Essential steps to shopping for a new vehicle.
If you are in the market to buy a new car, then you’re in good company. The auto industry is rebounding and production is being stepped up to meet the growing demand for new vehicles. Not since 2008 has the market shown such strength, as consumer confidence continues to build. However, before you sign a contract to purchase a new car there are some keys to making your purchase, including seven money-saving strategies that will help you not to regret your purchase months later. Read on and we’ll go over each key in depth.
1. What you can afford — Your heart may say Lexus, but your wallet says Toyota. Go with your wallet, but keep in mind that you can outfit several Toyota models close to what you would get in a Lexus and you may come away from the deal saving thousands of dollars. For example, the Toyota Avalon is priced from about $33,000 and the comparable Lexus ES starts at $36,000. The price difference here is not that great, but you should be able to negotiate a better deal on the Avalon as a new model is coming out later this year, with Toyota dealers ready to bargain. Calculate your monthly car payments to determine what you can afford and shop accordingly.
2. Your needs and habits — What will you be using your car for? If primarily for commuting to work, then go with the fuel efficient compact. If toting the family, then consider a crossover SUV or a minivan. Evaluate your current driving habits and project your needs over the coming five or six years, the normal length of car ownership according to R.L. Polk & Co. A compact car might help out in the short run, but it might be useless a few years out if your family is growing. On the other hand, a large vehicle may be more than you need especially if your children are ready to leave the nest. If you expect your needs to change in two or three years, consider leasing your next car instead of buying.
3. Warranties and maintenance costs — Comparing cars should be as close to comparing apples with apples and oranges with oranges. Still, even among like models there can be significant differences, especially in covering maintenance costs and warranties. Toyota, for example, offers free maintenance for the first two years or 25,000 miles, whichever comes first. Hyundai has a 10-year or 100,000 mile powertrain warranty. BMW and other luxury makes cover maintenance of up to four years. Your costs should include projected expenses over the next four to five years. Some states require manufacturers to offer longer warranties at no extra charge to consumers. For example, in California hybrid vehicles have a special warranty for each model’s battery pack. That warranty is for 10 years or 150,000 miles, greater than the 8 years or 100,000 miles offered in most other states.
4. Car safety and your insurance costs — Today’s cars are safer than ever before, but a larger size certainly is no substitution for a lack of safety features in the event of a severe crash. Your vehicle will come with stability control and will likely include traction control, four-wheel anti-lock brakes, electronic brake-force distribution and brake assist. It will also include multiple airbags including side curtain airbags. Check out the safety ratings from the Insurance Institute for Highway Safety as well as from the National Highway Transportation Safety Administration’s crash test ratings website. Those vehicles with high safety ratings can also lower your insurance costs. Before you shop, get an estimate of your insurance costs from your agent.
5. Reviews and recommendations — With so much information available to you, how can you go about choosing your next car? Likely, you’ll start with the make that you’re currently driving. If you’re happy with this vehicle, then keep this manufacturer on your list. You can also find out what cars family members and friends have purchased in the last 12 months and ask them about their shopping and purchase experiences. Read online details about each model including reviews, overviews and specifications. Take each vehicle you’re interested in for a test drive. Get in the back seat and observe leg room and shoulder room. Fold down the seats and compare storage capacities. What equipment is standard and what is optional? Do you need a navigation system and is Bluetooth connectivity important to you? Spec out the model with your list of “must have” features and shop accordingly.
6. Long term worth — Depreciation cannot be avoided, but such a steep erosion on your car’s value can be reduced by choosing a vehicle that holds up better in the long run. Knowing a vehicle’s projected depreciation can save you hundreds or thousands of dollars by choosing a car with a better resale value several years out. Edmunds has served up a handy infographic detailing how depreciation works. They also have a “True Cost to Own” tool that can help you calculate your expenses.
7. Get your financing right — Unless you’re paying cash for your new vehicle, you’ll be seeking auto financing. New vehicle financing typically runs from 36 to 60 months with 72-, 84- and even 96-month loans available. Seek financing yourself before settling on a new car. That way, you’ll know how much car you can afford and you will have a good idea what financing choices are available to you. When you have your financing arranged before you shop, then you’ll have more leverage as you negotiate. If your dealer offers low-rate financing or an optional rebate, you can go with your own financing and take the rebate, applying that amount to your down payment. The larger the down payment and the shorter the loan term, the lower your interest rate will be and your overall financing costs will also come in lower.
Much Consideration Needed
Clearly, buying a new car should never be rushed. Much thought should go into your purchase, leaving the emotional side of car buying to the side. Your financial livelihood may be on the line when you buy a new car, so solicit bids from several dealers and prepare to negotiate hard.
Photos courtesy of SXC.hu