How to Buy/Lease a New Car
Buying a new automobile is one of the most expensive purchases many consumers make - second only to the purchase of a home. For this reason - it is important to know as much as possible to make informed decisions.
Know What You Can Afford to Spend
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Examine your budget and determine how much you can afford to spend on the purchase of a new automobile.
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If financing the vehicle, the monthly payment is affected by the amount of your down payment, the length of the loan period, and the interest rate.
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Once you decide how much you can afford to spend, stick with it. Don't be pressured into committing to larger payments than you can comfortably afford.
Study Your Options
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Find out the invoice price (lowest price) of the model and the options you want. Options will increase the total cost of the vehicle, so make sure you really want or need the ones you select.
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Test drive the vehicle. Drive the car on different types of roads and drive it long enough to check the acceleration, braking, steering and stability. Try to listen to any car, wind and road noises during the test drive.
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Read the fine print in the advertisements carefully.
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If a particular model is advertised at a very low price, make sure the price includes freight and any additional dealer markup (ADM) or options. Ad prices usually do not include tax, license and title charges.
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Manufacturer incentives affect new vehicle prices. Calculate whether a low-interest loan is a better deal than a cash-back rebate and conventional finance.
Learning the Terms |
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Understanding car-buying terms will help you in your price negotiations. The following pricing terms are listed in order of increasing amount:
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Invoice Price is the manufacturer's initial charge to the dealer. However, dealers often pay less than invoice price since the dealers receive rebates, allowances, discounts, and incentive awards from manufacturers. Invoice price includes freight or destination and delivery charges. If purchasing a vehicle based on invoice price - "at invoice," "$100 below invoice," etc., make sure the dealer does not add freight to the sales contract.
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Base Price is the cost of the car without options, but includes standard equipment, factory warranty and freight.
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Monroney Sticker Price is required by federal law and shows the base price, the manufacturer's transportation charge, and the fuel economy (mileage). Only the purchaser may remove these labels.
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Dealer Sticker Price is the Monroney sticker price plus the suggested retail price of the dealer-installed options, i.e., additional dealer markup (ADM), undercoating and dealer preparation.
How Much Should I Pay? |
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Markups vary from model to model, dealer to dealer. The negotiated price may be higher or lower, depending on the demand for the particular model.
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Plan to negotiate price.
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Compare final sales with other dealers, buying services and broker buying services. Check with several dealerships.
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If you are thinking of trading in your vehicle, find out the value independent of a dealer's trade-in offer. After negotiating the best outright purchase price of a new car, discuss the trade-in amount.
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Look in the "National Automobile Dealers Association (NADA) Official Used Car Guide," which is available in libraries, financial institutions and insurance agencies, to determine the value of your trade-in.
Beware of Add-ons |
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Add-ons are charges which the dealer may attempt to add before finalizing the sale. Some common add-ons include:
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Conveyance fee is a charge for processing the paperwork involved in the sale. Refuse this charge.
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Extended warranties normally cover major drive train parts (engine, transmission, transaxle, etc.) at an extra charge. Some of the warranties include a deductible that the owner pays. Carefully weigh the benefits and costs of this type of added protection. If you feel you don't need, don't buy it.
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Service contracts and "wrap around" warranties are offered by manufacturers and warranty companies to cover repairs for a longer period than the manufacturer's drive train warranties. They operate like an insurance policy and are regulated as such in Florida. Weigh the costs and benefits and don't buy it if you feel you don't need it.
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Credit insurance will pay off your loan should you die or become disabled. Before buying it, examine your coverage under existing policies you already have. Remember, you cannot be forced to purchase credit insurance as a prerequisite to securing a loan.
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Advertising. Some dealerships may try to include an advertising surcharge after the offer has been accepted. Balk at this ploy. The charge represents the dealer's participation in national or regional advertising and is already built into the base price of the vehicle.
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Other packages. Before buying other costly packages - paint treatment, fabric finish, undercoating, etc. - look at the costs and benefits. Decide on what will best suit your needs.
The Purchase |
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Do not allow yourself to be pressured. If you are uncomfortable or unsure, tell the salesperson you need time to consider the offer.
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Do not sign a contract or leave a deposit unless you are sure this is what you want to do. Remember, a contract is binding on you and the dealer. There is no right to cancel unless the contract specifically states it. If you leave a deposit, make sure you get a copy of the refund policy in writing.
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Read and understand the contract before signing. If anything needs to be added, deleted or changed, have the written contract altered right then. Do not rely on verbal promises.
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Never sign a contract containing blank spaces. Make sure the sales contract states that you can void the agreement and get back your down payment if the dealer does not meet any part of the agreement.
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The salesperson's signature on the contract may not be binding on the dealership if an authorized representative, i.e., sales manager or general manager, has not signed it.
Leasing Instead of Buying |
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There are two types of automobile leases: Closed-End and Open-End
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With a closed-end lease, you simply return the vehicle at the end of the lease term. You do not owe any additional money unless the vehicle shows wear, damage or has more miles than specified in the lease.
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An open-end lease offers lower monthly payments than buying. It includes a specific value (the estimated residual value) that the vehicle will be worth at the end of the lease period. If the vehicle is worth less at the end of the lease, you owe the difference.
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Some of the advantages of leasing are fast and easy possession with little or no down payment; lower monthly payments, ease of paperwork, registration and inspection.
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Disadvantages of leasing are that you do not own your vehicle; you build no equity as you make payments; and you own nothing at the end of your lease to use as trade-in on your next vehicle. You may also have to pay a large amount of money on the vehicle if you decide to purchase it later.
Financing Your New Vehicle |
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Seventy percent of all new vehicles are financed. Shop around for the lowest annual percentage rate (APR) and compare rates offered by the dealer, banks, credit unions, savings and loan institutions, etc.
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Monthly payments on a long-term loan will be lower than the payments on a short-term loan; however, the overall cost of the long-term loan will be greater and equity will build more slowly.
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Under federal law, you must be given, in writing, the exact terms and total costs of the loan.
Motor Vehicle Enforcement Act |
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Florida law requires that auto dealers inform their customers about the Motor Vehicle Warranty Enforcement Act, also known as the "Lemon Law." Everyone buying a new vehicle in Florida must be given a state-printed booklet informing them of their rights under the law. For information about the Lemon Law, contact the Florida Department of Agriculture and Consumer Services' Lemon Law hotline at 1-800-321-5366.
Additional Resources |
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National Highway Traffic Safety Administration
Office of Defects Investigation - This site allows you to search consumer complaints, defect investigations, recalls, technical service bulletins and foreign campaigns.
Vehicle Identification Number (VIN) Check
The Florida Department of Highway Safety and Motor Vehicles has a website that allows consumers the ability to search the VIN or title number. Search the Database
National Insurance Crime Bureau
The National Insurance Crime Bureau (NICB) has compiled a database of vehicles and watercraft affected by Hurricanes Katrina, Rita and Wilma. The information in this database was gathered from a number of sources, including insurance companies, salvage yards and state and local authorities. Search the Database
