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Purchasing a Car

Purchasing a Car. Before You Go to Buy. Need vs. Want (first-time buyer) Enough room for family Safety Manual vs. Automatic Trim Levels (Base, SE, XLT, AWD, etc.) How much can I afford? What do you have saved? How much of a loan could you get Could you make monthly payments.

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Purchasing a Car

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  1. Purchasing a Car

  2. Before You Go to Buy • Need vs. Want (first-time buyer) • Enough room for family • Safety • Manual vs. Automatic • Trim Levels (Base, SE, XLT, AWD, etc.) • How much can I afford? • What do you have saved? • How much of a loan could you get • Could you make monthly payments

  3. Before You Go to Buy • What is my highest price/lowest rate? • Highest number you are willing to go and stick to it. • Lowest interest rate possible • New (0% - 6.9%) dealer or bank • Used (3.76% - 11.08%) dealer or bank • Negotiation process • Research auto • Shop • Time of year • CarFax on used autos

  4. Four Key Auto Finance Terms • Dealer Sticker Price • MSRP (sticker price) • Dealer Invoice Price • What dealer pays for auto (MSRP-Dealer Inv Price=profit) • Annual Percentage Rate • Includes all fees and charges • Tied in with the length of loan • Rebate/Incentive • Reduction in selling price or lower interest rate • An Example

  5. Financing Options • Dealership • Convenient • Higher interest rate and/or fees • Sell your loan to other lenders (dealer makes more money) • Pre-approved Loan • Use as leverage for dealer loan • Cash-back rebate vs. Zero % down (1/3 qualify) • Home Equity Loan • Borrow against paid-up equity of the home • Significantly lower interest rate • Deduct interest from tax bill

  6. During Process • Haggle with the dealer • Ask about Trade-in value • When do I mention this if at all? • What can I get for my car? (Bluebook) • Warranties • As-is • Basically, you buy the car in its current condition • Implied • A product will do what it is designed to do or what the seller promises it will do. • Dealer • These are warranties that the dealership gives you on the car. • Manufacturer’s (Example)

  7. Used Cars • Advantages • Depreciation has slowed. • Lower price • Disadvantages • Don’t know history of the car • Could be a dud and have a shorter life. • Warranties are not as great if any.

  8. Tips for Buying a Used Car • Be ware of oral promises, get it in writing • See copy of dealers warranty – it’s your right • Ask for cars maintenance record (CARFAX) • Test drive all over (not predetermined route) • Have car inspected by mechanic you trust • Dealer info at BBB • Private sales are a different than dealership as some laws don’t apply

  9. Certified Pre-owned • Advantages • Inspected by manufacturer and given a clean bill of health • Extended warranty • Repaired or reconditioned to run like new • Disadvantages • Costs more than noncertified car ($1000-$3000) • Warranty might be from a third-party, not from company • Warranty only covers repairs at certain dealership

  10. New Cars • Advantages • New Car • You are the only one who has owned it • More warranties come with it • Disadvantages • Depreciation is huge the first years of its use • Bigger cost • Loan • Insurance

  11. Leasing • Advantages • Smaller cash outflow, payments usually lower than loan payments • Detailed record of car use • Regularly serviced • Disadvantages • No ownership • Must meet requirements similar to getting credit • Additional costs depending on lease stipulation • Mileage limits (12,000-15,000/yr) • Can’t change vehicle in any way (Bling, Bling)

  12. Types of Auto Leases • You can negotiate certain parts of a lease • Leasing Guide online • Closed-end (walk-away) • Return vehicle at the end of the term with no further obligation • Not responsible for difference in residual vs. actual value • Still hit with extra charges • Open-end • “End-of-lease” payment - Responsible for paying difference in residual and actual value or could get money back • Makes sense for those who drive a lot or no mileage limits

  13. Avoid Extra Leasing Charges • Excess mileage • 10,000-15,000 miles per year (.07-.28 cents per mile over limit) • Calculate how many miles you currently drive per year • Wear and tear charges • Beyond normal usage • Clearly defined in lease agreement • Follow regular service schedule • Wash and vacuum regularly • Disposition fee • Charged if you do not purchase vehicle at the end of a lease • Make sure your lease doesn’t have this included

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