and situations. Leasing may be a great option for someone who likes to have a new car every couple years and does not have the money for large down payments. Whereas, buying will be a better option for someone who does a considerable amount of driving and incurs a significant amount of miles on their car.

2.Things to know before buying or leasing a car

Understand how a lease works and what to look for before going to the dealer.

When you plan on buying for a short period of time the costs will be higher than leasing for a short period of time. However if you plan on leasing for a long period of time the costs will be higher than buying for a long period of time.

If you lease during the warranty of the car you will not be liable for major repairs. Leasing can be done with no money down, however your payments will be higher if done in this manner.

Terminating a lease before the expiration date will cost you a lot of money out of pocket.

A leased car must be returned in the same condition it was given to you in.

Read the fine print before signing any paperwork.

Remember you are charged per mile that you go over on a lease.

Negotiate on your lease. Try to negotiate below the suggested price.

3. 9 Steps To Buying A New Car

1. Getting started
This step consists of figuring out which car is best for you and the price that you are willing to pay. You will need to not only think about the make and model but the color and options you will want.

2. Taking advantage of incentives and rebates
Nowadays the car market is very competitive. Dealers offer different incentives to get you to buy from them. Some dealers offer no interest or cash back. It is important to look around and figure out the best deal for you.

3. Figuring out the price of the car
At dealerships there is a "sticker price" on cars, which is what the dealership would like to sell the car at. However the actual price that the dealership will sell the car at is usually less than that price. You would need to figure out the true market value by doing some research. There are many websites that can give you this information. They include but are not limited to www.kbb.com, www.nadaguides.com and www.edmunds.com. Once you have the true market value you should not pay any more than that. Remember to factor in any incentives or rebates.

4. Finding your new car
Now that you know what kind of car you want and the price that you are willing to pay for it you must find it. There are different ways of doing this. First you can do it the old-fashioned way and go to the dealers in you area to look for the car. Nowadays though many people call, email or go onto the website for the dealers.

5. Picking a car salesman
When buying a new car you usually deal with a car salesman. This is the person you will test drive the car with, negotiate, and if all goes well make a deal with. You want to make sure this is someone who is not pushy, can answer any questions you have, and are looking at your needs and best interests.

6. Trading in your old car
If you are planning to trade in a car with your purchase, then some research needs to be done. Before walking into the dealership you should get the value of the car. This information can be obtained at websites like www.kbb.com. You should know though that most of the time selling it privately would result in a bigger profit. Make the salesperson aware that the sale will be based on what you will be offered for your car. Also let the salesperson know that you will be shopping around. The extra effort you make to get more money for your trade in will pay off in the long run.

7. Negotiating your price
Before talking to a salesperson about prices, you should have knowledge of the fair price. You obtained this information in step 3 when you researched the true market value. Anything at or below the true market value is considered fair. If you feel you want a rock bottom price you can try this strategy. Get prices from at least three different dealerships. Call the two higher dealerships and tell them that you were given this price and most likely they will beat it. The only disadvantage to doing this is that sometimes you get to a price where it is a take it or leave it.

8. Sealing the deal
Once you feel that you have reached a fair price, it is time to finalize the deal. Keep in mind that the price you were quoted is not your final price. The state may have taxes that must be added on plus other fees. Make sure you read over everything carefully and any fees that you do not understand question them. Also do not be afraid to ask for fees to be reduced or waived.

9. Inspecting and taking your new car
You have now signed all the paperwork and are the new owner of your car. The excitement may be overwhelming but make sure you do not overlook anything. Be sure to make sure they're nothing wrong with the car like scratches. Also be sure everything is included you asked for.

4. Mistakes You Do Not Want To Make When Buying A Used Car

Buying more or not enough car that you need: Figure out what you need the car for. A car is a big financial responsibility and you want to be sure that it will fit all your needs.

Not looking at all your options: When buying a used car you have three options. You can buy from a certified pre-owned vehicle, used car dealership or from a private seller.

Not taking the car for a test drive: One of the best ways to see if you like a car is to drive it. Not only will you see if it is comfortable, you will also notice mechanical problems.

Not taking a car to a certified mechanic: It may cost you some money but it could potentially save you hundreds or thousands of dollars.

Offering to give money before you are sure that is the car: Make sure no money changes hands prior to having the car inspected.

Not negotiating: Just because you are buying a used car does not mean that there is no room for negotiating. Do some research and find out what the car is worth and use that as a starting point and go from there. If there is damage to the seats or scratches in the paint all of those points can be used for negotiation.

Not documenting and getting everything in writing.

5. Questions and Answers

1. What options are worth the money?

The options that are worth the money are all-wheel drive, anti-lock Brakes, air bags, parking sensors and electronic stability control.

2. What does leasing a car mean?

It means that you borrow a car for a specified amount of time.

3. What does MSRP stand for?

MSRP stands for manufacturer's suggested retail price.

4. What happens if I terminate my car lease early?

You will be charged early termination leases, which can amount to thousands of dollars. You must read your contract sometimes there are other fees that you will be charged.

5. I have heard that cars are not good investments why is this?

Well, cars generally do not appreciate over time. Mileage and wear and tear on a car depreciate its value. It is very rare to make money on a car, however if the car is taken care of you should break even or at least get market value for it.

6. How do I know if I am getting a good deal?

A good deal in the car market is considered anything at or below the market value. The market value can be found at many websites including www.kbb.com.

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Newsletter 02
Rev.1
February, 2006