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Car Buying 102

Learn the game before you play

IntelliChoice
Apr 16, 2005
Many people equate the new-car buying process with the misery that often accompanies a trip to the dentist, and not without good reason. Stereotypical slick salesmen and that aching feeling that no one's got your back once you step onto a dealer lot have become expected aspects of the buying a new vehicle. But you need only one weapon to chase away the demons and succeed at the art of the deal: knowledge.

It's surprising that when it comes to spending anywhere from $20K to $40K, or more, many consumers don't research how they can spend that money in the smartest, most economical way. It's a big chunk of change; why not make sure you get precisely what you want and for the best price?
You'll find that most car salespeople are more than happy to help you with your purchase decision, but that willingness may be precisely why you don't want their help. They don't always have your best interest in mind; their goal is to bolster their bottom line. And they're not going to do that by helping you find the very best deal on the right vehicle for you. Showing up at a dealership with nothing more than a desire for a new vehicle could result in you driving off in a two-door off-roader geared for rock crawling with oversized tires and all the bolt-on trimmings. Doesn't sound so bad, eh? Sure, not until you discover it's too small for your passenger and/or cargo needs, the ride is harsh, it gets limited fuel economy on your commute, and costs more than you'd planned to insure. A four-cylinder, two-wheel-drive, five-door SUV or even a sporty mid-size sedan may have been a smarter choice--and probably a cheaper one too. Impulse purchases rarely turn out well for the buyer, but the salesperson won't have much sympathy, because you've already visited the dotted line.
Knowledge is power
Due to the sheer volume of vehicles and features available to choose from, research on the buyer's part is imperative. By reading this magazine, you're arming yourself with the knowledge needed to become an educated shopper. But don't stop here--the Internet has become an invaluable tool for the process. IntelliChoice.com offers reviews, safety ratings, best values, and current incentives on every major make, model, and trim level offered in the United States. While online, check out enthusiast clubs and chat rooms dedicated to the vehicle you're considering, as they can provide insightful owner feedback. Also, car magazines such as Motor Trend feature comprehensive road tests and multiple-vehicle tests to allow side-by-side comparison among competitive models, both in print and online at their respective sites.
Choosing the vehicle you want to buy is hard enough, but pinning down all the variables involved can make your head spin. Base model or fully loaded? Two or four doors? I-4, V-6, or V-8? Manual or automatic transmission? Two- or four-wheel-drive? Traction control or stability control? Four passengers or eight? Third row or cargo space? Fuel economy or performance? Torque or horsepower? Road trips or city driving? Single- or six-disc CD player? Hardtop or convertible? Navigation system? Sunroof? DVD? ABS? Turbocharger? Is your head spinning yet?
To focus your research, making lists is crucial. Begin with the essential features and functionality you require, followed by your desired features as well as those of anyone else who will regularly driving or riding in the vehicle, e.g., your spouse, your kids, etc. These non-essential-but-nonetheless-desirable items can you help find a vehicle that will please more than just the driver and may become important if the decision-making process comes down to splitting hairs.
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Next list your likes and dislikes about your current vehicle, so you can keep the good and avoid features you weren't happy with.
Consider passenger space, interior comforts, cargo flexibility, towing, and even brand loyalty. Be sure to factor in passenger needs, from securing wee ones in child safety seats to the number of adults you'll regularly be transporting. Special features such as power sliding doors and foldaway third-row seats can dramatically improve a vehicle's functionality.
On the mechanical side, weigh the importance of fuel-economy and purchase price against performance. Do you really need a huge V-8? Or will a V-6 or even an I-4 supply enough driving fun? Are there weather, terrain, or recreation reasons to invest in 4WD or AWD? Or will two-wheel drive suffice?
As you go through this exercise, maintain an open mind and focus on the attributes, rather than the body style. Vehicle segments are breaking from traditional definitions, with the latest products striking new niches such as the more-SUV-like minivans from General Motors, the sport-wagon-like Infiniti FX SUV, and the Chrysler Pacifica, which borrows equally from wagons, minivans, and SUVs. You might find the vehicle that best suites your budget and lifestyle takes on a different shape from that which you originally expected.
With the list roughed out, its time to revisit your budget to determine what down payment and monthly payment will be reasonable. The specification charts in this magazine include invoice, retail, and, most important, Target Price to create a common basis for comparison among makes and models. Ultimately, the real acquisition cost will factor in your old vehicle's value, whether you plan to trade it in or sell it yourself, and interest rates, but for now, these numbers can help you sort your shopping list, prioritizing those models that best suit your budget.
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In reading through our online buyer's guide, looking closely as the Cost of Ownership data, which reveal the true value story of each vehicle. Summarized by speedometer icons throughout, this information objectively measures the return on investment. You will need to balance these data with your own subjective evaluation, as you may find some vehicles are worth paying extra for up front because of a low cost of ownership in the long run. The most important point here is that you know going in to the purchase what the long-term implications will be, both lifestyle and financial.
Taking it out for a spin
With your detailed list completed, it's time for some hands-on experience with the vehicles that seem best suited for your needs and desires. The Internet can be helpful here, as well, as you may be able to check what kind of vehicles your local dealerships have in stock. When you arrive at a dealership, expect to feel pressure to buy the second your shoe hits the lot. Just remember, test-driving does not obligate you to buy. What may have sounded like the perfect vehicle on paper may prove not to be the right one once you're behind the wheel. You may discover that the seats are uncomfortable, the interior is cramped, the step-in height is difficult for you, cargo would be difficult to load, or the ease of seat removal is not all that easy. Once on the road, you may feel you need more power, or would be satisfied with less. The vehicle may have a blind spot, marshmallowy handling, spongy brake feel, or too much road noise. Walk away without guilt and then move on to the next vehicle on your well-researched wish-list.
Mind over money
Once you've narrowed down your vehicle list to just a few models, you'll have some financial decisions to make. Do you want to lease or buy? Leasing may be a nice fit if you prefer to get into a brand-new vehicle every couple of years, or don't want to cough up a large down payment (or any down payment). It may also be a good alternative if you don't plan to drive many miles each year. All leases have mileage limitations and require that any miles exceeding the limit be purchased by the lessee on a per-mile basis. So if you normally drive 20K miles a year and a lease only allows 15K, those extra 5K miles may become very costly. Some shoppers lease instead of buy because they can write off most or all of the payment for business purposes. When you lease, the burden of the vehicle's residual value is on the leasing company, but remember that most of the financial benefit goes to the dealer. When you buy, you'll own the vehicle outright.
Once you've determined which of these financing options is right for you, make sure you've got the credit to back the deal. Order a credit report in order to check your FICO score. Developed by Fair Isaac & Co., this score is a method of determining the likelihood that credit users will pay their bills--the higher the score, the better your credit rating. Next, run the numbers: What's your budget, what you can afford as a monthly payment, what your is trade-in worth? Don't plan to walk into the dealership and pay sticker price. Research actual invoice prices, and then learn the markup difference between what the dealer wants and what is fair. Now you're ready to sit down at the salesperson's desk.
Remember to keep each phase of the buying process a separate step, making it easier for you to understand and control the negotiations. Do not disclose that you are trading in your current ride until you finish negotiating the price for the new vehicle. This limits the dealer's ability to shift profit in his F&I (finance and interest) shell game from one aspect (new car) to another (trade-in).
The final step is financing. Only after you settle on a price for your new car and one for your trade-in, should divulge your preference to buy or lease and consider the dealer's finance offerings. It always pays to explore alternative financing through your bank, credit union, or local lender, but dealers often can provide compelling finance packages, especially when augmented by a manufacturer incentive.
Essential homework includes running through these financial scenarios before committing to purchase a vehicle, both to target your shopping and prepare for finance arrangements. While you should have alternative financing available, in this incentive-rich market, it's worth considering the dealership's offerings. Conventional wisdom cautions that the dealer will be acting as middle-man in the financing and collecting profit for that service, even when using a captive automaker lending agency. However, there are great deals to be had. Consider all your options, and ultimately choose what is right for you.
Tips from the showroom floor
Visit an auto show. Most of the new-model-year vehicles will be on display in a non-sales environment, offering a fun, time-efficient opportunity to comparison shop.

When a vehicle is about to have a significant redesign, dealerships will be eager to get rid of the old body style, which can mean significantly lower prices. Be sure to monitor IntelliChoice's auto-show coverage and Future Vehicle Forecast to keep abreast of upcoming model changes.

Shopping toward the end of the model year can reveal many clearance sales. Be aware, however, that these vehicles technically will become a year old the minute the new models arrive.

The end of the month is the best time to buy, as salespeople are trying to meet quotas.
Keep in mind that the dealership doesn't expect you to pay the sticker (MSRP) price--unless you haven't done your homework.
Because a test drive with a salesperson usually lasts only 15 to 30 minutes and is anything but relaxing, try renting the model you're considering owning. It's an inexpensive way to ensure that it has your and the whole family's approval.
Dealers tend to order certain options or packages repeatedly due to their popularity, so often the lot is filled with similarly outfitted vehicles. This means dealers may be willing to negotiate on these vehicles, but unless the compromise is one you can gladly live with, don't feel pressured into buying a vehicle that isn't equipped exactly as want it. You may have to special-order to get exactly what you desire, which may mean less room for negotiating. But you're spending a lot of money here, so why not drive home in the car or truck that makes you the happiest?
Nowadays you can use the Internet for researching everything about the vehicles you're interested in, including insurance premiums, financing options, and dealer inventory--plus the invoice price. Bring concise research notes with you to the dealership to aid negotiation.
Be open minded when you're researching. You may have your heart set on a Lexus sedan only to find that a Kia sedan has the same luxury options you seek at half the price. Also, be sure to check IntelliChoice's Cost of Ownership (in the buyer's guide portion of this magazine and online at intellichoice.com) on any "bargains" you find, as oftentimes the long-term cost scenario isn't as rosy as the sticker price.
Don't be a payment buyer. In other words, never announce to the salesperson that you're only interested in a particular vehicle if you can get the payments at a certain price. Be aware of your target as you negotiate through purchase price, trade-in, and financing, but don't use it as your sole purchase factor.
Questions to consider when researching your new vehicle

Will you be towing or carrying heavy cargo on a regular basis?
Consider a pickup or an SUV. Look into the factory tow package and make sure the gross vehicle weight rating (GVWR) is compatible with the weight you'll be hauling. 4x4s usually have stronger drivetrain/powertrain components than 4x2s. If you're only towing a couple times a year, however, you might be able to squeak by with the smallest engine (provided the load doesn't exceed the GVWR), but don't expect great fuel economy.

Will you be chauffeuring the soccer team?
If so, a Jeep Wrangler probably isn't the best choice. A minivan or an SUV could be ideal because, depending on model, you can get seating for up to eight and lots of cargo-carrying capacity.
Will you be using the vehicle mainly for commuting to work?
If you have a long commute and it's mostly in heavy traffic, a big, high-horsepower engine may sound impressive to your friends, but will probably be a waste of money, especially at the pump. Think right-size for the vehicle's main duty, which, in this case, means small and economical.
Do you plan to take road trips?
Comfort, navigation system, and an entertainment system could make those long journeys a lot more tolerable. Make sure you pay close attention to seat ergonomics--both front and rear--to ensure comfort during not only the long-distance vacation trip but also your daily commute. If your destination is off the highway, having four-wheel drive will prevent you from getting stuck there longer than you intended.
Do you live in a four-season state or encounter extreme weather conditions?
Consider all-wheel drive, which heightens traction in slippery conditions, including rain-soaked and ice-slicked roads. All-wheel drive is designed specifically to give you traction when the roads go south, so this may be a worthwhile option if it's not standard equipment. Traditional four-wheel-drive systems do not have the ability to smartly route power to the corner with the best traction. Pure AWD remains the better on-road option. If you live where the roads are frequently wet or icy, you may also want a stability- or traction-control system.
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