Buying a Car
Managing Your Financial Future
Steps in the Car Buying
Process
1. Identify your needs and wants
• What do you need to do with your car?
• Will you drive a lot of miles?
• What features would you like to have?
• You may have to trade off some of the wants
for a lower price
Steps in the Car Buying
Process
2. Determine what you can afford
• General Guideline: monthly payments should be
no more than 20% of money left over after paying
regular monthly expenses (rent, utilities, credit
card payments etc) or you can utilize the 20/10
rule (total debt monthly payments should not be
more than 10% of your monthly net income)
• Cost of maintaining car (gas, oil etc)
• Insurance
Steps in the Car Buying
Process
3. Identify and Research Your Choices
• Compare features of the models against list of
wants and needs
• Compare models with the same options
• List pros and cons of each model
Steps in the Car Buying
Process
4. Decide whether to buy new or used
• Cost is a major factor in this decision
• New car loses much of its market value as
soon as it is purchased.
• Used car may need more repairs.
Steps in the Car Buying
Process
5. Get credit pre-approval
• Allows comparison of total costs of buying,
including credit rates
• Fill out an application at credit union or bank
Steps in the Car Buying
Process
6. Research Insurance Rates
•
Call Insurance Agents and compare rates with at least
three different companies
Steps in the Car Buying
Process
7. Search for available vehicles
• Newspaper ads
• Internet
•
•
•
•
Craigslist
Autotrader
Cars.com
Dealer websites
• List cars that meet your specifications, features,
prices
Steps in the Car Buying
Process
8. Test Drive Each Vehicle
• Compare ride, handling, braking, features and costs
• Try all features
• Look for rust and mismatched paint which could
indicate car has been in an accident
Steps in the Car Buying
Process
9. Check the History of a Used
Vehicle
• Each vehicle has a unique VIN
(vehicle Identification
number) that identifies the car
• VIN is on the dashboard in
front of the driver and on all
vehicle documents
• Request a CarFax report from
the previous owner
Steps in the Car Buying
Process
10. Get the vehicle checked
mechanically
• Have the car checked out
by a mechanic that you
trust
• Vehicle Emission Test- test
to verify that a vehicle
meets the minimum cleanair standards
• Safety Inspections
Steps in the Car Buying
Process
11. Determine a fair price
• New Car sticker price or MSRP
(manufacturer’s suggested retail price)
• Invoice Price-price the dealer paid for the car
• Subtract any destination charges
• Make sure you understand and look up any
charges that do not sound right
Steps in the Car Buying
Process
12. Negotiate the price
• Stick to the facts
• Negotiate the price of
the new car separately
from the price of your
trade in.
Steps in the Car Buying
Process
13. Dealer Add-Ons
• High-priced, high
profit dealer services
that add little or no
value to your car
• Tell the dealer you
do not want these
services on the car
and remove them
FINANCING YOUR CAR
14. Financial Institutions
• Banks
• Credit Unions
• Online lenders
• Compare rates and
terms
FINANCING YOUR CAR
• Car Dealers
• May offer better
terms on particular
models and at
particular times of
the yearsponsored by
manufacturers or
their financing
agencies
LEASING A CAR
• It is a written agreement that allows use of the
car for a specified time period and monthly
payment
• Usually have option to buy the car at the end
of the lease period
• Can lease more expensive car than could
buy on credit
• Always have a car payment but a good way
to always drive a new car
Consumer Protection for
Car Buyers
• Warranty- states what manufacturer or dealer
will do if car does not perform as it should
• Lemon Laws-for cars needing repairs; a lemon
is a car with substantial defects that the
manufacturer has been unable to fix after
repeated attempts.
• 4 times to fix same problem in first year or 12,000
miles
• Out of service for at least 30 days in first
year/12,000 miles
Consumer Protection for
Car Buyers
• FTC Used Car Rule- requires
used car dealers to inform
consumers ahead of
purchase about who will be
responsible for paying for
certain repairs if they occur
after the sale
• Buyer’s Guide Sticker
• As is (buyer pays for all repairs)
• Warranty (dealer pays for some
repairs for specific time)
Cost of Operating a Car
• Gas and Oil
• National Average: $3.68
per gallon of unleaded
fuel
• Highest price in 6 years
for early summer
• 14.45 ¢ per mile
• Depreciation
• http://www.edmunds.c
om/car-buying/howfast-does-my-new-carlose-valueinfographic.html
•
Cost of Operating
a Car
Title, Registration, Personal
Property Tax, & Sales Tax
• Title (Proof you own the vehicle)
• 30 days to apply for a title (new car)
• $8.50 (title) $2.50 (processing fee)
• Registration (registering your
vehicle with the state of
Missouri)
• Pays for your license plate(s)
and tags
• $3.50 for one year; $7.00 for two
years)
• Personal Property Tax
• A tax which is based upon the
value of personal property
• Sales Tax
• Paid at the time you apply for the
title
• https://sa.dor.mo.gov/mv/stc/defa
ult.aspx
Cost of Operating a Car
• Maintenance and Repairs
• Up 11.26% from 2012 (based on
a 2013 statement from AAA)
• 4.97¢ per mile
• Accessories
• Window tinting
• Different wheels
• Audio System
Extending the Life of Your
Car
• Maintain Fluid Levels
• Perform Routine Maintenance
• Keep Your Car in a Garage
• Preserve the Exterior
• Preserve the Interior
• Follow Wise Driving Habits