CAR BUYING TIPS
By Carl O’Reilly

The best way to avoid automobile headaches is to buy a new vehicle; one which has an excellent track record for reliability. New vehicles have few problems (if any) and, in the event something does go wrong, you’re covered by the vehicle’s warranty. However, new vehicles are expensive – on average $26,000.00 and, if you’re like most people, you’ll finance it which then requires full, complete insurance coverage.

General guidelines
You should ask yourself the following questions when thinking about buying a new vehicle…

1. What are my transportation needs?
2. What is my price range?
3. How important is resale value?
4. What about reliability (see ratings tables)?
5. What about safety?
6. What kind of warranty comes with the vehicle?
7. Which local dealers do good warranty work?

Buy or lease?
This is the age old question – should I buy or lease? Before we can answer this question, let’s understand the differences between the two. Buying a vehicle is simple – you make a down payment, you make monthly payments, and, after you’ve made your last payment, you own the vehicle. Leasing, however, works differently – you may or may not make some sort of down payment, you make monthly lease payments, and after your last payment, you return the vehicle to the dealership or leasing company. In a sense, leasing is like renting a vehicle for a long time.

If you are the type that likes to drive the same vehicle for 100,000 miles or more, then leasing is definitely not for you. On the other hand, if you’re the type that likes to get a new vehicle every few years, then leasing could possibly work for you.
As a general rule of thumb, leasing is more expensive than buying but, it is also a little more hassle free. The only real way to know if buying or leasing is going to be cheaper for a particular vehicle is to do a side-by-side comparison using purchase and lease calculators. When using these, pay close attention to the “Total of Payments” figure. You have to remember that this figure represents how much you will have spent in payments. In the case of buying, you’ll own the vehicle after you’ve spent this amount. In the case of leasing, you won’t own the vehicle… even after making all of those payments!

Negotiating for the best price
When buying a new vehicle the game is called “you -vs- the salesman”. The salesman is trying to make as much money as possible and you’re trying to save as much as possible. As you probably know, new car salesmen are very astute. They know every tactic to get you to pay as much as possible for a vehicle.
Unlike most consumer products, the sticker price on a vehicle is negotiable (with the exception of most Saturn models). In theory, there is the absolute minimum a dealer will accept for a new vehicle. This amount is the factory invoice (what the dealer paid for the vehicle) + cooperative advertising costs (the contributing cost to run all those TV commercials, magazine ads, etc.). If the dealer sold a new vehicle for this amount he would make no profit on the car. Obviously, no dealer will accept an “at cost” or absolute minimum offer unless he is desperate to get rid of a particular vehicle because it is taking up valuable lot space (i.e. it is last years model that still has not been sold).

Your objective in buying a new vehicle is to negotiate a price which is as close to this absolute minimum as possible.
Here’s what you do…

1) No matter how much you’re “in love” with the vehicle you’re interested in, never ever let the salesman know this. You must maintain a sort of lukewarm attitude about the vehicle… sort of like “yeah… the car’s pretty nice but I’ve seen better. But then again, if I can get a great price, I might be interested”. If the salesman clues into the fact that possibly this vehicle is your “goal in life”, he’ll have the upper hand in negotiating.

2) If you are planning on trading in your old vehicle, make sure you find out how much it is worth. Consult either the NADA Official Used Car Guide or Edmund’s Used Car Prices.

3) Find out what the dealer paid for the vehicle you’re interested in. However, don’t walk up to the salesman and say “show me the factory invoice for this particular vehicle”. This is crass and will immediately create friction between you and the salesman (plus, you can’t be sure he is really showing you the actual factory invoice). Alternatively, find out on your own (before you go to the dealership) by visiting your local bookstore. Consumer Reports, Edmunds, and Pace all publish a new car buyer’s guide which will tell you what the dealer paid for a particular vehicle.

4) Add $300.00 for the cooperative advertising costs. You can’t get out of this.

5) You now have the absolute minimum for that vehicle. In all fairness, the dealership is a business and therefore must make a profit to stay in business. Therefore, don’t be ridiculous and offer the salesman the absolute minimum. Start by firmly offering the salesman $800.00 more than the absolute minimum (this is generally considered fair and, by the way, don’t let any applicable rebates influence your offer; rebates come from the manufacturer, not the dealer). If the salesman refuses your offer, simply write your name, phone number, and offer on a piece of paper and ask him to call you if he reconsiders.

6) More than likely the salesman will call. He will also more than likely make you a counteroffer which will be slightly higher than your offer (i.e. he’ll try to get a few more bucks out of you).

7) At this point you have to make a decision if the continued haggling is worth saving a couple hundred bucks. If his counteroffer is still way below the sticker price, you may opt to accept it. If continued haggling does not bother you, refuse his counteroffer. The salesman may then tell you he can’t go below this price and say goodbye (and he may be right if the vehicle is in healthy demand). In this case, hold your own and wait a few days to see if he calls back to accept your original offer (i.e. he may get somewhat desperate). If he does, then great – you win. If he doesn’t, you’ll have to either call him back and accept his counteroffer or start the whole routine over at another dealership.

Options
In order to keep the cost of a new vehicle down, you must use restraint when it comes to options. Much of the equipment offered to you when shopping is just that… optional. However, when it comes to safety, two options that you should definitely consider are anti-lock brakes and air bags. These two have been proven time and time again to save lives.
Some options are part of packages and cannot be requested separately. In this case, you must weigh the cost of the package to the total advantage of all of the package’s options.

The following should give you some insight into the various options you may come across while shopping for a new vehicle.