Dos and Don’ts of buying a car
It’s fall, time for the leaves to change and the car dealers to start offering great deals on the new cars they have on their lot to make room for the 2007 models. Can you score a good deal? Follow some simple rules and you’ll get the car you want at a price you can afford.
don’t negotiate the car purchase, trade-in, and financing altogether. A dealer knows how much they want to make on a deal and the more moving parts they have to play with, the more likely they will get the profit they want. Take one step at a time; find the real dollar figures for each transaction. Figure out the car you want, whether you will sell your car yourself or trade it in and look at all the financing options available to you. Some companies give an extra incentive to customers that lease instead of buying, i.e., Chrysler and Ford, so decide if you want to buy or lease a car.
find out the price of your new car first. There are two different prices: Invoice and Manufacturers Suggested Retail Price (MSRP). The invoice price is the price the dealer paid for the car. MSRP is the “suggested” price the manufacturer wants you to pay for the car. The Manufacturer has only one customer, the dealer. The dealer buys the car from the manufacturer and sells it to you. You cannot go through a Manufacturer to buy a car. Howe’ver, the Manufacturer can offer incentives to the dealer and the dealer’s customer to be more enthusiastic about making a deal on a car that might be moving slowly.
For example, according to nadaguides.com, the 2006 Mazdaspeed6 Sport has an MSRP of $27,995, but is that what you are going to pay for it? Not necessarily. The MSRP, the money you’re supposed to pay, has a customer incentive of up to $2,500 or you can finance it with a rate between .9 to 2.9 percent, depending on your credit score. The invoice, what the dealers pay, is $25,833 and has an incentive on it for up to $1,000. The dealer can pass this on to you as well. Ask your dealer if this offer still applies.
Should you take the cash or the financing?
If you have bad credit,
you won’t be able to get the great financing rates, so take the cash. I’m going to assume that if your credit is bad, you will need a 72-month new car loan, which gives you a lower monthly payment. At $27,995, with the customer incentive of $2,500 and the dealer generously giving you their $1,000 incentive that equals a principal amount of $23,995. Using Bankrate’s 72-month loan rate of 6.69% your monthly payment comes out to $405, with a total payment of $29,198, more than $5,000 over the best price you could get. Check all possible financing options, including your Credit Union.
If you have a great credit
look at the .9 over 5 years. At the full $27,995, which you should be able to negotiate down, the monthly amount would be $477.34 with a total payment of $28,640, only a little over $1,000 dollars of the asking price. Do the math before you decide.
Don’t use weak phrases:
Knowledge is king when you are wheeling and dealing. Know your invoice price and your MSRP. Go on the internet and find out if there is a customer and/or dealer incentive on the car. Don’t go into a dealer and ask them, “What’s the lowest price you’ll give me?”. If they make you an offer, counter-offer with an actual figure; don’t say, “Is that the lowest you’ll go?”
Selling your used car or trading it in
Two terms you should know; conquest or loyalty. Conquest, for example, is if you buy a Pontiac, G6, V-6, and trade-in a non-General Motors car you get an extra $1,000 over the negotiated trade-in amount. Loyalty, for example, is if you buy a Saab and trade-in a Saab, you get an extra $500 over the negotiated trade-in amount. Ask your dealer if there is a Manufacturer conquest or loyalty premium on your trade-in.
Find out what the dealer will give you for a trade-in or what you can get if you sell it yourself. Read “Used car selling advice” before you decide to sell on your own.
Make sure you can afford the car. Just because you can get a loan, doesn’t mean you want to overextend yourself. Here are some questions you should ask yourself before buying a car.
1. How long do I typically keep a car? If you keep a car for four years then get a four-year loan. Have the car paid off before you buy a new car, otherwise, you will have to roll over the payment to your next car. If you can’t afford a 4-year loan commit to keeping the car longer or getting a car with fewer options.
2. Do I buy a car for my own luxury or to get a better resale value? If you don’t need an all-wheel-drive vehicle and you keep your car for a long time it may not make as much difference on resale value. Plus, some options will add weight and weight reduces your fuel economy.
3. Do I have more than one car, perhaps even a home? When you combine your insurance costs the sum becomes less than the parts. Insurance companies will give you a break if you give them all your business.
4. After my car is paid off, am I looking for great fuel economy? Great fuel economy is relevant to the type of car you are buying. For instance, a Toyota Prius gets great miles to the gallon, but if you’re looking at a pickup you need to look at the best miles per gallon in that segment. And remember, miles per gallon go down faster if you don’t service your vehicle.
Financing, DMV costs, costs for servicing the vehicle, insurance and gasoline are all costs that need to be included in the cost of the car. If you own your own business add back the depreciation, service and gas credit you will get from the percentage of the time you use your car for business each year.
Below are some of the hottest car deals.
If you’re military personnel there are Manufacturers that offer $500 on the negotiated deal. Make sure to ask if they have a military discount for active duty, retired and/or honorably discharged veterans. Find out if the Manufacturer offers this benefit and if they do, wait until you’ve negotiated your deal to the dealer your status.
BMW does not give customer incentives; they only give a “market allowance” to dealers to either pass on to their customers or use in advertising.
The 2007 BMW X5 has a new model coming out in November, so look for deals on the 2006 BMW X5.
Also, if you live in cold-weather states consider convertibles. BMW gave its dealers a market allowance on the 2006 Z4 convertible and the 2006 M3 Convertible.
The 2006 3-series also have an incentive to dealers.
These incentives are good until the end of October.
The Sebring sedan and Stratus sedan are both out of production as the new Sebring has recently been introduced. The sedan has a $2,000 cash incentive and the convertible has a $2,500 cash incentive. Both have an array of financing opportunities depending on if your credit qualifies.
There are only about 200 Dodge Neons around, which was replaced by the Dodge Caliber, so if you want a Neon you will have to shop around. No incentive is offered on the Neon.
The biggest cash incentive goes to the Dodge Durango with up to $6,000 cash incentive being offered, $7,000 if the car is leased or zero-percent financing for up to 60 months if your credit qualifies.
Chrysler offers a military discount on Jeep products to active duty, retired and honorably discharged veterans. They would receive an additional $500 off the negotiated price of any 2006 Jeep product (Wrangler, Liberty, Grand Cherokee, and Commander), and selected 2007 Jeep products (Commander, Grand Cherokee, and Liberty).
Ford has deemed this “Truck Month”, and they are offering the following:
Zero percent financing for 60 months on all 2006 Ford F-150, Super Duty and Ranger models.
2.9 percent financing for 60 months on 2007-model year F-Series Super Duty and Ranger, or $2,000 customer cash in lieu of low financing on these models.
3.9 percent financing for 60 months or customer cash of $1,500 in lieu of low financing on 2007-model year F-150.
Zero percent financing on most 2006 model vehicles.
1.9 percent financing on 2006 Fusion and 2.9 percent financing on 2006 Mustang.
Looking at Lincoln, customers can get an outstanding deal on several products.
Through the end of the month, many 2006 Lincoln and Mercury products are available at 0 percent for 60 months.
In lieu of the financing deal, the 06 LS will be available with $8,000 customer cash + $1,000 retail bonus cash.
The 06 Town Car offers $7,000 customer cash + $1,000 retail bonus cash… along with an additional $2,000 owner loyalty offer for customers who currently own or lease a Lincoln Mercury vehicle.
The 06 Grand Marquis is available with $5,000 customer cash + $1,000 retail bonus cash.
There’s also $5,500 customer cash available on the 06 Navigator + $1,000 retail bonus cash.
$5,000 customer cash on 2006 Monterey
$3,000 customer cash on 2006 Mountaineer, with $1,500 retail bonus cash on Mountaineer Convenience and Luxury Models.
General Motors no longer does a national incentive plan, however, there are incentives galore.
A couple that stood out are:
The 2006 Chevy Avalanche has a $6,000 incentive on it. The 2006 Cadillac Escalade has an “up to $5,000” on certain models in certain regions. Cadillac is offering a free navigation system on many of its 2006 and 2007 models, so be sure to ask about the NAV system.
But the real deal is the Pontiac G6. If you buy 2006, V-6, G6, and trade-in a non-GM vehicle you get an extra $1,000 on top of the trade-in and a $1,000 incentive when you buy the 06, G6, V-6. You could opt for the zero-percent financing for 60 months, but make sure your credit qualifies for that option.
General Motors has lots of credit financing through General Motors Acceptance Credit (GMAC), but your credit has to be good enough to qualify.
If you can find a Honda Insight hybrid, buy it. They are being discontinued, but they get 60mpg.
Saab is a General Motors product, but you can get some special deals on many of the 06 models and you can combine a European vacation with the best deal on a Saab – European delivery gives 9% off MSRP, a further $2,000 in travel allowance (or payment towards the vehicle if you’re using frequent flyer miles), and $500 in loyalty bonus if you are already a Saab owner. Free hotels, meals, factory tours, and museum tours are included in the price. Partially free home shipment is available for the new car. If you buy an 06 convertible it is $4,500 off MSRP.
The MPV and the Tribute are both being discontinued. The 2006 Mazdaspeed6 had a great customer and dealer incentive on it, check to see if it still does.
Visit Mercedes for 2007 deals that are good until October 31, 2006. Mercedes has one 2006 vehicle, the R-350 Sports Tourer that is $499/mo. for a 27 month lease, $2,444 Total cash due at signing with a 4.9% APR Financing for 48 months.
The Lancer and the Montero are both being discontinued. Mitsubishi has incentives on its 2006 models, so check on those.
$500 SignatureGRADUATE Nissan Cash Back – Qualified recent or soon-to-be graduates can receive $500 Nissan cash back on the purchase or lease of a new 2006/2007 Sentra, Frontier (including Crew Cab), Altima, Versa or Xterra.
Nissan has a loyalty program to owners of the Model Year (MY) MY04 Nissan Quest. These owners are eligible for Nissan friends and family VPP discount plus an additional amount of cash depending on whether they buy another Quest ($2,000) or any other Nissan ($1,000).
The Subaru Baja is on it’s way out. There are very few, so the incentive is low at $500.
Suzuki is dropping two vehicles for the 2007 model year; the Verona mid-size sedan and the Aerio SX. Customer incentives vary across the country; Suzuki incentives are “moderate” (around $500 or so). But, according to Suzuki, the dealers are usually willing to wheel and deal especially at this time of year.