Getting All The Facts
Before delving into the details, it's
important to realize that by doing your homework, you can
save roughly $2,000 - money that can easily go to the dealer
if you have not. This process will require about 20 hours
of manageable work. Therefore, you will make about $2,000
for approximately 20 hours of work, or about $150 per hour
(before taxes). If you were paid someone this kind of money
to buy a car for you, you would expect a hardworking, dedicated
person who did his research first. This is exactly what
you should expect from yourself.
There are two general categories that must be considered:
"homework" and things to do "at the dealership." The homework
should be done in advance, and both the homework and the
at-the-dealership items must be done in the order given
in this kit, or you may lose control of the buy. Losing
control of the purchase will cost you money.
The following homework must be done before your trip to
the dealership. Research the vehicles you are considering.
Start with Consumer Reports for facts on costs and reliability.
Next, try Road & Track or Car and Driver to see expert opinions
about the vehicle and what specific options and equipment
they recommend. Look at other magazines and publications
and go from there. Start your research as soon as possible.
Some other sources you can use are: The Edmund Guides, Kelley
Blue Book Auto Market Report, commonly called the Blue Book,
and the N.A.D.A. (The National Automobile Dealers Association
Dealers Association) Official Used Car Guide.
Choose what car and options to buy. This part of your homework
includes pricing options such as stereos and antitheft systems
with outside sources. Make note of what you need versus
what you want. Prioritize, then estimate what your payments
will be and compare that with what you can afford.
Get your financing in order. Go to a bank and get your financing
in shape before you go into the dealership. Make sure you
are approved for enough money at a good interest rate, and
make sure it will be available when you need it. It can
be frustrating to lose a car or pay top financing interest
rates because your loan falls through or because you haven't
financed enough to cover the car you desire. It can also
be exasperating if your loan falls through because you buy
a car through an auction when your lending institution doesn't
give loans on auction purchases. Study all the details of
your financing before you buy. More details on this later
in Chapter 3.
Price your trade-in. Chapters 4 and 9 will help you evaluate
your vehicle. Don't dismiss the idea of selling a car yourself
without using this kit. You may save a serious amount of
money sell your call yourself, even though it may not be
for you.
Pick the dealership. Initially, consider only those dealerships
close to you and therefore convenient. It is important that
these dealerships be large enough to offer discounts more
easily. Also, check for longevity and reputation, and the
success of the dealership in fulfilling repair warranties.
Pick the time to buy and a buying companion. Your advantages
as a buyer are strongly influenced by picking the best time
(end of the month, weekdays, late in the day, before closing),
and taking the right type of people with you. Go when it
makes sense for you to get a great deal.
Practice. If you have the opportunity, tag along with a
friend when he purchases a car. Help him with his purchase,
and use the experience gained for your benefit. If you make
mistakes, at least they were made before your own purchase.
Below is a checklist of the things you will need to care
of before you go to the showroom.
Checklist 1: What kind of car you want
and need?
Deciding what kind of car you want and need means searching
your wallet, examining your dreams, your reasons and motivations.
It is also the most crucial thing to do before you step
into a dealership.
Winging it may be fun, but it is seldom profitable. One
of the problems with going to a dealership unprepared is
that if you aren't settled on what type of car you want,
the salesperson will certainly help you make up your mind!
This means that he will sell you a car that is the most
profitable for him. If the dealership offers incentives
to sales staff for selling luxury cars, you can be certain
that the salesperson will do his very best to sell you one.
The best way to avoid this pressure is to know precisely
what you want before you leave home. Here's a checklist
to help you:
I will use my car for:
____ driving to work
____hauling cargo
____transporting kids and groceries
____impressing my neighbor
____improving my social life (sports car?)
____long-distance commuting
____sales calls
____other___________________________________
I need a car with the following characteristics:
____ economical
____luxurious
____powerful
____spacious
____holds __________people easily
____2, 4, 5 doors
____other_______________________________
Want need comments (pro/con)
1. luxury car _________ _________ __________________
2. mini van _________ _________ __________________
3. RV's _________ _________ __________________
4. sedan 4-door_________ _________ __________________
5. sedan 2-door________ _________ __________________
6. sports car _________ _________ __________________
7. wagon _________ _________ __________________
8. truck _________ _________ __________________
9. other _________ _________ __________________
Conclusions about what kind of car
I need:
Here is an example of a completed checklist:
Want need comments (pro/con)
1. luxury car yes no too expensive
2. minivan no no useful, but...
3. Rvs yes no too expensive
4. sedan 4-dr yes yes boring, but I need a 4-door, family
car
5. sedan 2-dr no no need second set of doors
6. sports car desperately no can't afford
7. wagon no no not useful to me
8. truck yes no fun, but...
9. other
Conclusions about what kind of car
I need:
I need a four-door family car. I would love a truck or a
luxury car, but the latter is way too expensive, and the
former would only be used occasionally.
The following is a list of options to consider:
List of options wanted
Feature Selection
Air bag yes/no
Air conditioning yes/no
Antilock brakes yes/no
Antitheft package yes/no
Color _____________
Cruise control yes/no
Door crash protection yes/no
Doors (number of) 2/3/4/5
Extended warranty yes/no
Exterior protection packages yes/no
Interior package yes/no
Interior protection packages yes/no
Life insurance yes/no
Light package yes/no
Motor size (number of cylinders) 4/6/8/12
Power features:
Doors yes/no
Mirrors yes/no
Seats yes/no
Windows yes/no
Roof rack yes/no
Rust protection yes/no
Sound system (buy elsewhere?) yes/no
Special features:
Center console yes/no
Other ___________ yes/no
Suspension type ___________
Tilt wheel yes/no
Top styles:
Convertible yes/no
Hard top yes/no
Moon roof yes/no
T-top yes/no
Towing package yes/no
Transmission type automatic/manual
Trim packages:
Drink holders yes/no
Exterior trim yes/no
Including special upholstery yes/no
Leather yes/no
Pockets yes/no
Other ____________ yes/no
Type of seats bench/bucket
Other specials yes/no
(such as a still higher level sound system, CD players,
etc.)
Some of these options come only in an all-inclusive package.
For example, you may not be able to get air-conditioning
without a package that includes power steering, power door
locks, cruise control, and a tilt steering wheel. There
is usually no flexibility in these packages.
Now that you have decided what the car will be useful for,
what type of car you need, and what options are essential
to you, you can concentrate your effort on assessing the
performance and availability of your choice and its options.
The important point here is to find the areas of the car's
performance that are critical to you and to rate the car
accordingly. For example, a person who needs a performance
car and who trades in a car every year or two may be less
interested in reliability than in acceleration and style.
Likewise, someone who buys a family car and holds it for
10 years is likely to be more interested in reliability
than in styling. Therefore, see how the experts rate your
car, and see how their recommendations suit your situation.
You can find experts' ratings in car magazines such as Road
& Track or Car and Driver, or other publications such as
Consumer Reports and specialty books. It is also a good
idea to talk to friends, relatives and neighbors who purchased
cars like the one you are interested in.
Below is Checklist 2, where you should rate all your needs
on a scale of 1(least) to 10(most). Then see how the vehicle
you are considering fits this profile as rated by the experts.
After, you will find Checklist Number 3 to calculate the
vehicle's affordability.
CHECKLIST 2: PRIORITY-RATING CHARTS
Characteristic My Priorities Experts' Ratings
Acceleration _______________
Braking _______________
Bumpers _______________
Controls _______________
Cost _______________
Displays _______________
Driving position _______________
Emergency handling _______________
Front seating _______________
Fun to drive _______________
Gas mileage _______________
Heating _______________
Noise _______________
Rear seating _______________
Reliability _______________
Ride _______________
Routine handling _______________
Servicing _______________
Towing capability _______________
Trunk _______________
Value _______________
Ventilation _______________
SPECIAL ITEMS WANTED
Item Wanted Experts' Ratings
Air conditioning yes/no ________________
Cruise control yes/no ________________
Luxury package yes/no ________________
Moon roof yes/no ________________
Power brakes yes/no ________________
Power steering yes/no ________________
Roof rack yes/no ________________
Specialized engine yes/no ________________
Special exterior package yes/no ________________
Special interior package yes/no ________________
Special suspension yes/no ________________
Special tires yes/no ________________
T-top yes/no ________________
Tilt steering yes/no ________________
Towing package yes/no ________________
Other_________ yes/no ________________
SPECIAL RECOMMENDATIONS
Automatic or stick ___________________________________
Corporate twin available yes/no
Preferred model ____________________________________
Upgrade suspension yes/no
Upgrade transmission yes/no
Other_____________ yes/no
ADDITIONAL CONSIDERATIONS
Is the vehicle a first-year design of uncertain reliability?
yes/no
Do the experts say this is important? yes/no
Do the experts think the styling is dated? yes/no
Is this the last year the car will be produced? yes/no
Is the vehicle in great demand? yes/no
FINAL LIST
Now look over all the data you have gathered, and list the
cars (company and model) that fit the bill.
CHECKLIST 3: CALCULATING AFFORDABILITY
This checklist is designed to help you calculate how much
you can afford to pay for a car.
1. Maximum total price you can afford to pay $_____________________
(Note: You can either input a number here or take the maximum
monthly payments you can afford and multiply number of months
you want to pay to get the maximum amount you can afford
to pay for the vehicle. For example: $300 per month for
60 months = $18,000. Make this a realist figure, and use
it as a guide above, in which you will not go, even under
pressure.)
2. Maximum monthly payment you can afford $______________________
(Note: Do not reveal these numbers to the salesperson, because
if you say, "I can only afford $325/month," he will believe
you can afford at least $350/month and probably more.)
3. Realistic price for a suitable type vehicle $_______________________
(Get this from your literature search.)
4. What is your trade-in worth? $_______________________
(Get this from your Blue Book wholesale less $200-$400.)
5. How much cash can you put down? $_______________________
6. Taxes, licenses and other fees $_______________________
7. Transportation cost $_______________________
8. Extended warranty and other extras $_______________________
9. Factory rebates $_______________________
(factory-to-consumer or a piece of the factory-to-dealer
rebates)
10. Premiums, an AMU or an ADMU $_______________________
(additional dealer markup, or extra profit)
11. Options, extras, special tires, etc. $_______________________
TOTAL TO BE FINANCED
Numbers 3+6+7+8+10+11-4-5-9= $_______________________
This calculation will give you a good approximation of the
car's actual price. Many times, people forget item number
6, the costs of the taxes, licenses and fees. If you don't
know the tax and fee situation in your area, contact your
local Division of Motor Vehicles (DMV) or any local dealer.
Experiment with your calculation. For example, substitute
various values of your trade-in. Take the Blue Book wholesale,
or auction price, or Blue Book wholesale less $800, and
see how this affects the total amount to be financed. For
item number 9, see if the car becomes more affordable if
Detroit gives a factory-to-consumer rebate of $1,000 on
your vehicle.
(EXAMPLE) TOTAL TO BE FINANCED
$18,000+1,790+475+1.250+0+500-7,100-2.736-750 = $11,420
AMOUNT OF MONEY AVAILABLE TO SPEND
ON A CAR
1. Expressed as total dollars $__________________
2. Expressed as monthly payments $__________________
This gives you the dollar amount to be financed. For an
accurate monthly payment, go to a book of interest amortization
tables, and calculate what your monthly payments would be.
(EXAMPLE)
Amount to be financed: $11,000.00
Interest: 14.5 percent
Term: 48 months
You would expect monthly payments of: $303.36
Which be a total payment of: $14,561.28
Or interest of: $3,561.28
So, from this example, it looks like you can stay within
your $325 per month limit and afford an approximately $18,000
car. Now that you know how much you can afford for your
vehicle, search for cars that fall into that price range.
Whatever you do, though, don't slink up to a salesperson
and ask him, "What kind of car can I afford?" He will try
his best to confuse you by doing fancy footwork calculations
so you will be convinced to get a more expensive car than
you really want.
Now with your decision made, your research done, and your
financial calculations in front of you, you are ready to
make a choice. You can easily decide if you can afford the
car you want.
One other item of groundwork to consider is the two types
of rebates: factory-to-customer and factory-to-dealer. You
may be familiar with factory-to-customer rebate because
they are widely advertised and automatically presented by
the dealer to the customer. These are paid directly to you,
the purchaser of the new car, by the manufacturer. Not so
for factory-to-dealer rebates, which are hidden. These rebates
come and go. It would be useful to get information about
what types of cash and incentives are given from the factory
to the dealers. If you get a strangely low price on your
new dream car, this may be the reason for it. However, these
rebates are not always passed on to the buyer. Nationwide
Auto Brokers (810-559-6661) will give you current information
on incentives and rebates.
Now that you know yourself, your needs, and what your budget
will allow, it's time to strategize how to located the money
you need to purchase your car.