Steps before you buy a car
Buying a car is the biggest purchase most people make in their life. Given the fact that most Americans now own their cars for 10 years or more, if you’re in the market for a new or used vehicle, it’s likely been quite a while since you’ve gone through the process. So how do you avoid a financial pitfall and the chance you’ll be stuck in a car you hate? By doing your homework and taking the right steps.
1. Determine how much you can afford
Buying caviar when you’re on a ramen budget doesn’t make sense in the long run and neither does buying a car you can’t afford. Start by determining your budget. If you will be making payments, how much can you pay every month? Can you afford a new car, or will you have to go used? This step will help you to avoid the depression that may come from looking at expensive rides that you cannot afford and will also ground your search in reality as well as inspire you to find the best deal for the amount of money you have.
Consider your down payment as well as your trade-n value when making a budget decision, but don’t forget that owning a vehicle costs more than just a monthly payment. True cost of ownership accounts for fuel costs, the finance rate and length of the loan’s term, vehicle depreciation and durability, and insurance costs.
Also, if you’re shopping for vehicles at dealerships, check your credit yourself first and be careful about too many checking your credit for you, as this can detract from your credit rating.
2. New or used?
For most car buyers, this decision is based on budget alone, but for many, the cost of buying new just isn’t worth it. Many new vehicles lose more than 10 percent of their value as soon as they’re driven off the dealership lot.
Buying a late-model, used vehicle from an owner who has already taken the depreciation hit for you can be a smart investment. However, used cars require their own form of research, as hidden damage or wear can sometimes be difficult to spot.
3. If buying new, will you purchase or lease?
Each situation is unique, but consider both the financial and long-term obligations between purchasing a vehicle new versus leasing it. Purchasing a new vehicle is significantly more expensive than leasing it, but leasing a vehicle carries special requirements such as penalties for going over the lease contract’s mileage limit.
4. Needs vs. wants
Everyone would love to drive a 500-HP sports car that seats just two, but think about the practical implications of the vehicle you’ll purchase. Begin by deciding whether you want a coupe, sedan, pick-up truck, SUV, crossover or something else. Will your needs change or your family grow in the next five years? Do you use your vehicle for work? Can you afford a vehicle that doesn’t feature good fuel efficiency?
5. Must-have features
Once you find what you actually cannot live without, make a list of desirables that will only sweeten the deal. This list is important when you inevitably come down to deciding which vehicle you are most interested in.
6. Do your research
Now that you have a vehicle type in mind, it’s time to start making comparisons and researching your purchase. If your heart is set on a particular model, are there any comparable vehicles that may be a better value for the money? How much should you expect to reasonably pay for the car? Look up vehicle comparison tools available at sites like edmunds.com or kbb.org and research prices, including your local market.
Tips for buying a new car
While buying a new car doesn't contain as many financial pitfalls as purchasing a used one, the process can still be cause for anxiety for many consumers. Avoid a sour shopping experience by doing your research, staying focused and keeping the goal in mind.
Bring a friend or family member: Having an extra player on your team can keep you focused on the task at hand and help you from becoming emotionally attached to the car.
Know what you can afford: Evaluate your financial situation to determine what you can afford and stay within your plan.
What’s your trade worth? If you plan to trade in your old car, check Kelley Blue Book's kbb.com for the value of your trade-in and be as honest as possible about its condition. Used-car prices and trade-in values fluctuate with demand, so take the extra step of taking a look at what cars similar to yours are currently selling for. Keep the trade separate from the new car transaction. The price of a trade-in should have no bearing on the price of the new car.
Research models and pricing: Narrow down your list to three vehicles and do price research on all. There are many sites on the Internet that can help you including edmunds.com.
Do you really need the add-ons? Think carefully about additional options like a sunroof because they can affect the price of the car. Decide ahead of time what extra perks you want.
Is a service contract for you? Service contracts provide for the repair of certain parts or problems. These contracts are offered by manufacturers, dealers, or independent companies. Check to see if they provide coverage beyond the manufacturer’s warranty. Remember that a warranty is included in the price of the car while service contract costs extra.
Avoid focusing only on the monthly payment: Insist on negotiating one thing at a time. Settle on the vehicle’s price first, then discuss a trade-in, financing, or leasing separately, as necessary. Don’t bring up leasing until after you’ve agreed on the vehicle’s price.
You’re in control: If it is not the deal or price you want, be prepared to walk away. Don’t let anyone pressure you.
Tips for buying a used car
If you're in the market to buy a used car, protect yourself with as much information as possible by following these seven steps:
1. Research the models you’re interested in
Go online to find out information on the year, make and model of car you’re interested in. You can find comparison guides and vehicle reviews on sites like kbb.org and edmunds.com, but you can also find much more specific information by reading posts on enthusiast forms. Are there common problems, complaints or weaknesses? Can you expect any major repairs or common defects?
2. Get the money before you go shopping
If you’re planning on financing your used-car purchase, you can save time by securing financing before you’re ready to make a purchase. If you’re shopping for used cars at dealerships, never assume that the dealer will get the best financing for you. Secure a loan with a trusted bank or credit union before considering a dealer’s financing package so you can focus on negotiating a price.
3. Take a test drive
Put the prospective vehicle through its paces. Access the vehicle’s performance in different conditions, such as highway versus local roads, and check basic features like windows and air conditioning. Check for and listen for any sounds that may signal damage or needed repairs
4. Purchase a vehicle history report
The National Motor Vehicle Title Information System, which allows consumers to find information on the vehicle's title, most recent odometer reading, brand history, and, in some cases, historical theft data, makes reports available for purchase from companies such as Carfax and Auto Check. If a report indicates a car you would have otherwise purchased is a lemon or was severely damaged, it's worth the investment.
If you're purchasing a used car from a lot, many dealers provide their customers a vehicle history report at no charge. If you're dealing with a private seller, considering purchasing a vehicle history report to learn as much as possible about the car's ownership history and any major damage. If you plan to evaluate multiple used cars, some vehicle information providers offer discounts for multiple reports.
5. Get a pre-purchase inspection from a trusted mechanic
While a vehicle history report may reveal important information about the car's past, an inspection by a trusted auto repair technician is the best way to learn about the car's present condition. Have the car inspected by somebody you know or have worked with in the past. Don't put too much faith in a technician's opinion if the seller referred you to them.
Getting an inspection will require making arrangements with the seller to get the car to the shop. You will also probably need to provide the seller a hold fee, but consider it money well spent. The fee should be applied to the cost of the car or returned if the sale doesn't materialize. Just make sure you put the transaction in writing and have the seller sign the agreement.
6. Ask the right questions
You might not consider yourself an auto expert, but there is plenty to be gained from asking the seller relevant questions. Are they the original owners? How long have they owned the car? What are their daily driving habits? How many miles did they usually drive? Was it highway driving or around town? Has the car ever been any accidents or fender benders?
Most sellers understand that buying a car is a huge decision, so don't shy away from asking questions that will provide the answers you need to make a confident buying decision. If a seller seems hesitant to answer or tries to dodge a certain question, it's probably a sign that you should continue your car search elsewhere.
7. Inspect for drips and leaks
Even the least-savvy buyer can learn a lot by taking a peak below a car. Look for stains on the ground where the car has been parked that can indicate a radiator or oil leak.
If you notice even a small puddle of brown or green fluid, take it as a sign that the car might be trouble down the road. If you notice that the car has been parked in various places, inspect the ground of the previous parking places for signs of engine leaks that should give you caution.
8. Look at the service records
Sellers who are serious about taking care of their cars will have paperwork that clearly indicates how well the car was maintained. Ask to see service receipts that indicate the oil has been changed, the tires rotated and the radiator flushed.
Other items you might inquire about include receipts to indicate the wiper blades have been changed, the brake pads inspected and/or changed and the tires replaced. Learning as much as possible about the car's history can tell you plenty about how the current owners have cared for it. While this information may not be available at a used-car retailer, it never hurts to ask.
9. Trust your first impression
Fast-food wrappers on the floor and dust on the dashboard won't impact the car's performance, but they can speak volumes about how well the owner cared for a car. A spotless interior is a good indication they've treated it well, but you'll also want to look closely under the floor mats and in the trunk for signs that the car was neglected until it was time for sale.
10. There's no reason to rush
Don't be afraid to walk away from a potential purchase. Take your time to consider the pros and cons. Whether you're dealing with the infamous used-car lot salesman or a private seller in his driveway, avoid falling victim to the "act now or lose this great opportunity" pressure. If nothing else, your willingness to walk away may come in handy when it comes time to negotiate the sale price.
If you plan on buying a used car, a pre-purchase inspection can be the best investment you ever make. If the vehicle checks out to be what the seller purported it to be, you have peace of mind. If the pre-purchase inspection turns up serious issues or other red flags, you've saved yourself from a disastrous investment.
Why is a pre-purchase inspection important?
How much do you trust the person selling the car? Whether you’re buying a used car from a dealership or a private seller, many buyers take the seller’s word at face value or put too much faith in online photos of a vehicle. But savvy consumer is a skeptical one.
While a snappy description and high-resolution photos may focus on the positives of a used car and minimized its negatives, a pre-purchase inspection performed by a competent mechanic can level the playing field and provide an objective evaluation of the car you plan to buy.
Even though comprehensive inspection can cost $100 to $200 (less thorough visual inspections often cost much less), spending that money before purchasing a vehicle helps ensure you won’t be hundreds or thousands of dollars in the hole if a catastrophic mechanical failure occurs or otherwise hidden damage is discovered. A investment in a pre-purchase inspection is an investment in peace of mind.
What does a pre-purchase inspection cover?
A vehicle inspection can and will vary by the type, make and model of used car you seek to buy, but it should cover the following at a minimum:
Engine and chassis VINs checked for matching numbers
Test driving the vehicle for proper function and road worthiness of engine, transmission, brakes and suspension
Engine compression test, if necessary
Drivetrain/transmission for leaks or wear
Switches, knobs and controls checked for proper operation
Power options, such as windows or door locks, to ensure work correctly
Frame and vehicle underbody checked for collision damage, rust, rot, improper repairs or other defects
Body panels, chrome and trim for fit and alignment, as well as damage, rust, dents or dings
Condition of replaceable items such as tires and shock absorbers
Glass, lenses and emblems checked for cracks, chips and scratches
Interior, including seats, headliner, door cards and dashboard, for tears, cracks, wear and/or fading
What do you do with the information?
If the inspection reveals defects, but not enough to warrant breaking the deal, use that information to negotiate the price in good faith with the seller. If something's not adding up, or if a seller is willing to significantly discount the price in lieu of an inspection, walk away.
What to look for in an inspector
Before you look for a used car, call around and ask about pre-purchase inspections with local auto service shops or dealerships. If you’ve established a long-term working relationship with a mechanic or service center, they provide the service for free. Ask about pricing for inspections, what the inspection covers and the typical process for scheduling and conducting an inspection.
Avoid any inspection provider offered to you by the seller or dealership. Although it may save you time and effort, you want an independent third party who can provide an objective evaluation of the vehicle’s condition.
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