Car Buyer's Guide

PETER HOLLAND: Buying a car is probably the second biggest purchase you could ever make in your life after buying a house.

JOSH DREIBAND: I would find out on the Internet what dealers are paying for a vehicle.

PETER HOLLAND: The Kelly Blue Book, KBB. com, that is a free website that will tell you the value of a car. The consumer reports buying guide is a very powerful tool. It typically saves people around the area of $200.

JOSH DREIBAND: If you have two or three different cars in mind make sure you do the research to find out not just how much the car costs and what people are paying for it. Find out what is the cost of ownership.

PETER HOLLAND: Buying a car can be a four or five hour long process with lots of contracts and lots of clauses and terms, sleep on it and make sure that you are making an informed decision.

JOSH DREIBAND: However, the car business is a now business. It is an urgency business. So we, as dealers, will want to get everybody signed up immediately.

PETER HOLLAND: There is no reason that you need to buy and take delivery of a car the day you walk into the dealership. If the price is good today, it ought to be good tomorrow.

JOSH DREIBAND: It is one thing to say "would you do me a favor in buying the car now because it is the end of the month and I am trying to hit my numbers," and may be your friends now. That is one thing. But to say some body this is the price if you do not buy it now, I am not going to give you the price ...

PETER HOLLAND: That is what I call a high-pressure sales tactic.

JOSH DREIBAND: If you come back tomorrow, the price is going to be the same.

PETER HOLLAND: And if the dealer does not honor that then I say walk away. Find another dealer.

It shouldn't be an impulse buy.

Think about what car model and options you want and how much you’re willing to spend. Do 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.

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 dealer’s 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 manufacturer’s suggested retail price (MSRP) and the invoice price
• Because the price is a factor in the dealer's 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 don't see what you want on the dealer's lot. This may involve a delay, but cars on the lot may have options you do not 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 you're talking price.Invoice Price is the manufacturer’s initial charge to the dealer. This usually is higher than the dealer's 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 you are buying a car based on the invoice price (So, "at invoice," "$100 below invoice," "two percent above invoice") and if freight is already included, make sure freight is not 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 MSRP sticker
• Manufacturer's Suggested Retail Price (MSRP) is affixed to the car window and may be removed only by the purchaser. It shows the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and mileage
• Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, like 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'll 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 is 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's 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 is 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 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 you have negotiated the best possible price for your new car and after you have researched the value of your old car. Check the library for reference books or magazines that can tell you how much it's 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 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:

• What's 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?