Buying a new car is usually the second most expensive purchase
many consumers make next to the purchase of their home. This guide is intended
to help give you the information needed to make a smart deal on a new car.
Buying Your New Car
Before you step into a dealer's showroom, it helps to know
what car model and options you want and how much you are willing to spend. This
in turn allows you to feel less pressured into making a hasty or expensive decisions
and will help drive a better deal.
To help you shop you may want to consider the following suggestions:
- Check publications at a library, 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
at dealer showrooms. We offer a free local dealership quote system, which
will allow dealers in your area to give you their best price for a vehicle.
This price is often far lower then their advertised sticker price, and is
the price that would take hours of negotiations to get. To use our new car
quote system go here, to
fill out the price quote form.
- Plan to negotiate on price. Dealers may be willing to bargain on their
profit margin, which is generally between 15 to 20 percent. This is usually
the difference between the manufacturer's suggested retail price and the invoice
price. To skip the negotiation process and to get the dealers in your area’s
best price you can also use our new car quote form here.
- 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, adding considerably to the cost.
Learning the Terms of The Trade
To give you a better sense of the negotiating room you have
when buying your car, it helps to understand some common terms. The terms are
listed below in order of increasing value.
INVOICE PRICE
This 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
This is the cost of the car without options, but includes standard equipment,
factory warranty, and freight. This price is printed on the Monroney sticker
(see below).
MONRONEY STICKER PRICE
This is the printout which appears on a label affixed to the car window and
is required by federal law. This sticker 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). The label may not be
removed by anyone other than the purchaser.
DEALER STICKER PRICE
This is 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) of additional dealer profit (ADP), dealer preparation, and undercoating.
Financing Your New Car
If you decide to finance your car, you have the option of checking
the dealer's rate against banks, credit unions, savings and loans institutions,
and other loan companies. To get your loan quote click
here.
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.
In addition, they may require you to make a large down payment to qualify for
these special interest rates. 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 purchase a car that requires a smaller down payment. To
get your loan quote click here.
Some dealers and lenders may ask you to buy credit insurance,
which pays off your loan if you should die or become disabled. Before you add
this cost, you may want to consider the benefits available from existing policies
you may have. Remember, buying credit insurance is not required for a loan.
Trading in Your Old Car
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.
Considering a Service Contract
Service contracts that you may buy with a new car provide for
the repair of certain specified parts or problems. These contracts are offered
by manufacturers, dealers, or independent companies and usually (initially)
run concurrently with the manufacturer's warranty. Remember, a warranty is included
in the price of the car; a service contract costs extra.
Before deciding to purchase a service contract, read it carefully
and consider some of the following questions:
- What is the difference between the coverage under the warranty and the
coverage under the service contract?
- What repairs the dealerships covered?
- Who pays for the labor? The parts?
- Who performs the warranty repairs? Can repairs be made elsewhere?
- How long does the warranty service contract last?
- What is the dealership's cancellation and refund policy?
For more indepth information on extended warranties, please see our Extended
Warranty Article.
You are likely to get a better deal on a car if you know beforehand
exactly what you are looking for and what you are willing to spend. Therefore,
before signing a sales contract with a car dealer you may want to:
- Decide which car model and specific options you want.
- Find out the invoice price (the lowest price) of the model and each option
you want.
- Decide how much you are willing to pay the dealer, if anything, above the
invoice price.
- Compare final sales prices with other dealers and buying services. Again
you can do this by filling out our quote form to get your loan quotes here..
- Compare financing costs from various sources, such as credit unions and
savings and loans institutions, with those of car dealers.
- Find out the value of your old car, independent of a dealer's trade-in
offer.
- Decide if you need an optional service contract or credit insurance.
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