Be a Smart Shopper

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Knowing what you want — or need — before you start making the rounds of dealerships can save both time and money. It’s human nature to go looking for a practical family vehicle like a minivan, but be distracted in the showroom by a flashy sport sedan that costs more. Also, more buyers than ever are climbing out of passenger cars and into light trucks — sport-utility vehicles, minivans, and pickups. Light trucks now account for 55.5 percent of new vehicle sales. Whatever the model, if emotion drives you to an impulsive purchase, you are likely to pay more and suffer regret later.
While the nation’s economic recovery has been sluggish during the past year or two, new vehicle sales remained reasonably strong, topping 16.86 million units in 2004. That was an increase of just 1.5 percent compared to 2003, according to the National Automobile Dealers Association (NADA).
With so many brands and types of vehicles to choose from, consumers have more possibilities than ever. So, automakers have to fight for every sale. Record-high incentives in the form of cut-rate financing and/or cash rebates, which averaged more than $3100 in 2003, certainly helped move the metal. Raj Sundaram, president of the Automobile Lease Guide, predicts average incentives near $3600 in 2005.
Affordability remains a key issue among shoppers, especially since the average cost of a new vehicle reached $28,050 in 2004 (according to NADA). Fortunately, initial price increases for 2005 were largely moderate. Many manufacturers are expected to continue offering tempting incentives on some or all of their models during the months ahead.
Overall vehicle affordability has actually been improving steadily, according to monthly estimates by Comerica Bank. In 2004, the average new vehicle cost $28,050, approximately 22.4 weeks of median family income. On average, new vehicles were more affordable in 2004 than they’d been in the previous 25 years.
Even if cars are more affordable these days, it makes good sense to explore all your options and make informed, practical decisions. In this guide, we’ll arm you with some key survival tips
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To­ get the right vehicle at the best price, it’s important to do your homework before starting to shop. Begin with the basics.
Decide how much you can afford and how much you are willing to pay before you shop for a vehicle. If, like most consumers, you have to borrow money, shop for a loan before you shop for a vehicle. Calculate what you’ll have to pay each month, including interest. For instance, if you borrow $10,000 for 4 years at 8 percent interest, your monthly payments would be $24.41 times 10, or $244.10. Borrowing that same amount at 8 percent for 3 years would raise the monthly payments to $313.40 ($31.34 times 10).
Keep in mind, too, that you’ll probably need a down payment of about 20 percent (in the example above, about $2000), unless your trade-in is worth that much. The total of your loan, down payment, trade-in, and any factory rebate will have to cover the price of the car, as well as fees and sales tax. Your bank or credit union can discuss loan options to help you set a realistic price range that fits your means and budget.
Buying a new car is a financial stretch for many consumers and out of reach for quite a few. Many have turned to used cars and others to leasing, hoping to avoid a hefty down payment and lower their monthly payment.
More than 43.5 million used vehicles were sold during 2003, according to the National Independent Automobile Dealers Association. More than 13 million changed hands in private transactions, but the others were sold by either franchised new-car dealers or independent used-car dealers.
Buying a secondhand vehicle always carries some risk, and most of them include no warranty. To counteract that concern, almost all automakers have certification programs that operate through their dealers. About 1.58 million certified pre-owned vehicles were sold in 2003. Programs vary, but only vehicles up to a certain age, with less than a specified number of miles on the odometer, are certifiable. Each is given a thorough inspection at the dealership, according to manufacturer directives. Additional warranty coverage is included. Certified used cars cost more, but many consumers are willing to pay extra for the added peace of mind they provide.
As greater numbers of consumers wind up in bankruptcy or with insurmountable credit problems, even a used car becomes difficult. Credit-challenged customers are consigned to the rank of sub-prime buyers, who are obligated to pay interest rates far higher than the norm — assuming they can get credit at all.
Before visiting a dealership at all, gather as much additional information as you possibly can on the vehicles in your price range. Automakers’ brochures and Internet sites can offer other pertinent details, such as exterior color and interior-trim availability.
It’s always a good idea to visit an auto show if one is held in your area, because they present a rare opportunity to compare many makes and models side-by-side. If possible, rent or borrow the particular vehicle you’re considering, so you can take an extended test drive.
Perhaps the right “car” for you is a “truck.” SUVs, minivans, and pickups are considered “light trucks,” which account for more than half of new vehicle sales. However, some of these vehicles are tall and/or long, so make sure the one you want will fit in your garage. In addition, shorter riders may have trouble entering and exiting tall trucks. Look over the specifications for the vehicle that interests you, comparing them to similar models.
Most trucks and SUVs offer four-wheel-drive systems, as do some cars and minivans. Whichever type of vehicle you choose, select a model with options that suit your needs, not just your desires.
Some features may come as stand-alone options only. Or they may be included as part of higher trim levels and/or bundled with other items in specially discounted packages. Generally, it’s best to choose the trim level that includes most or all of the features you desire, instead of equipping the base model with individual options. On the other hand, if you’ll wind up with added features you may not otherwise want, taking the higher trim level can be a lesser value.
Not all features may be available with all trim levels in a given vehicle line, and some features may only be ordered as part of an option package.
Take the time to compare ownership costs. Consider factors such as insurance premiums, resale values, and fuel economy — including whether the vehicle requires more expensive premium gasoline. Compare financing rates from local lenders to find the best deals on new-car loans. The difference in such costs can add hundreds — even thousands — of dollars to your final purchase price in the long run.
Informed shoppers have an edge when negotiating price. To get the best deal, plan your moves and take your time:
Know what you want, but be flexible. Narrow your list to two or three models that best suit your needs and pocketbook.
Total the list and invoice prices for the models you’re considering, including any options or option packages that you want, and add the delivery charge to both columns. If a manufacturer’s rebate is advertised for a vehicle, deduct it from both the list and invoice totals. Your “target total” is the invoice price, though the final transaction will nearly always end up somewhere between the two figures. The final price will depend upon your knowledge and your ability to negotiate-and the salesperson’s resolve.
Research your present vehicle’s fair-market trade-in value ahead of time by checking published guides or consulting a local lending institution. A vehicle’s trade-in value is expressed as its “wholesale” value (as opposed to the “retail” value, which would be a dealer’s asking price if the car were placed on a lot). Some dealerships can provide access to trade-in values at Black Book Online, a web-based service from the Black Book, which is one of the price guides most often used by dealers.
You might want to “shop” your car or truck to a few dealerships’ used-car departments. Ask each manager what the dealer would pay for your vehicle in an outright sale, and get the bids in writing. Keep in mind, however, that you can usually get more money for your car if you sell it yourself to a private party. Also, if a dealership isn’t particularly interested in the vehicle that you have, the price offered is sure to be low.
Shop competing dealers to compare prices on the same vehicle, with the same or similar features. You’re not likely to get the dealer’s “best” price for a vehicle just by asking (you’ll usually have to dicker to obtain it). Still, this can give you an idea of how willing the dealer is to negotiate. Never put a deposit on a car just to get a price quote. Don’t allow the salesperson to “steer” you toward a more expensive vehicle or a version that includes features you don’t want.
Ask if the dealer has the vehicle in stock, exactly as you want it equipped. If not, ask if they can obtain one from a dealer in another area. Don’t give the impression that you’re “in love” with a particular vehicle, though. A well-trained salesperson can use your emotions to gain the upper hand in price negotiations.
Size up supply and demand for the car you want. A good deal on a slow-selling model might be below dealer invoice price, while a popular car can still command full suggested retail price or even more. Dealer inventories often tell the story. If you see large numbers of a certain model on the lot, it’s probably not a hot seller.
If you have a trade-in, don’t acknowledge this fact until you’ve secured a firm selling price on the new vehicle from a salesperson. This way, he or she won’t be able to “inflate” the trade-in value by manipulating the selling price of the new vehicle. (Such “adjustments” can sometimes work to your advantage if you need a larger down payment to qualify for financing, but you need to be on your guard).
Never give your trade-in’s keys to the salesperson. Your old car could wind up being held hostage while he or she pressures you to sign a sales contract on the spot.
Test-drive the exact car you’ve decided upon — before you buy. Think you want manual shift and a sport suspension? A 15-minute test drive might convince you to go with an automatic transmission and a softer suspension that produces a smoother ride.

Editors of Consumer Guide. “10 Car Shopping Tips” 20 October 2005. <> 03 May 2014.