Buying a car probably does not rank near the top of your list of treasured moments. Next to a home, a car is one of the larger items you will purchase. Often money is misspent and headaches occur.
A LOSING PROPOSITION
In general, vehicles are depreciating assets which are losing value from the moment we sign the dotted line.
* All dealers by brand pay the exact same price for cars, so a deal you can make at one dealership can also be made at another.
* Do not be deceived by 'bait and switch' advertising.
* After you pick your brand, visit a local dealership.
* Tour the service department.
* Buy the vehicle that fits your personality.
On average, a vehicle loses more than 20 percent of its value in the first year. Some vehicles lose as much as 40 percent. The second year, another 15 percent or so and then each year the bite is a little smaller, (i.e. 13 percent in the third year), 12 percent in the fourth, etc.) Since these are only averages, the depreciation may be more, or less, in any given time frame.
The average age of cars in the United States is somewhere between seven and eight years. Since most families have two or more vehicles, this means most people end up buying a car or truck every three or four years.
ASK THE IMPORTANT QUESTIONS
Ask yourself each time you are considering a vehicle purchase:
* Do I really need a vehicle change?
* Why do I need a vehicle change?
Sit down with a sheet of paper and write down that first question, "Do I really need a vehicle change?" Think "Why?" And keep asking yourself the why question until you run out of responses.
BIG, BIG BUSINESS
The car business is big, big business. The average manufacturer's suggested retail price for a new car is around $25,000. On top of having a wondrous sales price, the car business has a large capital asset barrier to entry, which in theory allows the car makers to sell cars at higher profit margins.
These choices are probably good for consumers, provided that consumers stay informed about the choices. It is important to remember here a critical concept: You don't want to be sold a vehicle by a salesperson you've known all of three hours. Instead, you want to purchase the vehicle you've already picked out yourself, preferably in the comfort and convenience of your own home. This idea alone will save you a great deal of time and money if and when you set foot on a car lot.
KNOWING YOUR NEEDS
So, before you go thumbing or clicking, take out a blank piece of paper and a pencil and determine your needs.
Draw a vertical line down the page from top to bottom -- about two inches from the right edge. Inside that two-inch, right-side margin, vertically list these vehicle categories:
b.) family sedan or station wagon
c.) sports car -- sedan/coupe/convertible
d.) mini van
e.) crossover vehicle
f.) sport utilty vehicle
g.) pickup truck
h.) full-size van or conversion van
i.) luxury sedan
Next: On the left side of that vertical line, write down your answers to the following five questions:
* How many miles a year do I think I'm going to put on this vehicle? (ie. 15,000 miles/year).
* How much time, on average, per day, will you be spending in the vehicle? (ie. three hours)
* What type of driving will the vehicle be used for? (ie.. 60 percent city, 30 percent highway, 10 percent off-road)
* Write down the budget numbers you came up with (ie. $5,000 down, with a max of $350 per month over three years)
* Write down all the reasons that you want and need this vehicle. The longer the list, the better.
Use the following as a guideline for your potential choices: Commute to and from work, carpooling, vacations, daily errands, etc.
Now underline the most important points. Then, cross out vehicle groups that don't fit your vehicle use profile. In other words, if one of your key uses is carpooling the children then cross out sports coupes because these vehicles are designed as two-seaters. This elimination process is very effective in helping match a vehicle group to our needs.
A car buyer is best served by lining up financing before buying the vehicle. Why spend hours test-driving, pricing and buying a new vehicle, only to turn around and hand back to the dealer all that you just saved? Go to the phone and call various lending institutions. Start with your own bank and see what kind of terms they offer.
Finance or pay cash? Find out what your monthly payments will be, how much you should put down, what term of loan you should consider, home equity vs. auto loan, and rebate vs. dealer financing.
After performing a little due diligence on the financing of your purchase, decide on one source.
Negotiate the particulars down to the last detail, but don't commit.
When the dealer takes a shot at you with a financing deal, you're well-armed to determine what's attractive and what isn't. If the dealer can't beat the best deal you've already arranged, then don't go with the dealer's deal. It's that easy.
Another financial preparation many consumers fail to perform is the inevitable insurance question.
As with loans, a great place to start is with someone you already know -- your current agent. Give him or her the exact listing of the vehicle you are planning to purchase, so that you can be given a quote on just what your insurance costs will be. Let your agent know your trade-in plans. In that way, you're providing information on the number of vehicles you own.
Question the agent directly on discounts. You may be able to receive discounts based on the trade organization to which you belong, and you may be able to shave off a few dollars from your theft portion if you purchase an alarm system.
At this point you're prepared and you know all the particulars. You've done your homework and you're ready to make your decision.
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