Buying a CarManaging Your Financial Future

Steps in the Car Buying Process

1. Identify your needs and wants• What do you need to do with your car?• Will you drive a lot of miles?• What features would you like to have?• You may have to trade off some of the

wants for a lower price

Steps in the Car Buying Process

2. Determine what you can afford• General Guideline: monthly payments should be

no more than 20% of money left over after paying regular monthly expenses (rent, utilities, credit card payments etc) or you can utilize the 20/10 rule (total debt monthly payments should not be more than 10% of your monthly net income)

• Cost of maintaining car (gas, oil etc)• Insurance

Steps in the Car Buying Process

3. Identify and Research Your Choices• Compare features of the models against list

of wants and needs• Compare models with the same options• List pros and cons of each model

Steps in the Car Buying Process

4. Decide whether to buy new or used• Cost is a major factor in this decision• New car loses much of its market value as

soon as it is purchased.• Used car may need more repairs.

Steps in the Car Buying Process

5. Get credit pre-approval• Allows comparison of total costs of buying,

including credit rates• Fill out an application at credit union or

bank

Steps in the Car Buying Process

6. Research Insurance Rates• Call Insurance Agents and compare rates with at least

three different companies

Steps in the Car Buying Process

7. Search for available vehicles• Newspaper ads• Internet• Craigslist• Autotrader• Cars.com• Dealer websites

• List cars that meet your specifications, features, prices

Steps in the Car Buying Process

8. Test Drive Each Vehicle• Compare ride, handling, braking, features and costs

• Try all features

• Look for rust and mismatched paint which could indicate car has been in an accident

Steps in the Car Buying Process

9. Check the History of a Used Vehicle

• Each vehicle has a unique VIN (vehicle Identification number) that identifies the car

• VIN is on the dashboard in front of the driver and on all vehicle documents

• Request a CarFax report from the previous owner

Steps in the Car Buying Process

10. Get the vehicle checked mechanically

• Have the car checked out by a mechanic that you trust

• Vehicle Emission Test- test to verify that a vehicle meets the minimum clean-air standards

• Safety Inspections

Steps in the Car Buying Process

11. Determine a fair price• New Car sticker price or MSRP

(manufacturer’s suggested retail price)• Invoice Price-price the dealer paid for the car• Subtract any destination charges• Make sure you understand and look up any

charges that do not sound right

Steps in the Car Buying Process

12. Negotiate the price

• Stick to the facts• Negotiate the price of

the new car separately from the price of your trade in.

Steps in the Car Buying Process

13. Dealer Add-Ons• High-priced, high

profit dealer services that add little or no value to your car

• Tell the dealer you do not want these services on the car and remove them

FINANCING YOUR CAR

14. Financial Institutions• Banks• Credit Unions• Online lenders• Compare rates and

terms

FINANCING YOUR CAR

• Car Dealers• May offer better

terms on particular models and at particular times of the year- sponsored by manufacturers or their financing agencies

LEASING A CAR

• It is a written agreement that allows use of the car for a specified time period and monthly payment

• Usually have option to buy the car at the end of the lease period

• Can lease more expensive car than could buy on credit

• Always have a car payment but a good way to always drive a new car

Consumer Protection for Car Buyers

• Warranty- states what manufacturer or dealer will do if car does not perform as it should

• Lemon Laws-for cars needing repairs; a lemon is a car with substantial defects that the manufacturer has been unable to fix after repeated attempts.• 4 times to fix same problem in first year or

12,000 miles• Out of service for at least 30 days in first

year/12,000 miles

Consumer Protection for Car Buyers

• FTC Used Car Rule- requires used car dealers to inform consumers ahead of purchase about who will be responsible for paying for certain repairs if they occur after the sale

• Buyer’s Guide Sticker• As is (buyer pays for all repairs)• Warranty (dealer pays for some

repairs for specific time)

Cost of Operating a Car

• Gas and Oil• National Average:

$3.68 per gallon of unleaded fuel

• Highest price in 6 years for early summer

• 14.45 ¢ per mile

• Depreciation• http://www.edmunds.c

om/car-buying/how-fast-does-my-new-car-lose-value-infographic.html

Cost of Operating a Car

• Title, Registration, Personal Property Tax, & Sales Tax• Title (Proof you own the vehicle)• 30 days to apply for a title (new car)• $8.50 (title) $2.50 (processing fee)

• Registration (registering your vehicle with the state of Missouri)• Pays for your license plate(s) and

tags• $3.50 for one year; $7.00 for two

years)• Personal Property Tax• A tax which is based upon the

value of personal property• Sales Tax• Paid at the time you apply for the title• https://sa.dor.mo.gov/mv/stc/

default.aspx

Cost of Operating a Car

• Maintenance and Repairs• Up 11.26% from 2012 (based

on a 2013 statement from AAA)

• 4.97¢ per mile

• Accessories• Window tinting• Different wheels• Audio System

Extending the Life of Your Car

• Maintain Fluid Levels• Perform Routine Maintenance• Keep Your Car in a Garage• Preserve the Exterior• Preserve the Interior• Follow Wise Driving Habits