CHAPTER 23BUYING A VEHICLE

Steps in the Car Buying Process

Identify your needs and wants

• What do you need to do with your car?

• Will you drive a lot of miles?

• What features would you like to have?

• You may have to trade off some of the wants for a lower price

Steps in the Car Buying Process

Determine what you can afford

• General Guideline: monthly payments should be no more than 20% of money left over after paying regular monthly expenses (rent, utilities, credit card payments etc) or you can utilize the 20/10 rule (total debt monthly payments should not be more than 10% of your monthly net income)

• Cost of maintaining car (gas, oil etc)

• Insurance

Steps in the Car Buying Process

Identify and Research Your Choices

• Compare features of the models against list of wants and needs

• Compare models with the same options

• List pros and cons of each model

Steps in the Car Buying Process

Decide whether to buy new or used

• Cost is a major factor in this decision

• New car loses much of its market value as soon as it is purchased.

• Used car may need more repairs.

Steps in the Car Buying Process

Get credit pre-approval

• Allows comparison of total costs of buying, including credit rates

• Fill out an application at credit union or bank

Steps in the Car Buying Process

Research Insurance Rates

• Call Insurance Agents and compare rates with at least three different companies

Steps in the Car Buying Process

Search for available vehicles

• Newspaper ads

• Internet• Craigslist• Autotrader• Cars.com• Dealer websites

• List cars that meet your specifications, features, prices

Steps in the Car Buying Process

Test Drive Each Vehicle

• Compare ride, handling, braking, features and costs

• Try all features

• Look for rust and mismatched paint which could indicate car has been in an accident

Steps in the Car Buying Process

Check the History of a Used Vehicle

• Each vehicle has a unique VIN (vehicle Identification number) that identifies the car

• VIN is on the dashboard in front of the driver and on all vehicle documents

• Request a CarFax report from the previous owner

Steps in the Car Buying Process

Get the vehicle checked mechanically

• Have the car checked out by a mechanic that you trust

• Vehicle Emission Test- test to verify that a vehicle meets the minimum clean-air standards

• Safety Inspections

Steps in the Car Buying Process

Determine a fair price

• New Car sticker price or MSRP (manufacturer’s suggested retail price)

• Invoice Price-price the dealer paid for the car

• Subtract any destination charges

• Make sure you understand and look up any charges that do not sound right

Steps in the Car Buying Process

Negotiate the price

• Stick to the facts

• Negotiate the price of the new car separately from the price of your trade in.

Steps in the Car Buying Process

Dealer Add-Ons

• High-priced, high profit dealer services that add little or no value to your car

• Tell the dealer you do not want these services on the car and remove them

FINANCING YOUR CAR

Financial Institutions

• Banks

• Credit Unions

• Online lenders

• Compare rates and terms

FINANCING YOUR CAR

• Car Dealers

• May offer better terms on particular models and at particular times of the year- sponsored by manufacturers or their financing agencies

LEASING A CAR

• It is a written agreement that allows use of the car for a specified time period and monthly payment

• Usually have option to buy the car at the end of the lease period

• Can lease more expensive car than could buy on credit

• Always have a car payment but a good way to always drive a new car

Consumer Protection for Car Buyers

• Warranty- states what manufacturer or dealer will do if car does not perform as it should

• Lemon Laws-for cars needing repairs; a lemon is a car with substantial defects that the manufacturer has been unable to fix after repeated attempts.• 4 times to fix same problem in first year or

12,000 miles• Out of service for at least 30 days in first

year/12,000 miles

Consumer Protection for Car Buyers

• FTC Used Car Rule- requires used car dealers to inform consumers ahead of purchase about who will be responsible for paying for certain repairs if they occur after the sale

• Buyer’s Guide Sticker• As is (buyer pays for all repairs)• Warranty (dealer pays for some repairs for

specific time)

Cost of Operating a Car

• Gas and Oil

• Depreciation

• Registration, Title, Sales Tax, Personal Property Tax

• Maintenance and Repairs

• Accessories

Extending the Life of Your Car

• Maintain Fluid Levels

• Perform Routine maintenance

• Keep Your Car in a Garage

• Preserve the Exterior

• Preserve the Interior

• Follow Wise Driving Habits