The Car-Buying Process
Transportation
Should you buy a car?
 Can you afford it?
- Car payment should be no more than 20% of your
take-home pay. But don’t forget car insurance, gas,
and maintenance.
- You should look at your overall budget, then
decide what kind of car payment you can afford.
New or Use?
 New or Used?
- Reliability – new most reliable, fewer mechanical
problems. Usually comes with a warranty.
- Cost – average new car cost around $20,000. You are
going to need @ 20% down. ($4,000)
* New cars lose value as soon as you drive off the lot.
* Average loss is about 25% each year you own the car.
- Mileage – on a used car the mileage can determine the
value of the car. (more miles, more wear and tear, and more
potential repair costs)
How to Choose a Car?
 What class of car?
-Economy size
-Midsize
-Full-size
-Luxury
-Sports Utility
-Mini Van
-Sports Car
-Truck
 Which Model?
-Within each class there are
different types of models.
-Look online at each
Features and Options
-Features: characteristics of a
particular model of car that offer
benefits to the owner.
-Options: features you can choose to
include or not include on the car.
Features and Options
–Air Conditioning
–Sunroof
–Convertible Top
–Automatic/Manual
Transmission
–Cruise Control
–Leather Interior
–Cup Holders
–Number of Doors
–Power Locks, Windows, Seats
–Airbags (driver, passenger)
–Anti-lock Brakes
–Anti-theft Package
–Sound System
Additional Features and Options
 Dealers Options (in their shop)
- Rust proofing
- Special paint sealers
- Protect upholstery
 Extended Warranties
- Basic warranty usually last 3 years or 36,000 miles
- Could have it extended for an additional price
 Safety Features
- Check Consumer Reports for safety rating
- Watch for safety bag recommendations
How to Evaluate a Used Car
 Look for mismatched paint and panels. This
indicates an accident.
 Check for rust. Look in less obvious places.
 Look for stains on the upholstery and the
smell of mold.
 Look for fluid drips.
 Check all controls and lights.
Finance Options
 Credit
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80% of those who buy a car use credit to finance.
Separate Bank vs. Auto Manufacturers
Offer promotions or special rebates at dealers
Rebate: partial refund of the purchase price.
Determine a Fair Price…
• Invoice Price – the amount the dealer paid
to buy the car from the manufacturer.
– Know this price ahead of time.
– Look at Edmunds, Kelly Blue Book, Microsoft
CarPoint
– You can call Consumer Reports 1-800-348-2028
and get a full report of a specific car. Gives you
dealer cost, available options, current rebates
and other incentives.
Price Continued…
• Sticker Price – Price tag in the window
detailing the car’s options and total
price.
– This is the MSRP (Manufacturer’s
Suggested Retail Price)
– This is almost always higher than what the
dealer expects consumers to pay for the
car.
– Usually 9 to 11% above invoice price.
Price Continued…
• A fair profit for the dealer is about 3%
of the invoice price of the car plus
options.
• Invoice price + Options =
Adjusted invoice + 3% = Fair price
• Determine the value of a trade in
before you go into the dealer.
The Buying Process
• Where to Shop
– No Haggle Dealers
– Buying on-line
• When to Shop
– End of the month commission
– Cold climates and winter months
– New model year (September) dealers might
have more incentives to offer for previous year
models.
– August and December are really slow months
The Buying Process Continued…
• Test Drives (Don’t talk about price)
– Examine First
• Check everything inside and out
– Then Drive
• Focus on the car, listen carefully, try it in
different situation.
• Test its acceleration, braking, shifting and
handling as you normally drive.
How to Negotiate the Deal
• Always remember you are in charge
• Don’t allow them to pressure you
• BE PREPARED TO WALK OUT!
• Don’t tell the salesman the price or
monthly payment you can afford
• Let the salesman know you are aware
of the invoice price, price of the
options, and rebates/incentives.
Negotiation Continued…
• Let them know you intend to shop
around for the best deal
• You will come back later if the price is
the lowest
• NEGOTIATE ON PRICE ALONE, NOT
MONTHLY PAYMENT!
• Negotiate the value of the trade in
separately. Be firm!
Round 1
• Make your first offer at just a little above
invoice , but below your target price.
• Do not make another offer until you get a
counteroffer.
• Counteroffer should be below sticker.
• If not, stick to your first offer.
• No matter what the counteroffer is respond
by saying your initial offer was fair, and you
would pay it today.
Round 2
• Your next offer should be slightly
higher, but still below your target price.
• Wait for a counteroffer.
• Keep the process until you reach
closer to your target price.
• Could depend on Supply and
Demand
The Final Price
• After you settle you still can expect to pay a
few additional charges.
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Sales Tax
Destination Fee (shipping)
License and Registration
Documentation Fee ($50-$100)
No administrative or advertising costs
Always read over the paper work, and ask
questions! Make sure every amount in paper
work was agreed upon.