A new car is second only to a home as the most expensive purchase many consumers make. According to Kiplinger.Com the average price of an automobile was $31,228 in 2013, a record high. That’s why it’s important to understand how to make a smart deal on your new purchase.
Think about what car model and options you want and how much you’re willing to spend. Spend time doing some research. You’ll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal.
Negotiations often have a vocabulary of their own. Here are some terms you may hear when you’re talking price.
If you decide to finance your car, be aware that the financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get. Contact lenders directly. Compare the financing they offer you with the financing the dealer offers you. Because offers vary, shop around for the best deal, comparing the annual percentage rate (APR) and the length of the loan. When negotiating to finance a car, be wary of focusing only on the monthly payment. The total amount you will pay depends on the price of the car you negotiate, the APR, and the length of the loan.
Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. To qualify for the special rates, you may be required to make a large down payment. With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.
Before you sign a contract to purchase or finance the car, consider the terms of the financing and evaluate whether it is affordable. Before you drive off the lot, be sure to have a copy of the contract that both you and the dealer have signed and be sure that all blanks are filled in.
Some dealers and lenders may ask you to buy credit insurance to pay off your loan if you should die or become disabled. Before you buy credit insurance, consider the cost, and whether it’s worthwhile. Check your existing policies to avoid duplicating benefits. Credit insurance is not required by federal law. If your dealer requires you to buy credit insurance for car financing, it must be included in the cost of credit. That is, it must be reflected in the APR. Your state Attorney General also may have requirements about credit insurance. Check with your state Insurance Commissioner or state consumer protection agency.
Discuss the possibility of a trade-in only after you’ve negotiated the best possible price for your new car and after you’ve researched the value of your old car. Check the library for reference books or magazines that can tell you how much it is worth. This information may help you get a better price from the dealer. Though it may take longer to sell your car yourself, you generally will get more money than if you trade it in.
Service contracts that you may buy with a new car provide for the repair of certain parts or problems. These contracts are offered by manufacturers, dealers, or independent companies and may or may not provide coverage beyond the manufacturer’s warranty. Remember that a warranty is included in the price of the car while a service contract costs extra. Before deciding to purchase a service contract, read it carefully and consider these questions:
Before you negotiate the price of your next new car, use this worksheet to establish the bargaining room.
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Mazda MX-5 Miata
Volvo 40 Series
Lexus ES 300
Hyundai Sonata/Kia Optima
Lincoln LS/Jaguar S-Type
Volvo 60 Series
Lincoln Town Car
Ford Crown Victoria/Mercury Grand Marquis
Chrysler 300/Dodge Magnum
Volvo 80 Series
Dodge Caravan/Chrysler Town and Country SWB
Ford Freestar/Mercury Monterey
Chrysler Town and Country/Dodge Grand Caravan
Hyundai Santa Fe
*2005 Best Car Bets is provided by The Center for Auto Safety, visit their website at www.autosafety.org to purchase a copy of this book.