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Buying a car in USA today

Transportation is something that we all need. Unless you live in an area with excellent public transportation, or where you can walk to the places you need to go, you are going to need a car. Cars may be a need for most of us, but there is a huge range of options, and costs that can meet that need. Here are some ideas to help you make a wise choice.  

If you already own a vehicle do you really need to buy a different one? When an older model vehicle needs a big repair it is tempting to want to be done with the vehicle and get something different. Before you decide to go purchase a vehicle, stop and consider it carefully. How much will that repair cost? What kind of vehicle would you be able to buy with the cost of the repair? How many car payments would you be able to make with the cost of the repair?  Fixing your current car often is the better option financially.

An advantage of keeping your current vehicle is that you know its glitches. You know whether it has been cared for. You may be in for new surprises with a different pre-owned vehicle, or even sometimes with a new one. Of course, before deciding you must consider that if you do fix your current vehicle, will there be another repair bill soon? That unknown factor is what often pushes us toward a purchase.

As with any purchase, you will make a better decision if you buy when the need is not pressing. Start the car buying process before you’re without transportation. It is hard to make a wise choice when the need is urgent.

If you’ve decided it is time to get another car, there is now a whole list of decisions to wade through. What is your price range? Hopefully you have some money saved for the vehicle, and ideally can pay cash, but very few of us are able to do that. Where do you go to get the best loan rates? What kind of vehicle should you get?  Buy or lease?  New or pre-owned?  Where should you shop? So many decisions that can have a big affect your finances.

First determine your price range. Add any savings you have to use toward a vehicle with the value of your current vehicle if you will be trading it in or selling it.This would be what you could pay cash with or what you can use for a down payment. If you are financing, a typical family can afford a payment of about 15% of their take home pay. Bankrate has a helpful tool to figure how much car you can afford.

You will almost always get more money for your vehicle if you sell it yourself. Selling your car yourself does take time. It can also be tricky to work out the timing. If you sell your current car before you buy, you will need an alternative form of transportation until the purchase is completed. An alternative is to finance the purchase, and then sell your current car. Then you could apply the proceeds of the sale to the loan. Kelley Blue Book can give you an idea of what you can expect to receive for your car at a dealer or by selling it yourself.

Do not only consider your monthly payment when determining your price range. The term of the loan (how many years until you pay it off) can make a huge impact on the monthly payment. A loan with a longer term, may give you a lower payment, but you will pay more interest. When deciding on your price range, consider the total cost, not just the monthly payment. You will want to get your financing in order before you start shopping. Obtaining the best vehicle financing is discussed in a separate article.

What kind of vehicle will you be shopping for? With your price range in mind, consider your needs first. How many people do you normally transport? If you are a family of four, you probably don’t really need an eight passenger vehicle. Do you need a lot of cargo space for work or other things? A car needs to fit into your budget. Don’t forget about insurance rates and gas mileage. Something else to consider, especially if you are buying used is the availability of parts.

Then consider your wants and prioritize them. Very few of us need all wheel drive, but if you live in a mountainous or snowy area, that may be an important want. Built in entertainment systems for the kids may be nice, but are they a requirement for you? Extras are nice, and can make our driving experiences more enjoyable, but don’t sacrifice your needs or your budget to get a car that is loaded with gadgets and niceties.

Do your research. Look at several makes and models that may fit your needs. Look for information on safety, reliability, insurance rates, and cost. A list of online resources is included at the end of this article. Rule out any vehicles that don’t fit your needs, or that don’t seem to be a good value for your money. You can rank the vehicles that remain on the list, but try not to lock yourself into a specific car. Keeping your options open will allow you more choice, flexibility, and leverage when it comes to the actual shopping.

Should you buy or lease?  At first glance leasing can look attractive. A lease allows you to get a brand new car for a lower monthly payment. The car is under warranty, so no repair bills to worry about. More car for your money, right? Well sort of, but at what price?

Will your mileage be limited with a lease? What is the cost if you exceed that limit? There are often other fees involved in the lease including fees for the wear and tear on the car. Leasing may look more affordable at the beginning, but what happens at the end of your lease? (usually two years) You own nothing, have nothing to trade in and must negotiate another lease or purchase. The car payments never end.

Leasing can be a convenient choice, but it is an expensive one. If it is important to you to have a new car every few years, and you understand that you are paying a hefty price for that luxury, leasing may be for you. For the rest of us though, buying is the better choice.

Now that you are buying a car, should you be looking in the new car lots or looking for a pre-owned vehicle? In most cases, buying pre-owned (used) is the better financial option. It depends on the type of car, but the value of a new car decreases by 12% to 30% in the first year of ownership. Save yourself from being the one to take that loss by buying your vehicle a few years old. It will save you thousands, and you may be able to get a vehicle that still is covered under warranty.

There are exceptions to that rule though. If you are buying a trendy vehicle or one that is in high demand, you may be better off purchasing new. An interesting article on that topic can be found at Yahoo finance, When a New Car Beats a Used Car.

You’ve done all the prep work. You are well researched, and ready to go. Now, comes the actual shopping. Where should you look? You can go to a dealer for new or used cars. You can also buy pre-owned vehicles from a private owner using eBay, or classified ads in print or at websites like cars.com.

When buying new, research carefully what the true dealer price is. Edmunds has a several tools to help you do this, and also will allow you to obtain several quotes from dealers in your area. Advice given by a former car salesman: Determine your price before you go to the dealer. Dealers need to make a profit, and your price should include some profit for them. Tell the dealer your bottom line, and stick to it. Stick to it by walking out the door if they can’t meet it. Most times they will not let you leave. They will meet your offer. If they don’t, and your offer is a fair one, try at another dealer. There are lots of cars that have made your list out there. Do not “fall in love” with a car and think you have to have it now.

When buying pre-owned, the above rules still apply. Other things to consider are obtaining a service record, having the vehicle inspected by a trusted mechanic, and checking the carfax report. Using the VIN number, a carfax report will give you information on the history of the vehicle.

There are advantages to buying from the dealer. They probably have inspected the vehicle already. Be sure to ask. You may still want your own mechanic to look at it.  Many times dealers offer a limited warranty. Ask if there is one, what it covers, and how long it lasts. If something does go wrong, you have a place to go back to that may try to make it right.

Some disadvantages of buying from the dealer. There will be a harder push for the sale, often dealers really don’t know anything about how a car was cared for, and a dealer may not be as able to negotiate your price as a private individual.

An individual is more likely to be motivated to negotiate to your price.  If you know the person, you can be confident of the care the car has received. If the seller is not someone you know there is a bit more risk, but having the vehicle inspected can take some of that uncertainty away. If you are comfortable shopping for a vehicle from a dealer or an individual, shop both ways. The more options you consider, the more likely you are to find the right car at the right price.

When You Are Ready to Buy a Car

1. Determine your price range.
2. Determine the type of vehicle according to your needs.
3. Research several vehicles that meet your needs and are in your price range.
4. Determine whether to buy or lease.
5. Determine if you’ll buy new or pre-owned.
6. Arrange pre-approved financing.
7. Start shopping, and stick to your price.
8. Enjoy your vehicle and the peace of mind that comes with making a wise choice.

Recommended sites for more information and research

Cars.com
Carfax
Consumer Reports – Limited information is available for free online. The annual subscription is $26. Their reports are detailed and in depth and may save you a substantial amount.  
Edmunds
Kelley Blue Book - To find the price of any auto.
MSN autos

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