CAR BUYING TIPS
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.
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
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
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.
clear windshield in a light drizzle without driver interaction.
you position steering wheel comfortably. Easy access to drivers
be an advantage if many different people will be driving the vehicle.
comfort. Reduces driver fatigue.
MPG. Expensive to fix and repair.
if hot climate area.
while driving. Lures thieves.
and installing car stereo after purchase may be cheaper.
on slippery roads. May cause driver to not pay attention to road.
only on wide open roads.
keep your vehicle from being stolen. Reduces insurance premiums.
must for expensive vehicles.
Instrument Panel Display
readouts are more accurate than analog.
expensive to fix.
only if standard displays are hard for you to read.
tells average speed, how many miles until empty, average MPG.
come in handy at times.
another expensive thing to fix when it does breakdown.
to lock all doors with the push of a single button.
handy; a timesaver.
waste of money.
need for this gimmick.
another way for a thief to get into your vehicle.
to help resale value a bit.
parking lot dings.
manufacturers will void their rust warranty if rustproofing is incorrectly
total waste of money. Modern vehicles do not need extra rustproofing.
when the salesman offers you this one. A can of wax is all you need.
laugher. Modern cars do not need undercoating.
steering during braking. Keeps vehicle from spinning out.
upper body and face in frontal crash.
you to find your destination quickly and accurately (usually).
to fix. Directions can at times be wrong.
in handy, especially for people who can’t read a map. Great feature,
especially for women.
pep to an engine.
than getting a larger engine if more power is what you want.
a matter of preference (i.e. stick -vs- automatic).
steering require less effort.
reduce road feel.
feature, especially for women.
adjusting mirrors a little easier.
another expensive thing to fix when it does breakdown.
driver to see through rear window on cold mornings.
if you live in a cold region.
driver to customize the height & position of the seat.
of the height adjustment capability, recommended for shorter drivers.
Essentially, an extended warranty (also called a “Service Contract”)
does just what it says, it extends a warranty on a new vehicle. As a
general rule, extended warranties are a great deal for car dealers and
a lousy deal for buyers. Why? Because dealers know that an extended
warranty will almost never pay off for the buyer. When the salesman
offers you an extended warranty, refuse it no matter how hard the sell.
Getting the most out of your warranty
The first thing you should know about a new vehicle warranty is that
it is something you pay for – it is not some sort of bonus offered to
you as an incentive to get you to buy the vehicle. Auto manufacturers
know that some things may go wrong with a particular make/model in the
first few years. Therefore, they factor that cost into the price of
Another thing you need to know about warranties is that they are another
“you -vs- them” situation. When a dealer does warranty work,
he is paid for that work by the manufacturer. However, manufacturers
pay dealers a lot less than what a dealer would normally charge a customer.
This kills much of the incentive for a dealer to do warranty work and
is why many people get the “run around” when they need warranty
Also, get your warranty work done at the dealership which sold you the
vehicle. Technically, you are entitled to have warranty work done at
any dealership (which sell vehicles of the same make as yours). However,
if you bought your Ford Escort at “Joe’s Ford” and you take
it to “Jim’s Ford” for warranty work, you can be sure Jim’s
Ford is not going to be too happy to do the work since you bought from
Finally, don’t ever be afraid to get what is coming to you in terms
of warranty work. For every 10 people that allow themselves to be manipulated,
one will stand firm ground and hold out until he gets what he is entitled
to… be one of those people!!
Here are some tips related to warranties…
Buy from a dealer that has a reputation for doing good warranty work.
Ask friends who have purchased from a dealer you are considering or
better, check the dealer’s CSI (Customer Satisfaction Index) rating
by calling the manufacturer (check the web for the number of the local
Always demand a copy of the warranty repair order. Even though you will
not pay for repairs under warranty, you are still entitled to the repair
order showing the work was done. This is an important document to have
in case you have the same problem in the future (i.e. you’ll be able
to show the dealer he did not correct the problem the first time).
If the dealer gives you the “run around”, contact the manufacturer’s
customer service department and complain. The harder you complain, the
better the results. Tell them you’ll never buy one of their vehicles
again if they don’t resolve your complaint. These key words carry weight
in the fiercely competitive automotive market.
About two years into the warranty, have an independent garage thoroughly
inspect your vehicle. Have the mechanic document any problems he came
across (including small problems that may turn into big problems if
not fixed soon) and then take this information to the dealer for the
repairs. This service may cost $150.00 but it is well worth the money.
Note: It is important to have an independent garage do the inspection.
Why? Because if you have the dealer do the inspection, there is a chance
he may not be truthful with you in this situation (because he may be
resistant to doing warranty work). A few months before the warranty
expires, repeat the above.