Frequently Asked
Questions about Buying a Car
What’s
the best time of the month to shop for a car?
Keep in mind that prices such as MSRP, invoice and dealer
cost do not vary from day to day. When buying a vehicle
the only two things that can change, the first is the willingness
of the dealer to sell at a lower price to meet quotas and
the second is if the manufacturers increase the money available
in rebates or dealer money. One of the more recent trends
we have observed is that at mid-month the manufacturers
tend to have increased rebates, bonus money and dealer
money. So if you are working on averages and percentages,
the best time to buy a car tends to be from the 16th to
the 31st of any given month.
What time of year is the best
to buy a vehicle?
With new vehicles, the time the car manufacturers give
the highest rebates and dealer money is normally around
the spring auto show (March or April) or at the end of
the model year (August or September). The only drawback
to buying in August or September is that you might not
have good selection on the vehicle you’re looking
for because it is so late in the year. Keep in mind that
sales of used cars and new cars can vary due to the economy,
the market, and even the weather.
Should
I trade my car to the dealer?
In almost every situation, if you sell your vehicle yourself
you will increase the money you put in your pocket by $1,000
to 2,000, or more. If you do not mind putting on your sales
hat or wheeling and dealing with potential customers who
are looking at your vehicle, it will save you money.
How can I get the best value for
my trade?
The value of your trade will be determined by what your
type of vehicle is being sold for at local auctions. You
can get book values from the Credit Union but most of the
time your real cash value will lower that what the books
and the inter-net values are showing. The best way to get
a good value is to keep the trade price separate from the
sale price of the new vehicle and compare the taxable sale
amount among at least three dealers.
Example New Car MSRP
Price $30,500.00
Less
Trade in Value $7,200.00
Taxable sale Amount = $23,300.00
Remember you are looking
for the lowest taxable amount, not just the highest trade
value.
What models of cars best
hold their value?
This is an important factor when purchasing a vehicle.
Most Japanese imports like Honda, Toyota, and their high-end
counterparts like Acura and Lexus do very well. The Chevy
and GMC SUV’s and pickups have also performed very
well. Because there are so many makes and models, each
vehicle should be researched.
Should I buy an extended warranty?
The short answer….it depends on your driving habits
and the reliability history of the vehicle you have
chosen. If you have a tendency to keep a vehicle for a
long time and drive from 80,000 to 100,000 miles, it can
be a good investment. Most warranties will run between
$1,200 to $1,400 with most terms running 5 to 7 years and
up to 125,000 miles. The Credit Union partners with CUNA
Mutual to provide this service to our members. Click here
for more information.
Should I Lease or Buy?
In most situations you will be better off buying than leasing.
When you lease, they generally do not tell you about the
up-front acquisition fee of $500 to $600. This is a fancy
and somewhat deceptive name for profit. At the end of
the lease, they will typically charge you a disposition
fee of approximately $300. In addition, they charge you
interest for the lease term on both the selling price,
known as the cap cost, and the end value, known as the
residual value. In short that means that if you lease
a $35,000 vehicle with an end value of $21,000, you pay
interest on $56,000 for the term of your lease.
Should
I take 0% financing or the Rebate?
Most of the time you are better off taking the rebate offered
by the vehicle manufacturers, and financing the difference
through your Credit Union.
- If you take the 0% financing
you will typically forego a rebate of $3,000 or more.
You will also be taxed on that amount so you will finance
a principle amount of $3,195.00 more than if you had
taken the rebate.
- Many people pay their vehicles off early. If you generally
do that, you will lose the advantage of 0% financing
because the payoff balance of your loan will be higher
than if you had taken the rebate.
- If your vehicle is totaled in an accident, you will
be at a disadvantage due to having a higher payoff balance
for your loan.
- Dealers are paid a flat fee of approximately $300
to $400 to get the customer to take the 0% financing
even when it is not in the best interest of the customer.
- The best way to make this decision is to calculate
it for your exact situation.
How should I negotiate?
There are several rules you want to use:
- Do Not Buy On
Your First Visit
Sales people are trained to sell you a car today – they
are told if you don’t buy now they will not see
you again. Be strong and clear with them that the only
way you are going home in a vehicle today is if they
give it to you for FREE.
- Do Not Buy On Emotion
Keep in mind that a willingness to walk away and to be
indifferent gives you a position of power. Don’t
fall for the old lines of “this is the last one
we have” or
the “price is only good today” or “wow,
you look great in that car!” There are always cars
and sales on any given day. Prices such as the MSRP,
invoice and dealer cost don’t vary from day to
day. The only thing that can change is the rebates or
dealer money that comes from the manufacturer. When a
manufacturer ends one program they will typically start
another program that is as good or better. Buying on
the spur of the moment, with emotions, instead of reason
and logic, can cost you thousands of dollars down the
road.
- Do Not Give the Dealer Checks, Cash, or Visa Card Numbers
Only give them a deposit once you are satisfied you have
gotten the lowest price possible on the vehicle you are
purchasing and the highest price on your trade. Then
and only then are you ready to buy and take delivery.
- Do Not Be Rushed, Pushed, or Pressured
Remember the golden rule – treat others the way
you want to be treated. If they won’t honor your
boundaries, don’t do business with them. Remember
they are trying to earn your business. Find someone who
will treat you with respect.
- Do Not Sign Credit Forms or Buyers Orders Before a Final
Deal
People can unwittingly sign credit forms and buyers orders
that when coupled together, approved and sent in can
legally mean that you own the vehicle.
- Do Your Research
Make sure you know what you want. Do your research on
the MSRP and the invoice price of the new vehicle you
are looking for. Find out about resale value, reliability
and the cost of insurance. Knowledge is power and it
may keep you from wasting time on a vehicle you don’t
want.
- Keep The Sale Price Separate From The Trade Value
Keep the sale price of the new vehicle separate from
the value of the trade until the end of the negotiations.
The dealer should then subtract the trade in price
from the sale price of the new vehicle to give you
a bottom line price. This is typically called the taxable
amount. This way you will be able to compare taxable
amounts when you are shopping between dealerships.
Glossary
of terms
Here are some frequently used terms you may need to know.
MSRP is the Manufacturer’s Suggested Retail Price.
Window
Sticker is the same as MSRP.
Trade in Value is the dollar
amount your trade is worth.
Taxable difference
or taxable amount is the difference between the sale price of the
vehicle you are
buying and car you are trading in.
RTB means “rebate
to dealer”
After Market Options refer to the equipment
or chemicals added to the vehicle after it got to the dealer.
Rebates
or bonus money are monies given back to the customer from
the manufacturer.
Dealer money is “hidden” money
that is available to reduce the net price of the vehicle.
It is given directly
to the dealer from the manufacturer.
Dealer Sticker Price
is usually a supplemental sticker added by the dealer to
include either ADM
(additional dealer mark-up), ADP (additional dealer profit),
or high-priced, low-cost after market items
such as rust-proofing. It is meant to boost the MSRP and
allow the dealer to make additional profits. |
