Things to Consider When Buying a Car
When an individual buys a car, the individual is essentially buying the transportation that they will possibly rely on for years to come. For most people cars are a major investment, second only to the purchase of a home. Most car buyers intend to have the car for a long while. After all, few people have the resources or options to upgrade their vehicle often, particularly in this economy.
Keeping an Existing Automobile Instead of Purchasing Another Car
The first factor to consider is the motivation behind purchasing a car. For example, if the individual owns a car that is relatively reliable, even if the car is older, they need to weigh the costs of purchasing a new car. If the car owner’s vehicle is paid off, purchasing another car may entail adding a monthly car payment into their budget.
If the individual simply wants another car to enhance their social status, careful consideration should be given to the costs of purchasing another vehicle. In addition to the purchase price and possibility of car payments, insurance costs may rise. For example, if the vehicle to be purchased is a newer model and the car is financed through a bank or finance company, the owner will be required to carry full coverage insurance on the car. With an older vehicle that is paid off, the owner may carry liability only. Not only must the owner consider the possibility of adding a car payment, or a larger car payment, to their existing budget, they must also consider a rise in insurance premiums.
If considering the purchase of a new car, the buyer must remember that the car will depreciate the minute the vehicle is driven off the lot. This means that if the buyer finances the car, as soon as they drive the car home, they will likely owe more on the loan than the car is worth. In addition, payments for a new car may be quite hefty, depending on the terms. Add in the full coverage insurance for a new car and the monthly costs may be quite significant.
Careful consideration must be paid to whether the individual wants to purchase another car or keep their existing car. If their existing car is no longer reliable, the choice may already be made for them. If the car owner is facing a costly repair, purchasing another car may be the most cost effective way to fulfill their transportation needs.
If their existing car runs well and the car is either paid off or the payments are low, the individual must carefully weigh the costs of purchasing even another used vehicle. Having shiny objects that you can barely afford is a far more stressful lifestyle than living below your means and having a safety cushion. It might make sense to keep driving the old car & save up capital for a larger future down payment, especially if you have the ability to fix minor issues when they come up.
For used cars, particularly if the car is five years old or older, the purchaser may be buying a few problems. For example, the timing belt generally gives out at about 75,000 miles in many vehicles. The purchaser can never really be sure how well the car has been maintained, unless, of course the seller produces all maintenance receipts. When the individual keeps their existing vehicle, they are usually familiar with the car and know how the car has been maintained. Careful consideration must be given to whether giving up the existing car for a newer one will be worth the transaction. Will the costs of payments, insurance and maintenance fit into the monthly budget? Weigh options carefully before committing to the purchase of another vehicle.
When Does It Make Sense to Trade In Your Old Car Versus Keep It
Depending on the make and model of the old car, the car may or may not get a good price on trade-in. The car’s owner would be better off keeping the car rather than giving the car up to a dealership on a low priced trade-in. However, some dealers offer specials where they will pay a minimum amount of money for any trade it. If an old car is only worth $1500 according to Blue Book value, and a dealer runs a special where they will consider any trade-in to be worth $3000, it makes sense to trade in the old car. If a dealership offers considerably less than the old car is worth as a trade-in, it probably makes more sense just to keep the car. The car owner may sell the car as a private owner and receive a selling price closer to the actual value of the car.
When a buyer is in the market for a new car, or a newer used car, they would benefit from shopping their old car around to different dealers to see which dealership will give them the best trade-in price on the old car. If the old car has some value, but no dealership offers a decent trade-in for the old car, the old car’s owner should consider just keeping the car. Even when a dealership offers a “fair” trade-in value, the old car owner will most likely receive more for the car if they sell the car as a private owner.
Buying versus Leasing
Another factor to consider when planning to purchase a car, particularly a new car, is whether to lease or buy the vehicle. Though many individuals believe that if a vehicle is leased, when the lease expires, they have nothing to show for the months of payments and the downpayment, if applied. However, there are many advantages to leasing a new car. The first advantage is that the purchaser does not shoulder all of the costs of initial depreciation. When a new car is purchased, the car immediately depreciates when the owner takes possession of the vehicle. If the owner attempted to sell the car a week after they purchased it, the sales price for the car would be much less than the price they paid. When an individual purchases a car, they assume all of the costs of depreciation, as well as rest of the value of the car.
Essentially, when an individual leases a car, they are paying ONLY for the initial depreciation and not for the car’s full value. This translates into lower payments than if they purchased the car. Even if the individual has excellent credit, their car payments will be higher to purchase a new car than if they leased the car. This is mainly due to the fact that when a new car is leased, only the initial depreciation is charged to the lessee.
When an individual leases a car, the downpayment is generally low. In fact, many times the lessee may negotiate the downpayment with the dealer and, in some cases, the downpayment may even be eliminated. However, as with purchasing the car, the more of a downpayment that is applied to the lease deal, the lower the monthly payments will be.
Finally, when the lease has run its course, the individual simply returns the car to the dealer and selects another car to lease. A car lease will extend for a term anywhere from two to four years. At the end of the lease, the return of the car to the dealer is simple and straightforward. There is no haggling or selling involved and the transaction is a smooth one. The lessee does not need to be concerned with getting a good trade-in price for the car.
The main advantage to purchasing a new car versus leasing it is that when the car is paid off, the individual owns the car. However, the car owner has shouldered the entire cost of initial depreciation, as well as the depreciation that has occurred over the course of the loan. If the individual had less than stellar credit when they purchased the car, they were likely charged a high interest rate on the loan. This likely translated into payments that were much higher than if they would have leased the car, and the payments may have even extended over five or more years.
When considering the purchase of a new car, consider leasing a new vehicle. Leasing a car alleviates much of the stress and trouble of owning a car, particularly if a new car is necessary every few years.
New Car versus Used Car
When considering the purchase of a car, the individual has the choice of purchasing a new or used car. Buying a new car has its advantages, such as the fact that the car has never been previously owned. The car has that “new car smell” and everything about the car is brand new. The engine is clean and the interior has no stains, burns or defects. However, the individual who purchases the new car pays a much higher price for the car than if they had purchased the same make and model used.
Though purchasing a used car means that there may be imperfections left behind from the previous owner, the cost of ownership is much less than for a new car in several ways. The advantages of purchasing a used car instead of a new one include:
There are several advantages for purchasing a used car instead of a new car. However, purchasing a used car does have a few disadvantages, too. For example, the car will no longer be under any type of warranty. The car may have significant wear and tear on the engine, especially if the car has been used as a fleet vehicle or owned by an individual who traveled a great deal, such as a sales professional. When purchasing a used car, purchase a car that is only two or three years old. Consider the mileage. On average, cars clock about 12,000 miles per year. If a three year old car has over 100,000 miles on the engine, the car probably is not a good bet.
A two year old used car should have about 24,000 or 25,000 miles on the engine and a three year old car should have no more than 40,000 miles on the engine. Additionally, the make and model is a consideration. Some cars handle high mileage better than others. For example, the Toyota Camry is known as a car that handles high mileage quite well. Some owners have clocked over 300,000 miles on their older Camrys.
Though purchasing a used car may not provide the buyer with the same thrill as purchasing a new car, purchasing a used car has many advantages in terms of cost.
How to Make Sure to Buy a Quality Used Car
One way to ensure that a car buyer purchases a quality used car is to purchase a used car that is certified by a manufacturer. For example, Toyota offers certified used cars at their dealerships. These used cars are inspected and repaired, if needed. Certified used cars will often be sold with an abbreviated warranty, such as a 90 day warranty. If the purchaser has any problems with the certified used car, they are able to return the car to the dealership for repairs or replacement. Certified used cars may cost a little more than buying a car from a private individual. However, the peace of mind resulting from purchasing a certified used car from a reputable manufacturer or dealer gives the buyer a level of protection against a bad used car deal.
When the buyer is ready to purchase a new or used car, there are many factors to consider before meeting with a salesman or a private seller. By spending some time doing a little preparation work, the buyer will be able to save money on the purchase price of the car, on the loan interest rates and on insurance premiums. With a little forethought, the buyer will be able to make an informed choice about the type of vehicle they need. Purchasing a car need not be a stressful experience. With a little homework and preparation, the buyer will be able to successfully navigate the process.
How to Prevent Buying a Lemon
When individuals purchase a used car, it is important that they take precautions against buying a lemon. A lemon is a car that has problems that cannot be resolved. For example, if a car has been through a flood and has undergone extensive water damage, this problem may surface in many ways for years to come. The engine and the electrical system may develop problems related to the flooding. Because newer cars heavily rely on computer sensors, these sensors may be damaged beyond repair due to water damage. Unfortunately, many cars damaged from Hurricane Sandy had their titles scrubbed and were later sold off at auctions without disclosure!
A car that has been through a flood is just one example of a lemon. Manufacturer defects may account for problems, as well. When considering the purchase of a used car, there are ways to prevent the purchase of a lemon. One way is to examine the vehicle history report from an agency such as Carfax. If the car has had damage, such as flood damage, or if the car was previously totaled, these issues will show up on the vehicle history report. If the potential purchase is through a car lot, the individual may ask to see the vehicle history report prior to purchase. However, be prepared to walk away if the salesperson does not wish to disclose the report.
Purchasing a used car directly from the owner allows the purchaser to have a conversation about the car. The purchaser will be able to ask direct questions about why the seller is selling the car. The purchaser is able to ask about any problems with the car. Those who are skilled at picking up nonverbal signals may find that questioning the owner of the car is helpful in identifying potential issues with the car.
When considering the purchase of a certain used car, perform as much research as time will allow on that particular make and model. By researching a particular make and model, certain patterns may develop. Reviewers and owners of the car may have first-hand information about repairs needed on the car, recurring problems and recalls. Read professional reviews from sites like Edmunds.com and ConsumerReports.com. Find out everything possible about that particular make and model before making the purchase. Research lemon listing sites to see if that particular make and model is listed. Services like Carfax show background information on automobiles.
Finally, when inspecting the used car prior to purchase, check for signs of water damage. If the car has been through a flood, there may be telltale signs, such as mud in strange places or water stains in places such as the trunk. If a car has been in a flood, many issues will probably manifest throughout the life of the vehicle. Some problems that are seemingly unrelated may surface. For example, one individual purchased a vehicle that had been flooded. The owner was forced to replace the speedometer four times over two years. Though the problem was likely related to the sustained water damage, the problem was not identified as being the result of a flood until the owner was ready to sell the car. Be sure to do the homework required to weed out the lemons prior to purchase. When an individual purchases a lemon, they may find out only when they attempt to sell the car.
Whether the car buyer is considering a new car or a used car, one important factor in the decision must be fuel costs. As gas prices rise in the U.S., fuel costs have become a salient consideration when purchasing a new or used car. Inefficient vehicles, such as large SUVs and trucks, not only cost more for fuel to operate, but in many areas, these large gas-guzzlers are considered environmentally irresponsible. No matter the car buyer’s views on the environment, driving a fuel efficient car will save money. Over the life of the car, fuel costs must be considered. This means that the car purchaser must do their research and select a car that will be affordable to operate.
Energy efficient cars are generally smaller than full-sized or luxury vehicles. Very efficient cars include those that operate with electricity, such as hybrid models. Though most hybrids, such as the Prius, are small and lack power when compared to standard efficiency vehicles, more hybrid models are currently being developed. GM will soon produce a hybrid Cadillac for those who would like energy efficiency in a luxury model. The main drawback when considering the purchase of a high efficiency model is the cost. Hybrid and other high energy efficient models generally cost significantly more than standard efficiency models.
Car buyers do not necessarily need to purchase high efficiency models to save money on fuel. Four cylinder engines are more fuel efficient than six cylinder engines. The smaller the car, the more fuel efficient the car will be. Cars are more energy efficient than trucks and SUVs. If the car buyer travels a great deal each week, they must consider the costs of fuel to operate the vehiclel. Sticking to smaller cars and foregoing the SUVs and larger trucks is one way to ensure fuel savings for long commutes.
Each vehicle in the U.S. is evaluated for its energy efficiency, though not all vehicles use these evaluation in their marketing materials. Car purchasers must research the make and model of the car they are considering to find the two fuel efficiency ratings. Highway MPG is an estimate of the miles per gallon the vehicle will get while traveling on the open road, such as a highway. City MPG is an estimate of the fuel efficiency of the vehicle when driving under stop-and-go conditions. Car buyers need to take the extra step of researching the fuel efficiency rates of any car they are considering for purchase.
Fuel costs will likely rise over time. In addition, social pressure to reduce each individual’s carbon footprint will become even more pronounced. Car purchasers must consider that the car they buy today will likely be the one they are fueling two years from now. Selecting the most fuel efficient model available will keep operating costs in control. Guard against out-of-control fuel prices of the future by purchasing a smaller, four cylinder vehicle or a hybrid, whether considering a new or used vehicle.
Ways to Lower Insurance Costs
No matter if the car buyer purchases a new car or a used car, the car will need to be insured. Unless the purchaser pays cash for the vehicle, they will be required to carry a full coverage policy in order to protect the lender’s interests in the case of a collision, weather damage or if the car is stolen or vandalized. If the car buyer purchases a used car with cash and no portion of the purchase price is financed, the new owner may carry liability only insurance. In most states, at least a liability policy is required. However, depending on the age of the car, a car buyer who pays cash for the vehicle may still want to consider full coverage. In “at fault" states, liability covers only the other driver and vehicle in case of an accident. In “no fault” states, liability will cover only the minimum required for the policy for property damage and bodily injury. If the car is five years old or newer, the car purchaser probably needs to carry full coverage insurance to make sure they are able to cover the cost of repairs in case of an accident or damage.
Whether the car purchaser opts for full coverage or liability insurance for their newly purchased car, shopping around and comparing rates for similar policies with various insurance carriers is essential for lowering car insurance costs. Car insurance premiums greatly vary between companies for similar policies. With the Internet, comparing similar policies for several insurance companies is quick and easy. Before the Internet, the task of comparing rates would entail calling each company for a quote for a specific policy. Now, with the Internet, comparisons between companies may be made within minutes. Those who seek to insure a newly purchased car will need insurance for the car. Shop and compare the rates for several companies and choose the company that offers great rates for their products.
Many people may think that the longer a consumer stays with an insurance company, the better rates they will get as a “loyalty” benefit. Unfortunately, this is not true. In fact, the longer a consumer stays with an insurance company, the less likely they will be to receive discounts and the more likely they are to having extra charges tacked onto their policies. Review insurance policies each year prior to renewal. Make sure that extra coverage has not been added without your knowledge. Renewal time is a great time to shop around for insurance. The car owner will likely find that switching to another company will save them money on their insurance costs, especially if they have been with their insurance companies for years.
Ways to Negotiate Sales Prices and Online Alternatives to Haggling
Many Americans do not like to haggle for a better deal. However, haggling is commonplace in some cultures. If a car buyer will haggle over the price of a new or used vehicle, they stand a chance of obtaining a better purchase price for the vehicle. Haggling simply means that the car purchaser makes a counter-offer to the dealer or seller once they have presented the purchaser with a selling price. Haggling is simple negotiation. Dealers in particular have some bargaining leeway when it comes to the purchase price of their new and used vehicles. When purchasing a car, the purchaser has nothing to lose. They should attempt to negotiate a lower selling price. Even a $500 break is often equivalent to a car payment. Car buyers should always attempt to gert a better price than the asking price of the seller.
For those who are uncomfortable with the prospect of haggling for a better price, some websites offer services that allow users to comparison shop for the same make and model of vehicle. Sites such as CarsDirect and TrueCar allow users to search for a specific make and model in their geographical area. The search results provide the asking prices of various sellers and dealers. The site user may then contact the seller or dealer and even offer a lower price, if the so choose.
In addition, sites such as CarsDirect are a one-stop-shop for the car buyer. The buyer may locate their car, purchase car insurance and apply for loans right from the site. Sites like TrueCar show the user the amount others have paid for the make and model they are searching for. Many people may prefer haggling over email or simply comparison shopping for a good selling price instead of haggling with a salesperson or a seller over their asking price for the car. No matter the preference of the buyer, they should try to obtain the lowest selling price for the vehicle they choose. Online alternatives make the process less personal and more efficient. Use such sites to see what others are paying for the same make and model regardless of comfort level of face-to-face haggling. Some people may simply be intimidated with the prospect of being on the seller’s own turf when attempting to negotiate. Sites like CarsDirect and Truecar level the playing field and ensure that the dealer or seller is not able to influence the buyer as with a face-to-face interaction.
Even if the purchaser is a talented negotiator, sites such as CarsDirect and TrueCar provide a baseline of data that they should arm themselves with before confronting the dealer or seller. No matter how it is accomplished, buyers are advised to utilize all resources and become educate with regards to an acceptable purchase price before dealing with the seller or salesperson. Just remember that the asking price is often set with room built in for negotiation.
In some cases the car you want most might not be available with all the features you want. For that reason it can make sense to be willing to consider used cars as well, or to pick out 2 or 3 different cars, such that you can compare the best deals for them and chose the one which fits your needs while being the most affordable after you factor in the full operating costs and your typical usage patterns.
Should You Accept Dealer Financing? Learn How to Save on a Loan
Generally, a car buyer should not accept dealer financing, unless there are compelling rebates that more than offset the typically higher interest rates. Even if the buyer has an excellent credit rating, the dealer’s finance company will likely charge them a higher interest rate than if the buyer were to obtain a loan from a bank or credit union. If the purchaser has less than perfect credit, the dealer finance company will likely charge a very high interest rate for the loan. Dealer financing with 18 percent interest are not uncommon for those with poor or no credit.
Just like with car insurance, shopping around for good loan rates will save the car buyer a great deal of money on their loan. The lower the interest rate, the lower the overall cost of purchasing the car. Better still, if the purchaser is able to pay cash for the car, they will not need a loan. This, however, requires that the purchaser save the purchase price before embarking upon the purchase of the vehicle. If the purchaser is able to pay cash, there will be no car payments. The purchaser will have the option to carry liability or full coverage insurance and the buyer will only pay the price for the vehicle. They will pay no interest charges or fees associated with a loan. Clearly, a cash transaction is the most preferred method of financing a car.
However, most people are not prepared to pay the full purchase price in cash when they buy a car, financing at least some portion of the vehicle. Still, a large downpayment will minimize the loan and keep car payments down. For those who must finance their vehicles, taking a few months to clean up any credit problems before applying for the loan is advisable. Obtain credit reports from all three credit reporting agencies, which you can do for free at AnnualCreditReport.com. Challenge any information that is not recognized or verifiable. The company that has placed the entry on the credit report has 30 days to respond to a challenge with proof that the creditor owes them what the entry claims. If the company does not respond within 30 days, the entry is removed from the credit report.
Once credit reports are cleaned up, the buyer should shop the loan around to various banks and finance companies. With good credit, the purchaser will be more likely to obtain a low interest rate for the loan. Factor in a healthy downpayment so that an amount less than the full purchase price must be financed, and the car purchaser will obtain a better interest rate and lower car payments, too. Generally speaking, the lower the amount borrowed & the shorter the loan term, the less interest you have to pay on a loan.
What Time of Year to Buy to Get the Best Deals
Many people believe that the best time of year to purchase a new car is in September. For example, the best time to purchase a 2012 model is in September of 2012. This is because the next year’s models are released in September of the preceding year so in September of 2012, the 2013 models are showing up at the dealerships. The dealers will make better deals knowing that they need to clear out the inventory to make room for the 2013 models. Dealers will often offer “year end” sales on the previous years’ models.
Edmunds recommends that the best time of year to purchase a new car is during the holiday season. The reasoning for this is that dealerships are not selling new cars during this time of year and the odds of getting a good deal are in the car buyer’s favor. Edmunds also recommends that buyers will get a better deal if they purchase a new car at the end of the month.
One responder to a survey about when the best time of year to buy a car suggests that during the Superbowl is the best time of year to buy. This person apparently went into a dealership when the salespeople were gathered around a TV watching the game. The salesman gave the purchaser a great deal in record time, and did not try to sell the customer any extras, simply to get back to watching the game. Though this study is anecdotal, it does give the car buyer something to think about.
Other car experts believe that any time of year is the best time for purchasing a car. The fact is, car purchasers may negotiate good deals on new and used cars any time of the year. Dealerships will often offer special sales on particular makes and models, or they may have sales over a period of time. As long as the buyer does their homework and shops around for the best deals, and they are able to negotiate a good purchase price, any time of the year is right for buying a car.
Other Important Considerations
Manual versus Automatic
Many car buyers do not consider the question of manual versus automatic transmission when they being researching to find a car to purchase. They may select a car only to find that the car has a manual transmission. If the purchaser does not drive a manual transmission, they can either quickly learn or move on to find a car with an automatic transmission.
If the buyer purchases a car with a manual transmission and does not yet know how to drive this type of car, they might damage the clutch in their attempts to learn, racking up a large repair bill before they even begin to enjoy the new car. However, a friend or family member will likely teach the buyer to drive a manual before they purchase the car. Regardless, the type of transmission is a consideration when purchasing a car.
A manual transmission vehicle will get better gas mileage than an automatic transmission. However, the trade off is that a manual transmission is more cumbersome to drive in heavy city traffic. With the constant clutching required to shift and down shift, automatic transmissions are often preferred for driving in heavy city traffic, especially in cities that are hilly like San Francisco.
People who drive manual transmission vehicles often claim that a manual gives them a sense of control over the vehicle. This could be that the driver has more control by deciding when to shift to a higher or lower gear. However, a down side of the manual transmission is that eventually the clutch will need to be replaced. Clutch replacement is a standard part of maintaining a manual transmission vehicle. Clutch replacement can be a fairly costly procedure. The car purchaser must weigh all considerations when choosing between a manual or automatic transmission.
Forward Family Plans
A consideration when purchasing a car is how the car will fit into life plans in the future. For example, if the buyer is engaged and plans to get married within a year, they might not want to consider a two-seater sports car. If the car buyer has children, their decision should be influenced by the needs of the children. A minivan or SUV might be the proper transportation for a family with children that will need to be shuttled to and from school and activities.
Car buyers should take an inventory of what their life may look like within the next year or two. If there is a chance that they will have a family within that time, they might want to consider purchasing a vehicle that is family-friendly.
If the car buyer is facing “empty nest” syndrome, now might be the time they invest in that sports car. Regardless of the life circumstances, these circumstances need to be considerations when deciding the type of vehicle to purchase.