Tips on Buying A New Car

Before you step into an automobile dealer's showroom, it helps to know what car model and options you want to purchase and how much you are willing to spend for your new car. That way, you are less likely to feel pressured into making a hasty or expensive decision and more likely to get a better deal. To help you shop, you may want to consider these suggestions:

  • Check publications at a library or bookstore that discuss new car features and prices. These may provide information on the dealer's costs for specific models and options.

  • Shop around to get the best possible price by comparing models and prices at dealer showrooms. You also may want to contact car-buying services and broker-buying services to make comparisons.

  • Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, which is generally between 10 to 20 percent. This is usually the difference between the manufacturer's suggested retail price and the invoice price.

  • Consider ordering your new car if you do not see the car you want on the dealer's lot. This usually involves a delay, but cars on the lot frequently have options you do not want -- which add considerably to the cost. 

  • Arrange your own financing, preferably through a credit union or bank that will offer you a low interest rate.  You can save thousands on the price of the car by taking steps to raise your credit score as much as you possibly can before you begin your car search.

Buying a New Car:  Your Trade-in

After getting your new car for the best possible price, only then discuss the possibility of a trade-in. First, however, find out the value of your old car. You may want to check the library for references and periodicals that can tell you how much your car is worth. This information may help you get a better overall price from the dealer. Remember, too, that though it may take longer, you generally will get more money by selling the car yourself.

You can lose the benefit of a good deal on your new car if you don't get a good price on the old car you are getting rid of. The best way to get a solid estimate of your used car's value is to take it to several new car or used car dealers to see what they will pay you for it.   Simply tell each dealer that you plan to sell your car and that you are getting offers from at least five dealers. You can expect the dealer where you buy your new car to pay you roughly the same amount for your used car as these other dealers would pay. If not, you might as well sell your car to one of the other dealers.  
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Think of trading-in as really a sale of your used car at wholesale. If you've gotten a rock bottom price on your new car, the dealer won't be able to pay you more than the true wholesale value for your used car. A dealer who offers a fat trade-in allowance must be making it up on the new car price, so watch out.

Remember, you can sell your used car on your own to another consumer. By checking classified ads, you can get an idea how much your car might sell for.  That will probably be more than a car dealer will give you for it, but selling the car on your own is more trouble than selling it to a dealer or trading it in. You have to advertise the car and you may have to deal with a number of potential buyers.

The following terms are associated with purchasing a new car and are defined as follows:

Invoice Price is the manufacturer's initial charge to the dealer. This is usually higher than the dealer's final cost because dealers often receive rebates, allowances, discounts, and incentive awards. The invoice price always includes freight (also known as destination and delivery). If you are buying a car based on the invoice price (for example, "at invoice," "$100 below invoice," "two percent above invoice"), be sure freight is not added to the sales contract.

Base Price is the cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker (see below).

Monroney Sticker Price shows the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and the fuel economy (mileage). It is a label affixed to the car window and is required by federal law. The label may not be removed by anyone other than the purchaser.

Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer mark-up (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.

Next Topic:  Tips on Buying a Used Car