Step 2: Deciding What Vehicle To Buy
The first thing to do is to decide on a class of vehicle that best fits your lifestyle. For instance, if you need to tote children, a two-seat roadster is obviously not a wise decision. With the plethora of new cars and trucks on dealership lots, choosing a car can be a confusing and time-consuming process. Below are some questions that may help you make some important decisions early in the game.
1. Do you prefer a manual or automatic transmission? (Since some cars today come with only one or the other, making this decision early can cut down your options)
2. Do you require two-, four- or all-wheel drive? Location and use are prime factors in this decision. A Southern California resident probably won't see enough inclement weather to justify the extra money and reduction in gas mileage that comes with four- and all-wheel drive vehicles. Someone who lives in Vermont, however, may need four- or all-wheel drive for several months out of the year. However, the Angeleno who heads to Big Bear every weekend might need four- or all-wheel drive, while the Vermonter who simply commutes to the office might be able to get by with two-wheel drive.
3. Do you plan to take your vehicle off-roading? (Note: Not every four-wheel drive vehicle is appropriate for off road travel. Off-road vehicles require more than an automatic four-wheel drive mode-other things to look into are ground clearance, suspension enhancements and tire specifications.)
4. How many passengers do you tote around on a regular basis?
5. Do you require a lot of cargo room?
6. Will you be taking many road trips?
7. How long is your daily commute?
8. Is your garage or parking area large or small? What about height clearance, is this an issue?
9. Are there certain features that you must have? (For example, if you have a bad back, lumbar support may be a non-negotiable item for you. Or perhaps you are very short and need a seat adjuster that will allow you to raise the driver's seat. If there are features you know you simply must have, make a list of them so that you can immediately throw out any vehicles that don't meet your requirements.)
While it is important to purchase a car that fits your immediate and future needs, we can't forget that people are passionate about their cars. A vehicle reflects an image an owner wants to project. But while a sports car may be the ideal of a person who happens to work in the sales field, it might not be the best vehicle to drive clients or lug samples around in. Similarly, a stay-at-home mother of three may see the practicality of buying a minivan, but loathe the stigma attached to such mommy-mobiles.
A compromise is usually possible. For the businessperson: a sedan with a manual transmission and a mammoth engine. And for the mother of three: a full-size sport-utility vehicle or sporty wagon. But be sure to plan ahead. You may end up keeping the same vehicle for the next six or seven years, so try to anticipate future needs and lifestyle changes.
There are several different classes of automobiles on the market. By class, we mean sport-utility vehicle, van, roadster, sedan, coupe, pickup, station wagon, etc. Deciding on a class of vehicle also revolves around money. So think about how much you want to spend, how much you want to put down, and how much you can afford per month ahead of time. Don't wait until you're in the dealership to come up with these estimates.
Once you've decided on a class, look at individual models. Midsize sedan shoppers, for example, should read up on several different sedans before narrowing down the list (there is a smorgasbord of midsize sedans on the market). Sport-utility vehicle shoppers should gather as much information on the different trucks available from web sites, magazines and dealerships.
After you've compiled the information on the vehicles you're interested in, compare them to one another in detail. If it helps, you can even make a chart comparing standard equipment, invoice price and MSRP, cost per option, and colors. Another thing to look at is the performance of a vehicle.
Specifications, or "specs" include engine size, horsepower, number of cylinders, curb weight, gas mileage, etc. After you've done your homework, cut your list down to three possibilities. This will help later when it comes to negotiating with a dealer.
Leasing vs. Buying
Deciding whether to buy or lease a new car is a common dilemma. Most people know that if they buy, their payments may be a bit higher, but they will at some point own the car outright. They also know that if they lease, their payments will probably be lower, but they will have a limit on the number of miles they can put on the car, and at the end of the lease, they won't own anything. The lists below may help illustrate our point.
Advantages to Leasing:
Lower monthly payments.
May be able to get into a car you otherwise couldn't afford.
May not have to pay for repairs and tune-up services; a lease should not be longer than the factory warranty for that car.
Can get into a new car every two or three years. No trade-in hassles at the end of the lease. You either drop it off or arrange to buy it when the lease term is completed.
Disadvantages to Leasing:
Won't own the car at the end of the lease.
Can drive only a certain number of miles without paying a penalty; basically, you can drive to work and back. Easier to be taken advantage of due to confusing documentation.
It is almost always more expensive in the long run. If the car isn't cared for properly, wear-and-tear charges can mount quickly.
It's hard to escape a lease if you decide the car isn't right for you.
Advantages to Buying:
Total ownership of the car - you can do with it as you please.
Monthly payments don't last forever.
Cars last much longer than five years when properly cared for.
Unlimited miles.
Though you are paying for the entire car, you can sell it after a few years and reclaim the amount that the car has not lost to depreciation. In other words, if you keep a $20,000 car for five years, it may still be worth $8,000 when you decide to sell. Total cost to you: $12,000.
Leasing for lower monthly payments over the same five years will cost much more.
Disadvantages to Buying:
Higher monthly payments.
After the warranty expires, you are responsible for maintaining the good health of the car.
When you want a new car, you must sell the old one or trade it in. And if you want a new car sooner rather than later, you could be upside-down on your loan. In other words, you might owe more than the car is worth.
Most people should probably buy because it saves money in the long run and it provides more freedom. However, certain lifestyles may work better with leasing. For instance, if you're in a corporate sales position or another industry where you must entertain clients and transport them around town, leasing a car may allow you to get into more of a luxury vehicle than you could otherwise afford. That can have a positive effect on your business if you want to be seen as a powerful figure or successful businessperson. It can also be worth it for certain individuals to pay more in exchange for the convenience and luxury of driving a brand new car every two or three years and not having to deal with the hassles of repairs and, in some cases, maintenance.
If you decide that you want to lease rather than buy, here are some quick tips that anyone who is thinking about leasing a vehicle should know.
Quick Leasing Tips:
1. Decide whether you are going to lease or buy before you go into a dealership.
2. Don't tell the salesperson that you're planning to lease a car until after you've negotiated a fair price.
3. Know the invoice/retail cost of the car and negotiate the price in exactly the same way as if you were buying it.
4. Ask if there are any subvented leases going on right now. A subvented lease is a discounted factory lease, which usually offers extremely low payments but a higher residual value. This can be a good deal if you plan to give the car back after the lease is up.
5. Don't ever lease for more than three years. After the third year, everything you pay each month is pure profit to the dealer. Two-year leases are recommended.
6. You always want a closed-end lease rather than an open-end lease. The closed-end lease sets the residual value of the car in stone, which means that the price you can pay for the car at the end of the lease is protected, regardless of fluctuations in the marketplace. With a closed-end lease, the dealer has guaranteed that price to you.
7. Dealerships are required by law to present the consumer with certain information about a lease before contracts are signed. Regulation M ensures that dealers: Adopt a revised lease form that is easier for consumers to understand. Disclose all expenses, such as the amount of money due at the lease signing, the capitalized cost (agreed-upon value of the car), the cap cost reduction (trade-in or down payment values) and the residual value (value of the car at the end of the lease) Provide a mathematical breakdown of how the lease payment is calculated. List fees for early termination and excess wear and tear.
