Steps in the Car Buying Process

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Steps in the Car Buying Process

• Personal Finance
• Chapter 23

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Identify Your Needs and Wants

• Think about what you NEED from your car.
• How much will I drive?
• Do you plan to haul a lot of people or gear?
• Will I take the car off-road?
• What features would you WANT if you could afford
  them?

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Identify Your Needs and Wants

• After you have made a list of your wants and
  needs, prioritize them.
• You may have to trade off some of the wants for
  the lower price.

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Determine What You Can Afford

• Before you start shopping for a car, determine
  how much you can afford to spend.
• One general guideline
• You should not have monthly payments that take up
  more than 20 of the money you have left over
  after paying your regular expenses.

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Identify and Research Your Choices

• Select several types of cars that would meet your
  needs and research the features of each
  possibility using places like Consumer Reports.
• Compare the features of the models you are
  considering against your list of wants and needs,
  and note the pros and cons.

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Decide Whether to Buy New or Used

• A new car is much more expensive than the same
  model bought used.
• A new car loses much of its value as soon as it
  is driven off the lot.
• Buying a well-maintained used car can save you
  money.
• But, used cars are likely to need more repairs.

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Decide How You Will Pay For It

• Preapproval is the process of getting a new or
  used car loan pre-arranged through your bank or
  credit union.
• Typically, the preapproval will expire within 30
  or 60 days, and you will then have to reapply.

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Check Insurance Rates

• Check out the insurance rates on your vehicle
  choices.
• If a car is rated as a sports car the cost of
  insurance may be much higher than vehicles rated
  highly for safety.

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Search for Available Vehicles

• Search newspapers, online, and print publications
  for available vehicles in your area.
• Many dealer websites allow you to search through
  their inventory and get prices before going to
  the dealership.

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Test Drive Each Vehicle

• Compare the ride, handling, brakes, features, and
  cost.
• Take your time dont be in a hurry when shopping
  for this purchase!
• Check the dealers reputation as well.

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Check the History of a Used Vehicle

• The Vehicle Identification Number (VIN) is a an
  alphanumeric number that identifies each vehicle
  manufactured in the US.
• It is available on vehicle documents and on the
  dashboard of the car, visible through the front
  windshield.
• You can enter the VIN at www.carfax.com where you
  can purchase a detailed history of the car.
• This will cost you money, but you will find out
  if the vehicle has been in an accident, how many
  times it has been sold, and the mileage readings
  when it was sold.

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Get the Vehicle Checked Mechanically

• After the used vehicle as passed the VIN check
  list and you want to buy it, get it checked out
  by a mechanic.
• Ask for a record showing that the car has passed
  the vehicle emission test, which is a test to
  verify that a vehicle meets the minimum clean-air
  standards.

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Determine a Fair Price

• Decide what price you think is fair before you
  make an offer for a car.
• Kelley Blue Book publishes a pricing guide for
  all models and all years.
• By looking up the model and year of the car you
  are considering, you can find an estimated fair
  price for it.

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Determine a Fair Price

• The sticker price on a car, or manufacturers
  suggested retail price (MSRP) is the price shown
  on the tag in the cars window.
• A fair price for a new car usually lies somewhere
  between the sticker price and the price the
  dealer paid for it (the invoice price).

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• According to the Automobile Association of
  America (AAA), the dealers invoice is
  approximately 90 of sticker for compact and
  subcompact vehicles, 84-87 of sticker for luxury
  vehicles.
• A fair price is likely to be 3-6 over the
  invoice price.

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Negotiate the Price

• Statements like, This is the only car I want,
  or This is just what I am looking for, weakens
  your bargaining position.
• Dont reveal emotions.
• Make your initial offer lower than your top
  price, and then be prepared to negotiate.
• A car-buying service allows you to choose the
  vehicle features you want, and the service will
  located it, negotiate the price, and arrange for
  the delivery (for a fee).

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• Negotiate the price of the new car separately
  from the price for your trade-in.
• After you have settled on a price for your new
  car, then ask the dealer how much they will give
  you for your old car.
• If the dealer will not offer an amount close to
  the value in Kelley Blue Book, you may want to
  consider selling it yourself.

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Dealer Add-Ons

• After you have agreed on a price, the dealer may
  try to increase the purchase price by the use of
  dealer add-ons high-priced, high-profit dealer
  services that add little or no value. For
  example
• Dealer preparation
• Special wax or polish
• Rust-proofing

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Financing Your Car

• Financial Institutions
• Banks, credit unions and even insurance companies
  offer car loans for 36, 48, 60, or 72 months.
• Longer terms mean lower monthly payments, but
  higher total interest paid because you are using
  the money for a longer period of time.

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Financing Your Car

• Car Dealers
• Most new car dealers offer financing
• On particular models during particular times of
  the year they may offer better terms than others.
• GMAC (General Motors Acceptance Corporation) is
  an example of a finance company that makes loans
  on cars through dealerships.
• Most other manufacturers offer similar programs.
• You would make your payments to the finance
  company, not to the dealer.

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Leasing a Car

• A car lease is similar to an apartment lease. It
  is a written agreement that allows you to use the
  property (the car) for a specified period of time
  and monthly payment.
• You do not own the car, you are simply renting
  its use.
• At the end of the lease period, you usually have
  the option to buy the car for the price specified
  in the lease agreement, which is based on the
  expected value of the car at the end of the lease
  term.

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Leasing a Car

• Because interest on car loans is not tax
  deductible, leasing is a popular option.
• People can afford to lease a more expensive car
  than they would be able to buy on credit.
• An advantage is that there is no down payment, no
  trade-in to worry about, and a new car every few
  years, but in the end, you actually own nothing,
  and you may have to pay penalties for excess
  mileage or wear and tear.

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Consumer Protection for Car Buyers

• Warranty- a written statement about a products
  qualities or performance that the seller assures
  the buyer are true.
• A new car warranty provides a buyer with some
  assurance of quality.
• Car warranties vary in the time and mileage of
  the protection they offer and in the parts they
  cover.

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Lemon Laws

• Lemon laws exist in many states and protect
  consumers from the consequences of buying a
  defective car.
• A lemon is a car with substantial defects that
  the manufacturer has been unable to fix after
  repeated attempts.

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• You have a lemon if, in the first year of
  ownership or 12,000 miles
• a) you have taken the car to the dealer for four
  or more unsuccessful attempts to repair the same
  substantial defect or
• b) your car has been out of service for a total
  of at least 30 days

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• Lemon laws allow you to get a new car or your
  money back.
• You need to have good documentation and be
  prepared for a long process. A procedure called
  arbitration and a possible lawsuit may be
  necessary to enforce your states law.

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FTC Used-Car Rule

• People who buy a used car must be concerned about
  whether it has some hidden defects or potentially
  expensive repairs ahead.
• The Federal Trade Commission Used-Car Rule is
  designed to protect used-car buyers.
• The rule does not guarantee that the car has no
  problems, but does require 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.

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• The rule requires dealers to place a sticker,
  called the Buyers Guide on all used cars they
  offer.
• If the As Is box is checked, the buyer must pay
  all repair costs.
• If the Warranty box is checked, the dealer will
  pay to repair the items listed as under warranty
  for the specified period of time.
• Cars bought from a private seller do not have a
  warranty.

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Maintaining Your Vehicle
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Cost of Operating a Car

• Fuel
• The cost of gasoline depends on the fuel
  efficiency of your cars engine and number of
  miles that you drive.
• Larger vehicles and more powerful engines require
  more fuel.
• In an effort to improve gas mileage and reduce
  air pollution from exhaust fumes, you may want to
  buy a hybrid vehicles- they use alternate energy
  sources, like natural gas or battery power, in
  addition to gasoline.

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• Depreciation- a decline in the value of property
  due to normal wear and tear.
• As a car ages, the number of miles driven
  increases, the physical condition begins to
  deteriorate, and mechanical difficulties arise.
• Also, styles and consumer tastes change over
  time.
• All these factors usually cause cars to lose
  market value.

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• Not all cars depreciate very old vehicles in
  excellent condition may appreciate in value if
  people value them as collectors items.
• Depreciation is the single greatest cost of
  owning a car- the cost of gasoline is second.
• A car will retain more of its value over time if
  it is well-maintained and has fewer miles on it
  at the time of sale.

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Registration and Title

• All states charge a fee to register a car title-
  the legal document that establishes ownership.
• A car title lists the legal owner (usually the
  lending institution) and the registered owner
  (you)
• You must pay title fees and sales taxes only at
  the time you buy the car.
• However, you must pay a tag fee each year and pay
  for emissions testing in some states every few
  years.

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Maintenance and Repairs

• The owners manual will tell you what services
  your car needs and how often.
• Typically, you change the oil every few thousand
  miles, have a major engine tune-up every 20,000
  to 30,000 miles, and perform other maintenance at
  scheduled intervals.

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• You should plan for unscheduled repairs, like
  flat tires, broken belts, and leaky hoses that
  can be costly.

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Accessories

• Things that are added to the vehicle, like snow
  tires, floor mats, seat covers, paint features,
  alarm and sound systems.

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Extending the Life of Your Car

• Maintain Fluid Levels
• Many newer cars claim to run 7,000 or more miles
  between oil changes, but changing the oil more
  frequently can add years of life to a car.
• Oil lubricates the moving parts of the engine and
  keeps it clean.
• Oil must be changed to eliminate accumulated dirt
  and sludge, and experts recommend you change the
  oil every 3,000 miles or 3 months.

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Extending the Life of Your Car

• Perform Routine Maintenance
• Dont wait for trouble before checking fluid
  levels and inspecting belts, hoses, and tire
  pressure.
• Inspect tires for wear and replace them before
  tread wear puts you in danger of a blowout.
• These checks may cost a few hundred dollars a
  year, but will save you major repairs in the long
  run.

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Extending the Life of Your Car

• Keep Your Car in a Garage
• If possible, keep your car in a garage
• This protects the vehicle from theft and
  vandalism
• Also protects from weather, which can damage or
  destroy the vehicles finish and even affect its
  mechanical condition.
• Low temperatures make it harder for the engine to
  start, and the starter has to work harder, and
  the charging system is stressed.

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Extending the Life of Your Car

• Preserve the Exterior
• When water sits on the surface of metal, it can
  cause rust.
• Cleaning off road grime occasionally will protect
  the shiny finish.
• Apply protective wax to guard your paint from the
  damaging rays of the sun and from snow-melting
  chemicals spread on streets in cold climates.
• If you live near a coast, wax is essential for
  protecting the vehicle from the salty air.

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• Once paint has begun to oxidize (permanently lose
  its color and shine because of chemical reaction
  with the air) it is very difficult to restore the
  original gloss.
• In most cases a vehicle with oxidized paint must
  be repainted to restore its shine.

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• A polishing compound is a substance that can
  smooth out surface scratches, scuffs, and stains
• They often contain abrasives, which are coarse
  materials that scour or rub away a surface.
• Used gently, an abrasive can remove the top layer
  of paint and will expose shiny paint underneath.
• Rubbed too vigorously, an abrasive will strip the
  paint down to the primer.

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• You also want to repair dents and paint chips
  before rust ahs a chance to take hold.
• You should touch up dings or nicks with vehicle
  paint that matches your color.

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Extending the Life of Your Car

• Preserve the Interior
• The condition of the inside of your vehicle is
  also very important for good resale value.
• The upholstery is the seat-covering material.
• Generally, cloth upholstery is more durable than
  vinyl.
• Although spills and dirt are more difficult to
  clean off of cloth, vinyl can crack, tear, or get
  punctured.
• Leather holds up best, but is most expensive.

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• Floor mats will protect the carpeting
• You can cover the interior of your trunk with an
  old blanket
• Vacuum frequently
• Avoid parking car in the sun to avoid fading

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Follow Wise Driving Habits

• New vehicles have a break-in period, and you
  would need to drive differently during this
  period than later in your vehicles life.

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When the Vehicle is New

• Dont drive for long stretches at a constant
  speed. Vary speed as driving conditions permit.
• During the first thousand miles, drive
  progressively faster, accelerating gradually.
• Avoid fast starts, sudden stops, sharp turns, and
  rapid gear changes to help your brakes get broken
  in.
• Drive at moderate speeds and around town,
  avoiding long trips so your tires can get
  adjusted .

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For All Vehicles

• Dont race a cold engine. Give it 10 to 15
  seconds to warm up to allow the oil to start
  circulating.
• Keep coolants in the radiator during hot weather
  and anifreezes in it during very cold weather.
• When driving a vehicle with a manual
  transmission, shift deliberately, pausing as you
  move through the neutral position.
• Dont shift into a forward gear when your vehicle
  is rolling backward, or vice versa.

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• When stopped in traffic, hold the vehicle in
  place with the brakes rather than engaging the
  clutch, to avoid excessive wear on the clutch.
• Dont turn the steering wheel when the vehicle is
  motionless. This strains the front-end
  components. Turn the wheel only when the vehicle
  is moving.
• Keep the windshield and back window free of ice
  and use a scraper. Running wiper blades over a
  dry surface can scratch the surface.
• Glance at gauges and warning lights as you drive.
  When your vehicle signals you to stop or to get
  something checked, do it right away.
• Always wear your seatbelt.