What You Need to Know Before You Buy Your Next Car-

The fear. The anxiety. The unknown ... "I hate car buying!"  

If you feel this way, it's likely that you don't have enough information to approach the process with confidence and to actually enjoy it.  Yes, you can enjoy that new car smell.  Breathe in ... breathe out ... repeat.  

 The steps you take before you go car shopping will determine whether or not you have a good shopping experience.

And in most cases the advice is not what the so-called "experts" would say.

Rather it's based on real world situations.

You have got to deal with

 1. your current vehicle

 2. your credit and income

3. the vehicle you want to get.

Buying a vehicle can be frustrating or easy ... depending on the steps you take before you buy. But what do you do before you start shopping? The first thing to do is to take stock of your current vehicle. Did you finance it? Lease it? Or did you pay cash? If you you are currently financing your vehicle; before doing anything determine whether or not you can actually trade it in. Can you pay off your existing loan when you trade (or sell). Is your vehicle in condition to be sold? Are you the sole owner?

Consider ten costly mistakes friends, family, and co-workers may make when buying their cars and rejoice that with a little information you can avoid these mistakes like the large pot-holes in purchasing highway.   

    1. Not knowing the value of your car before you trade it in or sell it privately.  The term "value" to most is a subjective term; however in the automotive marketplace your vehicle has a value that can be defined quickly within a very tight range of values.  First, you must detach yourself from any sentimental value you may have about the vehicle.  Forget the family trips, personal conversations, and refuge it provided - for in the marketplace it is boiled down primarily to the vehicle's (a) year, (b) make, (c) model, (d) equipment, and (e) mileage.  These are the most important factors, condition playing a secondary role.  Like the stock market the value of vehicles changes daily.  Imagine that the car you're driving is subject to a National Recall - what impact does that have on the value? What if you're driving a hybrid and gas prices spike to $4 a gallon or higher?  

To get a gauge on your vehicle's value, I recommend that you go to 2 or more references for market valuations.  Consider www.kbb.com or www.nadaguides.org for guide valuations and then check out www.autotrader.com to see what others in your area are asking for similar vehicles.   

2. Vehicle Report.  You wouldn't buy a home without a home inspection.  So why buy a car without a Vehicle History Report?  The two most recognized authorities when it comes to Vehicle History Reports are www.carfax.com and www.autocheck.com.  Each will tell you whether there are public reports of an accident, police report, theft, flood, lemon law, salvage title, etc.  You will also discover how many previous owners the vehicle had and where it was registered.  Consider how important it is to know if the vehicle you were considering was registered in New Orleans at the time of Hurricane Katrina and then resold immediately after. Would that give you food for thought? Would you look closer at any signs of water damage?  Additionally, an as important, these reports will give you a sense of whether there is an odometer discrepancy.  And if you end up buying a vehicle with an odometer problem - you will typically lose at least 1/2 of the vehicle's value.  So ... Vehicle History Reports are worth their weight in gold!   

3. Buying from an unknown.  I'm sorry, however, I would not recommend purchasing a used vehicle from someone you don't know; and know well.  Think of it from a practical standpoint.  It's easier to sell your vehicle outright to a dealer - so selling it privately is not the fastest way to dispose of your car.  It's easier to trade a vehicle to a dealer as opposed to holding it for a private sale - so it's not the convenience.  The primary reason people choose to sell their cars privately is to make more money or to hide something the dealer will likely discover on inspection. So ... why would you put yourself in a position to overpay on something that may have hidden problems?  Especially, since you receive none of the consumer protections you would had you purchased the vehicle from a licensed dealership.  Makes no sense.  Mom's car - - ok.  Dad -- ok.  Close friend or neighbor -- ok.  Stranger -- No way.   

   

4. Cosigning.  The phone call usually comes at night, after a long sob story, or in a rushed voice.  "I need your help.  They only way I can get this car is if you co-sign for me.  Just sign, I promise to make the payments, you won't have to do anything."  Now here's the voice you should be hearing in your head - - "RUN, Forrest, RUN!"  The reason this person needs a co-signer is they are buying too much car.  The bank said no.  And they are trying to boot-strap you to their loan.  Now remember this, you are not "co-signing."  You would be "co-buying."  If they are late, you're punished.  If they go bankrupt - it will affect you.  Unless you're married to this person (and plan on staying so) DON'T co-sign.  Yes, that means your children, friends, cousins, aunts, and uncles.  If you're not ready to have full financial responsibility (even if they stop paying and won't bring the vehicle to you), don't co-sign.   

5.  Leasing People love to hate it.  It's the 3 eyed monster in the closet. OK, here it goes.  If ... (a) you have good credit; (b) you drive fewer than 20,000 miles a year; and (c) you plan on keeping the vehicle fewer than 4 years - - in my opinion, you MUST lease.  It will allow you to shift the risk of depreciation to the leasing company.  If, on the other hand, your credit has problems, OR you drive more than 20,000 miles; OR you plan on holding the vehicle 4 years or longer - - in my opinion, you MUST buy.   

6.  Why buy a used vehicle without a warranty.  You wouldn't go out into the ocean without a life preserver.  You wouldn't jump out of plane without a parachute.   In most states, you buy a used vehicle "AS IS." Which means exactly that.  You get nothing. Nada. Zilch. Zero.  If the transmission falls out in the dealer's lot as you are driving away for the first time, technically, it's your obligation to repair your car.  If you do purchase a warranty - here are some tips: (a) The most coverage for the least amount of money is a "powertrain" warranty. It covers the engine, transmission, and drive train.  The expensive stuff.  Warranties that cover electronic components and accessories are more expensive. (b) Make sure the warranty is a "manufacturer's warranty." Remember, a warranty is simply a contract - or in other words - a promise to repair.  The more reputable the promisor, the more valuable the promise. (c) And definitely look at Certified Pre-Owned vehicles, especially those with low mileage.  The manufacturer offers warranties longer than the original new car warranty.  So if you buy a low mileage, slightly used car, that's been "certified" - this is the ideal purchase for that someone who wants the best overall value.  It will cost less than a new car and come with a longer warranty.   

7. Make sure to consider GAP insurance. I know ... what's that?  GAP insurance protects you from owing money to the bank in the unlikely event your vehicle is totaled and the insurance company proceeds to not satisfy your outstanding loan.  Here's the harsh reality of life.  If you total your car - the insurance company only pays you the value of the vehicle - at the time of the loss.  So, if you total a new car in the first year of ownership, it will in all likelihood have depreciated faster than you would have paid off the loan.  As a consequence, you'll end up with a deficiency balance.  If you have GAP insurance, it pays off that deficiency so you are free to get a new vehicle without still paying for the old one.  The times you should definitely look at GAP insurance are: (a) when buying a new car with little money down; (b) when financing a vehicle for longer than 60 months; (c) if you rolled over negative equity from your last vehicle into the new loan; (d) if you purchase a vehicle over $30,000; and (d) if you lease - in which case it's usually included in the lease contract since the leasing company is technically the owner and they are protecting themselves.   

   

8. If you're considering a used vehicle - make sure you know whether it needs to pass an emissions test for you to get it registered; and whether it has passed a test in the last 12 months.  If you want to see whether there is a valid emissions certificate on the vehicle you are considering, click here BEFORE you buy.  http://www.cleanairforce.com/motorists/virreprints.php  Don't discover this unknown after the purchase.   

     

   

9. Consumers often think that the biggest savings they receive off a vehicle is from the dealership.  Not typically true.  The largest savings are those provided by the manufacturer.  They are in the form of rebates and consumer cash.  Now there are all sorts of rebates and most can be combined - like double coupon day at the grocery store.  Make sure you go to a manufacturer's website and look at the "special offers" before you buy any new vehicle - see the different low interest financing options, the college grad rebates, those for the military, or loyalty coupons.  There are even "conquest" coupons - when a manufacturer is willing to offer you money to switch to their vehicle from a different brand.  For a full list of the different manufacturer sites, go to the "links" section in the top right of this site.  For special lease deals click here.  

10. And finally, the most costly mistake of all ... not looking at the "true cost of ownership."  Having a vehicle is an expense.  There is annual cost, whether you buy, lease, or finance.  Consider the combined cost of your annual monthly payments (or if you paid cash - divide the cost the vehicle by the number of years you think you'll own the vehicle); plus the cost of insurance; plus the annual cost of gas; plus the annual cost of maintenance and repairs; AND don't forget, the cost of the vehicle's depreciation.  Remember, vehicles lose value. Some at faster rates than others.  Sometimes a more expensive vehicle actually costs less than a cheaper vehicle.  Consider the warranty, cost of repairs, gas mileage, whether the vehicle requires premium gas, and the future value of the vehicle.  Remember, buying a home next to the love canal is not a bargain even if it's less expensive than one on the good side of town.  

 Answer these questions and you will be on your way to getting a great deal.  For more information check out my other articles under Advice.

Have any other tips or advice that you would give? Post your thoughts, comment or opions below.