Buying a New Car: Getting Started
This tutorial is about buying a new car, but before you decide to buy new, spend a little time deciding whether new or used makes sense for you. Why Used Cars Are a Good Deal Right Now will give you the case for the other choice.
We will now assume that you decide that a brand-new car with untouched upholstery, a new warranty and a chance to be equipped with all the latest technology is the way you want to go. A lot goes into buying a car, and the more you know before stepping onto a dealer’s lot, the better prepared you will be to negotiate with salespeople and get a good deal for yourself – one that leaves you in solid financial shape.
When you're getting started, you need to narrow down the auto universe to the vehicles that make the most sense for you financially. Here are five things to weigh about each car you're considering.
Many factors go into calculating the true price of a new car. The sticker price on a car can quickly balloon with additional costs such as taxes, freight and administration fees. There are also extended warranties and pre-paid maintenance to consider. And don’t forget the “A.D.M.” which stands for “Additional Dealer Mark-Up.” Sometimes, this is expressed as “A.D.P.” which is “Additional Dealer Price.” This acronym allows a dealership to mark up the price of a car and charge customers more than the advertised price for a vehicle.
The more you understand about the factors that go into the price of a new car, the better you will be able to negotiate a lower and fairer price. Educate yourself on all the costs that go into the final price of a new car so that you can understand how a vehicle advertised as being $20,000 is suddenly costing you $25,000. Websites such as Car Buying Strategies enable you to see what a dealership paid for a car, what all the additional costs are, and how much you should actually pay. Know those number before you walk into the showroom.
2. Resale Value
It’s often said that you shouldn’t view a vehicle as a financial investment. After all, a car’s value begins depreciating the moment you drive it off a dealer’s lot, and only continues to trend downward as wear and tear piles on. That said, not all vehicles are created equal and some retain their value better than others. This often has to do with the reputation of a particular make and model. The Honda Civic, Toyota Camry and Ford Focus, for example, tend to retain their value better than other vehicles in their class because they have earned a reputation for reliability and durability. Vehicles that have a reputation for breakdowns and costly repairs tend to lose their value the quickest.
The good news for consumers is that there is a wealth of information online about which vehicles will retain their value best over the long-term. Kelley Blue Book remains the gold standard in this area. The company’s website enables people to easily calculate the value of older model vehicles based on the make, model, year and mileage. It's also good to know this information if you're trading in your car as part of buying a new one.
3. Safety Rating
Money isn’t everything. The safety of a vehicle is important, too. Again, some vehicles have better safety ratings than similar-seeming models. Fortunately, a number of companies and organizations rigorously test the safety and reliability of cars, trucks, SUVs and mini-vans.
No organization is more thorough in this regard than Consumer Reports, which issues annual lists of both its “10 Most Reliable Cars” and “10 Least Reliable Cars.” While getting detailed reports requires subscribing to the website or magazine, people interested in becoming educated car buyers will find the cost worth it.
Warranties are a vanishing perk among most automotive manufacturers and dealers. A five-year or 60,000 mile warranty used to be standard throughout the industry. Today, most dealers are offering what they call “one year no cost maintenance,” which basically replaces a traditional warranty and means that if a new car breaks down in the first year the dealer will repair it at no cost to the owner. After that first year, you’re on your own for repair costs.
While this appears to be a widespread trend, a few automakers still offer decent warranties on their new vehicles. These include Mitsubishi and Hyundai, which each provide a five-year/60,000-mile warranty as well as a warranty on the powertrain of its vehicles that covers 10 years/100,000 miles.GMC and Chevrolet offer a three-year/36,000-mile standard warranty, and a powertrain warranty that is good for five years or 60,000-miles, whichever comes first. U.S. News and World Report magazine issued a report in 2017 on the car companies that still offer some form of traditional warranty on their vehicles.
5. Cost of Ownership
The initial cost of a new car is just the beginning. Once parked in your driveway, a new vehicle has several ongoing costs that you must contend with – including maintenance, fuel, insurance and seasonal expenses such as snow tires and undercoating if you live in a winter climate. Taking time to consider the total cost of car ownership is as important as calculating whether you can afford to purchase a new vehicle in the first place. Failure to account for the cost of ownership often leaves people car poor and regretting buying a new vehicle. If budgeting isn’t your strong suit, you can get help online at resources such as Financial Mentor, NerdWallet, and CAA – all of which offer car cost calculators free of charge.
The Bottom Line
Knowledge is power in most situations. Nowhere is that more true than when you're buying a car. Understanding the fees charged by car dealers, which vehicles retain their value best; where to get a decent warranty, and the total cost of owning a particular make and model will save you valuable time and money in the long run. Take the time to read up, do some number-crunching, and know what you want and can afford before going car shopping.
Next, we'll talk about smart shopping strategies when you're actually in the showroom.
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