WHAT YOU NEED TO KNOW Buying a Vehicle

The Car Buying Process 1. Identify Your Needs and Wants  What do you need to do with the car?  How much will you drive? (Consider fuel efficiency.)  Do you plan to haul a number of people or gear?  Will you take the car off road?  What features would you like to have on the vehicle?

Questions to Ask Yourself DECIDING ON THE RIGHT PURCHASE What level of quality do I want? (low, medium, high) What level of quality do I need? What types of service and repairs does the dealer offer? Should I wait until there is a sale on the type of car I want?

More Questions to Ask Yourself DECIDING ON THE RIGHT PURCHASE Should I buy a new or used car? If I buy a used car, should I buy it from a dealer or from a private party? Should I choose a car with a well-known name even it costs more? Do I know anyone who owns the type of car I want? Are the warranty and service contracts on the car comparable with the warranties and service contracts on similar cars? What do consumer magazines say about the car?

The Car Buying Process 2. Decide what you can afford.  Before you shop, decide how much you can afford.  General Guideline: You can afford no more than 20% of your income after you pay for all your regular monthly expenses

Questions to Ask Yourself DECIDING TO SPEND YOUR MONEY Do I really need this item? Is it worth the time I spend making the money to buy it? Is there a better use for my money right now?

The Car Buying Process 3. Identify and Research your choices.  Select several types of cars that would meet your needs and wants.  Look for articles about cars…Consumer Reports  Compare the features of the models.  Note the pros and cons for each model

The Car Buying Process 4. Decide whether to buy new or used.  Cost is a major factor in this decision.  Things to consider:  A new car is more expensive.  A used car may require more repairs.

The Car Buying Process 5. Decide how you will pay for it.  Find out how much money you will be qualified to borrow before visiting the dealership.  Preapproval is the process of getting a car loan prearranged through your bank or credit union.  To get preapproved, fill out an application. Based on your information, the bank will decide how much to loan you.

The Car Buying Process 6. Check Insurance Rates.  Check out the rate on your vehicle choices.  A car rated as a ‘sports car’ will likely mean higher insurance costs than for those vehicles that are rated higher for safety and other features.

Types of Auto Insurance Coverage Liability (40–50% of premium) Bodily injury coverage Property-damage coverage (e.g., to another person’s car) Collision (up to 30% of premium) Pays for the physical damage to your car as a result of an accident Limited by deductible Comprehensive (about 12% of premium) Pays for damage caused by vandalism, hailstorms, floods, theft, etc. Medical Covers medical payments for driver and passengers injured in accident Uninsured motorist Reimburses you for bodily injury in accidents caused by uninsured drivers Towing and labor Rental reimbursement Pays a specific amount per day to rent a car while yours is being fixed

How Insurance Rates are Set Personal characteristics Age Sex Marital status Personal habits (e.g., smoking) Type and frequency of vehicle use (e.g., commuting) Geographic location (often classified by zip code) “Rural” usually lowers rates, “urban” usually raises rates Driving record Accident with death, bodily injury, or property damage in excess of $400 may trigger surcharge on premium for 3 years Number and kind of moving violations (and total of associated points) Number of years insured with the company Vehicle characteristics Damage, repair, and theft record of type and model of car Age of car

The Car Buying Process 7. Search for available vehicles.  Search online for cars available from dealers and individual sellers in your area.  Many areas offer a free print publication such as Auto Trader.  Make a list of the available vehicles that match your criteria, including their features and prices.

The Car Buying Process 8. Test drive the vehicles.  Sometimes descriptions are different from the actual car.  Compare the ride, handling, braking, features, and cost.  Listen for noises that might indicate a problem.  Check the dealer’s reputation before buying.

The Car Buying Process 9. Check the history of the a used vehicle.  A vehicle identification number (VIN) identifies each vehicle manufactured and sold in the U.S.  Use the VIN and enter it onto the online search tool CARFAX. You will get the history of the car.

The Car Buying Process 10. Get the vehicle checked mechanically.  Hire a mechanic to have it inspected.

The Car Buying Process 11. Determine a Fair Price.  Decide what price you think is fair.  Kelly Blue Book Value publishes a popular pricing guide for all models and years.  Sticker Price: manufacturer’s suggested retail price is shown on the price of tag of the car’s window.  Invoice Price: The price the dealer paid for the car.

The Car Buying Process 11. Negotiate the Price.  Make up your mind that you will not be pressured into paying more than you think is fair.  You can use a car buying service that allows you to choose the vehicle features you want, and a professional car buyer takes over the price negotiation for you. 12. Be aware of Dealer Add-Ons:  Services that add little or no value to the car such as cleaning the car, checking the tires, dealer preparation, etc.

Buying a Used Car BEFORE you begin shopping…  Decide how much you can afford to spend.  Decide which car models and options interest you.  Research the reliability of the model car you want.  Find out where the nearest repair facility.  Find out whether parts are readily available.  Find recent prices used car “blue books”.  Shop for financing.  Factor in the costs of the loan and the cost of the maintenance.

Buying a Used Car WHILE you shop…  Find out the reputation of the dealer.  Find out what type of warranty comes with the car.  Find out what type of service contract comes with the car.

Where to Buy a Used Car New Car Dealers:  Provide quality used vehicles.  Service department available.  Higher prices than other sources. Used Car Dealers:  Specialize in previously owned vehicles.  Limited warranty.  Vehicles may be in poor condition.

Where to Buy a Used Car continued-- Private Parties  May be a good buy if vehicle was well maintained.  Few consumer protection regulations apply to private party sales. Other Sources  Auctions, Sales by government agencies, auto rental companies, and on the Internet.  Most of these vehicles have been driven many miles.

Shopping for a New Car Decide which car model and specific options. Find out the invoice price and the true cost to the dealer. Decide how much you are willing to pay the dealer above the invoice price. Make your offer to as many dealers as possible. Compare the final sales price with other dealers and buying services. Compare financing costs from various sources.

Shopping for a New Car continued- - If you already have a car, find out its value independent of the dealer’s trade-in offer. Try to sell your old car yourself (dealers give better deals without a trade-in). Decide whether you need a an optional service contract or credit insurance.

Financing Your Car 1. Financial Institutions  Banks, credit unions, and insurance companies offer vehicle loans.  Loans are often for 36, 48, 60 or 72 months.  Longer terms mean lower monthly payments, but a higher interest rate.  Compare rates and terms before selecting a loan.

Financing Your Car 2. Car Dealers  Most new-car dealer offer financing.  They may offer you better terms on certain models at particular times of the year.  Finance companies make loans through dealerships.

Financing Your Car 3. Leasing a Car  Similar to an apartment lease.  A written agreement that allows you use the property (the car) for a specified period of time.  You don’t own the car.

Leasing a Vehicle Advantages Smaller initial outlay than down payment when buying on credit Monthly lease payments may be less than monthly finance payments Lease agreement provides detailed records for business purposes Oftentimes, all service charges related to maintenance are included in lease, so there is no additional outlay of money for regular maintenance Disadvantages No ownership interest in the vehicle Must meet requirements similar to applying for credit Additional costs occur (such as for extra mileage, certain repairs, ending lease early) Discussion of Leasing vs. Buying You must decide which option makes the most sense for your situation. Do you have cash available for a down payment? How much of a monthly payment can you afford? How long do you plan to keep the car?

Consumer Protection 1. Lemon Laws  Exist in many states that protect consumers from the consequences of buying a defective car.  LEMON: A car with substantial defects that the manufacturer has been unable to fix after repeated attempts. 2. FTC Used-Car Rule  Requires that dealers fully disclose to buyers what is and what is not covered under the warranty.

Maintaining a Vehicle Costs of Owning a Car 1. Fuel/Gasoline 2. Depreciation: a decline in the value of property due to normal wear and tear. 3. Interest on the Loan (if buying on credit) 4. Car Title and Car Registration 1. Car title: legal document that establishes ownership of the vehicle. 2. Car Registration: license tag fee 5. Maintenance and Repairs (Oil, other fluid, tires) 6. Accessories: GPS systems, paint features, wheel covers, etc.

Maintaining a Vehicle Extending the Life of a Car 1. Maintain Fluid Levels 2. Perform Routine Maintenance 3. Keep your car in a garage: Protects from theft, vandalism, and weather. 4. Preserve the Exterior 5. Preserve the Interior