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Steps to Buying a Vehicle That Is Right for You
Brenda Procter, M.S.,
State Specialist & Instructor
Personal Financial Planning, University of Missouri-Extension
The allure of a new car is strong, but there are several considerations that you may not think about if you fall victim to the high-pressure tactics of some salespeople. Buying a car is a large commitment that involves more than the monthly payments. Continue reading for tips on what to consider before buying a car; the differences between buying a new and used car and leasing a vehicle; and financing options.
So many choices…How do I decide what
kind of car to buy?
Answer these questions before purchasing a vehicle:
- What size/kind of vehicle do
I need? Do I have a large
or small family? Do I transport several people (carpooling,
taking kids to sporting events, etc.) at one time? Will I need
my vehicle to pull a boat or a trailer?
- How do I plan to use the car? Will I drive the car to work everyday? Will it get
dirty easily? Can it survive the weather conditions of my area?
Is the car easily accessible to older or disabled family
members? Does the car get good gas mileage?
- What options do I want? Is a sunroof important to me? Do I prefer power
windows? Does it matter if the seats are cloth or leather?
- What price can I pay? Do I have enough room in my budget to accommodate one
more debt?
- What are the other costs associated with the car that I will have to pay for later? What are the insurance costs? How much are repairs? Are parts hard to find for this car? How much will the sales tax be?
You can also do some research by reviewing magazines such as Consumer Reports, Car & Driver, Motor Trend, and Consumer Digest Buying Guide to see how a car has rated on a number of features. You can find a large amount of information on www.edmunds.com. This site helps you determine what you should pay for a vehicle, allows you to compare various vehicles, and gives you a resource for all kinds of information related to buying a car. The Consumer Reports website at www.consumerreports.org/main/home.jsp also provides information, and after paying a small subscription fee, you can get low-cost reports specifically on cars.
Decisions, decisions…New, Used or
Leased?
After you decide what kind of car you are interested in, it is time to decide if you will buy it new or used or if you will lease a vehicle. The advantage to a new car is that it has very few miles on it, you might be able to get more of the options you want, and you do not have to wonder about the previous owner's care of the vehicle. Be aware that if you order a vehicle with many custom features instead of purchasing a car on the lot, you will probably have to pay a fee. Be sure to read all the paper work to make sure that you are really getting what you want.
The downfall to a new car; however, is
what makes many people select a used car instead--price.
Buying a used car is usually cheaper, but you must take greater care in selecting a used vehicle. Previous wrecks and poor care may be hidden from the untrained eye. Before you purchase a used vehicle, have it inspected by the mechanic of your choice. Check to see if the car is being sold "as is" or if there are any warranties on the car. Get all promises in writing. A used car dealership must show a buyer's guide (http://www.ftc.gov/bcp/conline/pubs/autos/buyers.pdf) in the window of each car, which gives pertinent information about the car and warranties. Be careful when purchasing a used vehicle from a private party. Most of the laws that govern dealerships do not apply to individuals.
Leasing a vehicle also is an option; however, take great care if you choose this option. Leasing can be an advantage for many people. For example, if you like to frequently have a different car or if you know you will only need a car for a short period of time, leasing might make sense. Shop around and compare options that various dealers offer. When reviewing a lease, fully understand all of the costs involved, including all of the costs that you will have to pay up front (like deposits, taxes, processing fees, or destination charges). During the lease, you will have to pay for property taxes, insurance premiums, maintenance costs, and if you end your lease early, a substantial termination fee. At the end of the lease, you will have costs if you buy the vehicle. If you do not buy the vehicle, you will more than likely have a disposition and excess wear fee, possibly along with other fees. It is important to understand all fees and terms before signing a contract. If you don't, keep asking questions until you do.
Money, money, money…I know the car I
want, but how do I pay for it?
When you buy a car, you can either pay the full amount due or you can finance the vehicle. Before getting a loan for your car, shop around. Check with various sources for rates--banks, credit unions, family members, and car dealerships. You may want to consider getting pre-approved for your loan before you begin car shopping. This may offer you some additional leverage in the negotiating process. Don't get tricked by the promise of "low monthly payments." Consider loan lengths, late payment penalty fees, and interest rates before locking yourself into a loan for several years. Ask what you will pay in total for the car for each financing option you are considering. A slightly higher monthly payment might be better than a much higher cost in the long run.
Last update: Friday, April 04, 2008
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