March 1999
Anew
car is second only to a home as the most expensive purchase many consumers
make. According to the National Automobile Dealers Association, the average
price of a new car sold in the United States as of June 1998 was $23,480.
Thats why its important to know how to make a smart
deal.
Buying Your New
Car Think about what car model and options you
want and how much youre willing to spend. Do some research. Youll
be less likely to feel pressured into making a hasty or expensive decision at
the showroom and more likely to get a better deal.
Consider these suggestions:
- Check publications at a library or
bookstore, or on the Internet, that discuss new car features and prices. These
may provide information on the dealers costs for specific models and
options.
- Shop around to get the best possible price
by comparing models and prices in ads and 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, often between 10 and 20 percent.
Usually, this is the difference between the manufacturers suggested
retail price (MSRP) and the invoice price.
Because the price is a factor in the
dealers calculations regardless of whether you pay cash or finance your
car and also affects your monthly payments negotiating the price
can save you money.
- Consider ordering your new car if you
dont see what you want on the dealers lot. This may involve a
delay, but cars on the lot may have options you dont want and that
can raise the price. However, dealers often want to sell their current
inventory quickly, so you may be able to negotiate a good deal if an in-stock
car meets your needs.
Learning the
Terms Negotiations often have a vocabulary of
their own. Here are some terms you may hear when youre talking
price.
- Invoice Price is the
manufacturers initial charge to the dealer. This usually is higher than
the dealers final cost because dealers receive rebates, allowances,
discounts, and incentive awards. Generally, the invoice price should
include freight (also known as destination and delivery). If youre buying
a car based on the invoice price (for example, "at invoice," "$100 below
invoice," "two percent above invoice"), and if freight is already included,
make sure freight isnt added again 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.
- Monroney Sticker Price (MSRP) shows
the base price, the manufacturers installed options with the
manufacturers suggested retail price, the manufacturers
transportation charge, and the fuel economy (mileage). Affixed to the car
window, this label is required by federal law, and may be removed only by 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 markup (ADM) or
additional dealer profit (ADP), dealer preparation, and undercoating.
Financing Your New
Car 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 its
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 its
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.
Trading in Your Old
Car Discuss the possibility of a trade-in only
after youve negotiated the best possible price for your new car and after
youve 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.
Considering a
Service Contract 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 manufacturers 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:
- Whats the difference between the
coverage under the warranty and the coverage under the service contract?
- What repairs are covered?
- Is routine maintenance covered?
- Who pays for the labor? The parts?
- Who performs the repairs? Can repairs be
made elsewhere?
- How long does the service contract last?
- What are the cancellation and refund
policies?
Worksheet for Buying a New Car
Before you
negotiate the price of your next new car, use this worksheet to establish
the bargaining room.
Model
__________________________ Base
Price__________________________
Options: |
Invoice Price* |
Sticker Price |
Transmission: Automatic___Manual___ Air Conditioning Engine:
Size______ Audio
System: AM-FM___w/cassette___w/CD___ Brakes:
Antilock___ Power-assisted___ Power Locks Seats: Power___ Heated___
Leather___ Rear Window: Wiper___ Defroster___ Wheels and
Tires: Alloy
Wheels All Season Tires Mirrors and
Lights: Illuminated Dual Vanity
Mirrors Map
Lights Exterior Power Mirrors Alarm
System Cellular Telephone Remote Keyless Entry Sunroof
Other:
____________________________ _________________________________ _________________________________ _________________________________
|
________________ ________________ ________________
________________ ________________ ________________ ________________ ________________
________________ ________________
________________ ________________ ________________ ________________ ________________ ________________ ________________
________________ ________________ ________________ ________________ |
________________ ________________ ________________
________________ ________________ ________________ ________________ ________________
________________ ________________
________________ ________________ ________________ ________________ ________________ ________________ ________________
________________ ________________ ________________ ________________ |
Totals |
|
|
*You can get
the invoice price by looking at the dealer's invoice or reviewing car
publications. |
For More
Information
The FTC works for the consumer to prevent
fraudulent, deceptive and unfair business practices in the marketplace and to
provide information to help consumers spot, stop and avoid them. To
file a complaint or to get free
information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP
(1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing,
identity theft and other fraud-related complaints into
Consumer Sentinel, a secure,
online database available to hundreds of civil and criminal law enforcement
agencies in the U.S. and abroad. |