Saturday, February 23, 2013

How to buy a new car in the US


Deciding to buy a car is a big decision in most people’s life. In this article I am going to outline some tips that will help make the process easier. If you are in the market for a used car, please read this article I wrote a couple of years back ‘Buying a used car in the US’. I would not consider myself a car expert, but I am a savvy buyer and a car enthusiast who wants to spend his earnings wisely.

Why would one buy a new car?
Seriously, why would you, given that cars depreciate the moment you own them. Well, if you are looking for owning a car for considerable length of time, say over 5 years, it would be better to buy a new car than to get a certified pre-owned or an expensive relatively new used car. New cars come with untouched company warranty with which comes peace of mind and confidence that you can take it anywhere without doubting its safety and reliability.

Alright, where to start?
If you are not an impulse buyer, then car buying can be stressful. This is especially true if you are targeting the midsize sedan segment, which is the most crowded segment. The good side is you get ample options to suit everyone’s taste.

Knowing your budget would be the first step. For most buyers, your spending power is going to determine which car you can buy without feeling a pinch in your monthly payment. Car websites like www.kbb.com, www.edmunds.com, www.cars.com have useful tools that we will use throughout this article. Use the APR calculator, cost to own calculators and get to know your budget. Most banks would loan you for APRs starting from 2.99% and if you plan right, you can buy the car with 0% APR from the manufacturer’s finance division.

Chart a timeline for your purchase. If you worked full time and could only dedicate weekends for car searching, it could take as much as a month to buy that car for that best deal available.
Try to arrive at an early idea of which type of cars you want to buy – sedan / coupe / minivan / SUV. Name those makes that you like. Run an early screening process and rule out those models that you would never consider buying. After this elimination process, list those makes that you want to proceed with.

How to shortlist?
Never buy a car without test driving it. But you cannot test drive every other car in the market. So start shortlisting the cars from the list you made. Use the websites listed above to compare features, boot size, fuel efficiency etc. Make a note of those features that you like in your present car, those that you think are essential in your next car and screen out the models. With too many options, elimination is the best method to screen out cars in the family sedan segment. You can also search for video reviews online in sites like YouTube. There you can see the can in different angles and hear expert reviews about the pros and cons.
Try to arrive at 3 to 5 makes/models. Within the models use the company website to look for trims and the MSRP. At this step it is easier to get overwhelmed and lose track. Just look for those features that you cannot drive without and those that you think you would use in your everyday driving. Also wisely look for those features other drivers of your car, like your spouse or children, would benefit from.
After you had narrowed down, use those websites mentioned above to get the list of dealerships within say 50 miles from your ZIP. Fill your email and contact details (phone # optional) and request for a free quote. These days, customers can easily shop around and dealerships knowing this, present their best offers online. Use this information to call the internet managers and make appointments for a test drive and to talk the deal in person.

At the dealership
Car dealers are some of the best salesmen and can read your body language well. So a little bit of preparation will come in handy. Dress well, really, groom yourself like you would for a date. Once you arrive, ask for the internet manager who first offered you the deal.
I would suggest you pick a small or medium sized dealer that is in your locality when you are test driving a particular model for the first time. Large dealers usually have the best deal and it is strategically benefitting if you did not test drive at a bigger dealership, we will get to this in a minute. New cars would drive the same no matter at which dealership you drive and choosing one that is in your area will allow you to drive it on rough roads that you already know off to get a better idea of how it handles.
At the dealership, maintain a poker face. Try not to be overly enthusiastic and if you did not like something in the car, be vocal about it. When you are a tough customer to please, the dealer has to provide his best deals, offers to convince you.

Ask for the particular trim of the car that you are interested in when you test drive. Checkout all the features that you like in it. Do this at the first dealership, when you get to other dealerships for the same make / model, you can skip the details and get straight to the numbers. This saves you time, but most importantly conveys the message that you are a savvy buyer who is looking for the best deal. The dealer is more likely to realize that you are a potential buyer and will offer his best deal.
Try test driving competing models in your list back to back on the same day or subsequent days. This allows you to compare them easily. Once you like a particular model, sleep over your thought to see if you feel the same way the next day. Do this process for all the models in your list and identify the car that you really want to buy. Make use of the websites listed above to read expert and customer reviews, reliability stats of previous year models etc.

Getting the best deal
Generally larger dealers have the best deals. This is because they seek profit in bulk sales unlike smaller dealerships. But you do not want to head there right away and test drive like a new buyer. If you did so, you are less likely to get the best deal. Hence like mentioned before, test drive your car of choice sufficiently at other dealerships. At the big dealer (who has most likely given you the best rate online so far) meet the finance manager or chief sales manager who has the power to finalize the deal. Refuse to test drive the car and say that you want to speak the numbers. Tell that you are there to buy the car and if they offered a deal that you are comfortable with, you would buy immediately. This will get you the best offer. You do not have to buy at this point. The dealer would dodge the quote request by talking about monthly payments etc. But stick to your question, ask for the final purchase price (the price before taxes and registration).

Use websites like www.truecars.com that pool local and national sale prices of every make and model. The sale prices are plotted as a histogram giving you a clear picture. Make note of the average and lowest sale prices in your area. This or lower than this will be your asking price.

The car salesman does not have to know your credit score for providing the asking price. They need it only to calculate APR and monthly payment. Even if you get what looks like the best deal, do not finalize it. Say that you want to think over the deal and walk home. Later call other dealerships and use the asking price you just got to shop around and get better deals. When calling other dealers, they might ask for a printout of the asking price that you just got. No dealer would give away their best offer (one which is considerably lower than what is put online at their websites) in print and all other dealers know this. So when you are posed with such a question, just answer that you already have a better deal and if he / she cannot beat it, you will buy from the best one you have. This way you are not losing much but the dealer you are calling is losing a potential buyer.

Finalizing your deal
By now you know which make/model you want to buy and probably also know the dealer from which you are going to buy. Next are a few more steps that you can follow to sweeten the deal further. Go to your bank’s loan manager and get yourself preapproved for the price of the car. Banks usually have the lowest APR of 3% or close to it. Get a printed copy of your preapproved status. You can do this at a couple of banks to compare the best interest rate that you get (depends on your credit score and other relevant factors).

At the dealership, try to target for 0 down 0% APR by financing through the car manufacturer’s own financing division. Use your college graduation status, company affiliation status, military service status to obtain discounts on a new car. Talk to your friends, colleagues and visit the car maker’s website to see current offers. Usually opting to finance through the car maker will offer you an additional discount. If you are offered an APR higher than your bank, show the preapproved letter as proof and bargain for a better interest rate.

Time your purchase for the end of the month, mid of the week during a weekday. End of the month is when dealers want to maximize their sales to earn a good commission and mid of the week is when sales is minimal and the dealer can spend sufficient time in a bargain with you.

When you get a low or 0% APR, you would not benefit much in making a large down-payment, since your interest is anyways lower. Hence use that money for some other expense. Visit your state’s DMV website and calculate the cost for registration and sales tax using their online calculators.

If you are trading in your present car, reveal this only after you get the best deal on the new car. Salesmen usually try to convince buyers by offering good deals on the new cars, but compensating for that by providing a very small asking price for your old car. Keep both these transactions separate.

Get insurance quotes from your present agent for the new car. You could also shop around to get lower premiums for car insurance. By this time you can get the VIN number of the car that you are going to buy and use that to write up a new policy or update the existing policy such that your new car is insured right from the minute you buy it. The dealer would do the paper work for registration for you and charge a minimal fee (about $80).

That’s it, you are all set to buy now. You have a clear picture of the car you want and also a good deal. Go ahead and buy the car that you love. Throw your friends and family a party. Drive safe and care for your car. Good luck folks.
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