New Car Buying Guide
New Car Buying Guide
Buying a new car is usually the second most
expensive
purchase many consumers make, after the purchase
of their home.
This guide, which includes a checklist and
a worksheet,
is intended to help give you the information you
need to make a
smart deal on a new car.
Buying Your New Car
Before you step into a dealer's showroom,
it helps to know
what car model and options you want and how much
you are
willing to spend. That way, you are less likely
to feel
pressured into making a hasty or expensive decision
and more
likely to get a better deal. To help you shop,
you may want to
consider the following suggestions:
* Check publications at a library or bookstore
that discuss
new car features and prices. These may provide
information
on the dealer's costs for specific models
and options.
* Shop around to get the best possible price
by comparing
models and prices at dealer showrooms. You
also may want
to contact car buying services and broker
buying services
and make comparisons there.
* Plan to negotiate on price. Dealers may
be willing to
bargain on their profit margin, which is
generally between
15 to 20 percent. This is usually the difference
between
the manufacturer's suggested retail price
and the invoice
price. To help you do this, refer to the
worksheet listed
at the end of this brochure.
* Consider ordering your new car if you
do not see the car
you want on the dealer's lot. This usually
involves a
delay, but cars on the lot frequently have
options you do
not want -- which add considerably to the
cost.
Learning the Terms
To give you a better sense of the negotiating
room you
have when buying your car, it helps to understand
the following
terms, listed here in order of increasing price:
INVOICE PRICE is the manufacturer's initial
charge to the
dealer. This is usually higher than the dealer's
final cost
because dealers often receive rebates, allowances,
discounts,
and incentive awards. The invoice price always
includes freight
(also known as destination and delivery). If you
are buying a
car based on the invoice price (for example, "at
invoice,"
"$100 below invoice" "two percent
above invoice") be sure
freight is not added to the sales contract.
BASE PRICE is the cost of the car without
options, but
includes standard equipment, factory warranty,
and freight.
This price is printed on the Monroney sticker
(see below).
MONRONEY STICKER PRICE, which appears
on a label affixed
to the car window and is required by federal law,
shows the
base price, the manufacturer's installed options
with the
manufacturer's suggested retail price, the manufacturer's
transportation charge, and the fuel economy (mileage).
The
label may not be removed by anyone other than
the purchaser.
DEALER STICKER PRICE, usually on a supplemental
sticker,
is the Monroney sticker price plus the suggested
retail price
of dealer-installed options, such as additional
dealer mark-up
(ADM) of additional dealer profit (ADP), dealer
preparation,
and undercoating.
Financing Your New Car
If you decide to finance your car, you
have the option of
checking the dealer's rate against banks, credit
unions,
savings and loans institutions, and other loan
companies.
Because interest rates vary, shop around for the
best deal and
compare the annual percentage rates (APR).
Sometimes, dealers offer very low financing
rates for
specific cars or models, but may not be willing
to negotiate on
the price of these cars. In addition, they may
require you to
make a large downpayment to qualify for these
special interest
rates. With these conditions, you may find that
it is sometimes
more affordable to pay higher financing charges
on a car that
is lower in price or to purchase a car that requires
a smaller
downpayment.
Some dealers and lenders may ask you to
buy credit
insurance, which pays off your loan if you should
die or become
disabled. Before you add this cost, you may want
to consider
the benefits available from existing policies
you may have.
Remember, buying credit insurance is not required
for a loan.
Trading in Your Old Car
After getting your new car for the best
possible price,
only then discuss the possibility of a trade-in.
First,
however, find out the value of your old car. You
may want to
check the library for references and periodicals
that can tell
you how much your car is worth. This information
may help you
get a better overall price from the dealer. Remember,
too, that
though it may take longer, you generally will
get more money by
selling the car yourself.
Considering a Service Contract
Service contracts that you may buy with
a new car provide
for the repair of certain specified parts or problems.
These
contracts are offered by manufacturers, dealers,
or independent
companies and usually initially run concurrently
with the
manufacturer's warranty. Remember: a warranty
is included in
the price of the car; a service contract costs
extra.
Before deciding to purchase a service
contract, read it
carefully and consider some of the following questions:
* What is the difference between the coverage
under the
warranty and the coverage under the service
contract?
* What repairs are covered?
* Who pays for the labor? The parts?
* Who performs the repairs? Can repairs
be made elsewhere?
* How long does the service contract last?
* What is the cancellation and refund policy?
For Further Information
In addition to checking publications about
new car
features and prices when buying a car, you may
find it helpful
to read other Federal Trade Commission brochures.
These
include: "Car Ads: Low Interest Loans and
Other Offers,"
"Service Contracts," "Warranties,"
"Buying a Used Car," and "A
Consumer Guide to Vehicle Leasing." For a
free copy write:
Public Reference, Federal Trade Commission, Washington,
D.C.
20580. For further information, you may want to
write to:
Division of Marketing Practices, Federal Trade
Commission,
Washington, D.C. 20580. Although the FTC generally
does not
intervene in individual consumer disputes, it
can take action
if there. is evidence of a pattern of deceptive
or unfair
practices.
Checklist for Buying a New Car
You are likely to get a better deal on
a car if you know
beforehand exactly what you are looking for and
what you are
willing to spend. Therefore, before signing a
sales contract
with a car dealer, you may want to:
* Decide which car model and specific options
you want.
* Find out the invoice price (the lowest
price)of the model
and each option you want.
* Decide how much you are willing to pay
the dealer, if
anything, above the invoice price.
* Compare final sales prices with other
dealers and buying
services.
* Compare financing costs from various sources,
such as
credit unions and savings and loans institutions,
with
those of car dealers.
* Find out the value of your old car, independent
of a
dealer's trade-in offer.
* Decide if you need an optional service
contract or credit
insurance.
Worksheet for Buying a New Car
To help you negotiate the price of your
next new car, you
may want to use this worksheet to establish your
bargaining
room before you talk with a dealer.
Model_______________________________________________________
Base Price Invoice Price*
Retail Price
Options:
Transmission: ______________
____________
Automatic ______________
____________
Stick ______________
____________
Air Conditioning ______________
____________
Engine: ______________
____________
Size ______________
____________
Diesel ______________
____________
Sound System: ______________
____________
AM-FM ______________
____________
AM-FM Cassette ______________
____________
Power Brakes ______________
____________
Power Steering ______________
____________
Power Locks ______________
____________
Power Seats ______________
____________
Rear Window Wiper/Washer ______________
____________
Rear Window Defogger ______________
____________
Luggage Rack ______________
____________
Tires: ______________
____________
Full-Size Spare ______________
____________
Steel Belted Radials ______________
____________
Mirrors: ______________
____________
Dual ______________
____________
Remote ______________
____________
Passenger Visor ______________
____________
Other: ______________
____________
* The invoice price may be obtained by looking
at the
dealer's invoice or by reviewing new car
publications.
FTC Headquarters
6th & Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-2222
TDD (202) 326-2502
FTC Regional Offices
1718 Peachtree Street, N.W., Suite 1000
Atlanta, Georgia 30367
(404) 347-4836
10 Causeway Street, Suite 1184
Boston, Massachusetts 02222-1073
(617) 565-7240
55 East Monroe Street, Suite 1437
Chicago, Illinois 60603
(312) 353-4423
668 Euclid Avenue, Suite 520-A
Cleveland, Ohio 44 114
(216) 522-4207
100 N. Central Expressway, Suite 500
Dallas, Texas 75201
(214) 767-5501
1405 Curtis Street, Suite 2900
Denver, Colorado 80202-2393
(303) 844-2271
11000 Wilshire Boulevard, Suite 13209
Los Angeles, California 90024
(213) 209-7575
150 William Street, Suite 1300
New York, New York 10038
(212) 264-1207
901 Market Street, Suite 570
San Francisco, California 94103
(415) 744-7920
2806 Federal Bldg., 915 Second Ave.
Seattle, Washington 98174
(206) 553-4656
|
