Choosing a Car
Buying a car can be complicated. By doing some homework before you start,
you can narrow your search.
What can you afford?
Your budget is the best place to start when considering a car
purchase.
First, decide how much you have available as a lump sum. This
will be your down payment, if you're planning to finance the car. If you
don't plan to finance, the lump sum is what you can spend on the car.
Next, if you're taking out a loan to buy the car, you'll need to budget
for the monthly payment.
Finally, every car has some ongoing expenses that you'll need
to include in your budget:
- Insurance - Costs vary depending on your gender, age and driving
record, your location, the make and model of the car and the type of
coverage you want. If you're financing, your lender will require you
to maintain specific coverage.
- License fees - Costs depend on the make and model of the car,
as well as your geographic location.
- Taxes - Include sales tax when you buy the car, as well as
annual personal property tax based on your location and the make and
model of the car.
- Gas - Be aware that some cars require high-octane gas, which
costs more.
- Maintenance (including tires and oil) - Maintenance schedules
vary by car; some require more maintenance, which can cost more over
the long run.
- Repairs - including batteries, tires or engine repairs
- Parking
Use our calculators to help you determine what you can afford:
What
car can I afford?
How
much will my vehicle payments be?
What do you need?
The next step in choosing the right car is determining what you need.
Some questions to ask include:
- How much driving will I do, and what type of driving - city
or highway?
- How many people does the car need to accommodate? Do any of
them have special needs?
- How much cargo space do I need?
- What safety features are important to me?
- What comfort features are important to me?
- What weather conditions will I be driving in?
- Where will I park?
- Is gas mileage important to me?
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Does gas mileage matter? Consider the difference in expense for
a driver who drives an average of 200 miles per week over a year's
time, at a cost of $2.00 per gallon:
- If your car gets 15 miles per gallon, you'll spend $26.66 a
week on gas - $1,387 per year.
- If your car gets 30 miles per gallon, you'll spend $13.33 a
week on gas - $693.33 per year
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New or used?
By now, you have a sense of what you can afford and what you'd like to
have. This is a good time to decide whether you want a new car, or a used
car.
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New car advantages
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New car disadvantages
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| More choice of model, color and features |
Higher purchase price |
| Potentially more reliable |
Higher cost for taxes and insurance |
| Warranty coverage |
Loses value more quickly |
| Lower interest rates when financing |
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Used car advantages
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Used car disadvantages
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| Lower purchase price |
Shorter or no warranty |
| Lower cost for taxes and insurance |
Reliability difficult to gauge |
| Loses value more slowly |
Smaller selection of color and features |
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Higher interest rates when financing |
Use our calculator to help you make your decision: Which
is better, a new or used vehicle?
Lease or Buy?
If you've decided on a new car, you'll also need to decide whether it
makes more sense for you to lease the car, or to buy it. With a lease,
you're paying to use the car. When you buy, you're paying to own the car.
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Leasing Advantages
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Leasing Disadvantages
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| Monthly payments may be lower |
You don't own the car, so you don't build equity |
| Initial costs may be lower |
The lease may be hard to terminate if you need to |
| Terms may be shorter - you may be able to get a newer model more
frequently |
The lease will contain restrictions on mileage and use; exceeding
the limitations can be expensive |
| May be tax-deductible under certain conditions if the vehicle is
used for business purposes |
You can pay a penalty at the end of the lease if you don't adhere
to the maintenance schedule |
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Buying Advantages
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Buying Disadvantages
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| You own the car |
Monthly payments may be higher |
| You can sell at any time |
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| You can customize the car to your liking |
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| You won't have mileage restrictions |
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Use our calculator to compare leasing versus buying: Should
I lease or purchase?
Doing Your Homework
Whether you're buying a new car or a used car, it pays to research your
potential choice before you commit. These web sites provide information
for the make and model you want to research. They may also provide tips
on price negotiation, buying vs. leasing and other useful information.
Shopping for a Car
Once you've done your research and have a good idea of what you want,
it's time to go shopping.
Whether you're buying a new car or a used car, the Internet can help
you locate cars matching your specifications. This can save numerous trips
to dealers. Plus, you'll have a better idea of what you'll have to pay
for the car you want.
newcar.com
ausedcar.com
autoweb.com
For a new car, you'll probably buy from a dealership. See below for helpful
negotiating tips.
If you're buying a used car, you can go to a dealership, or buy from
an individual seller. Both have advantages.
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Individual Seller Advantages
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Dealership Advantages
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| You may be able to buy the car for less. |
The dealer may offer a limited warranty. |
| You can have the car inspected by your mechanic. |
A dealer offers a greater variety of used cars. |
| Negotiations are less pressured. |
You can check out the dealer's reputation. |
Negotiating the Price
Most people know that the price you pay for a car is negotiable. These
tips will help you negotiate confidently.
- Don't buy a car in a hurry. You're likely to spend more. And
never let the dealer pressure you into acting more quickly than you're
comfortable.
- Do your research and get as much information as you can before
discussing price. Using the Internet, you can get close estimates of
what you'll have to pay for the model you want, with the features you
want, in your geographic region.
- Look on kelleybluebook.com
to find out the car's invoice price - that's the price the dealer
pays for the car. Dealers base their profit goals on the invoice price
(for example, $1,000 over invoice). If you negotiate up from the
invoice price, you'll likely arrive at a better price than if you
negotiate down from the sticker price.
- Be flexible about the features you'd like to have. The more
specific your needs, the fewer choices available to you, and the less
room you have to negotiate.
- Beware of dealer add-ons. Make sure you understand exactly
what is meant by each add-on item so you can determine its value. If
that $200 "appearance package" really means a wax job, you're paying
too much. Some add-ons, like rust protection and undercoating, are applied
at the factory. You shouldn't pay more to have them re-applied at the
dealership. Ask to see a list of add-ons and their costs before you
begin to negotiate on a car. If the add-on is something you'd like to
have done, such as fabric protection or an alarm system, it pays to
get a price quote from an auto detailer or a mechanic. The price will
probably be much less than the dealer will charge for the same service.
- Ask questions until you're certain you understand all of the
costs.
- Ask to see a copy of the worksheet that lists all of the costs,
and compare the worksheet to the contract to make sure the numbers match
up and nothing has been added. The contract should spell out sale price,
down payment, trade-in value of your previous car (if applicable), destination
charge, sales tax, total cost and loans.
- When discussing price, focus on the total cost of the car.
Try to avoid naming your ideal monthly payment - you'll likely end up
with that payment, when you may have been able to negotiate a lower
payment.
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