the car buying process - california state university ...hfcat002/carwebinarslides.pdf · property...
TRANSCRIPT
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The Car Buying Process: Don’t Get Taken for a Ride
Presented By: Gregorio Alcantar M.S. ‘06
*If you can hear the Matador Fight Song in
the background, then your audio is working!
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Before we begin…
1. In the chatbox, please input whether you are a CSUN
Student OR
Alumni
2. Please take a moment to follow the link in the
chatbox to take our survey after the presentation.
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4 Steps to the Car Buying Process
BUDGETING
NEGOTIATING
PICKING A CAR
MAINTENANCE
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BUDGETING
• Before you start shopping for a car, determine how much you can afford to spend.
• Usually begins by reviewing your budget • Budget - a plan on where your money is going
Car Payment $$
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Guidelines
● You should not have a car payment
that can take up more than 20% of
your discretionary income after
paying your regular expenses
● $2000 discretionary income = $400
car payment
BUDGETING How much can you afford? (Be real!)
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• Research is important because it gives you bargaining power
• Pick a good car (i.e. reliable) - NOT shiny, or with bells and whistles
• Review reliable sites for information
KBB.com
PICKING A CAR Research
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PICKING A CAR
How much car do you need? • Type: Compact, Sedan, Sport,
Truck, 2-door, 4-door • Will you drive it much (e.g., living
close to campus-walk) • Car Features: Apple’s Carplay,
heated seats, Power Windows
Identify your Needs vs. Wants • Prioritize (you may need to
trade off some of the wants for a lower price
• Select 3 or 4 choices that meet your needs and research the features of each car
• Make a pros and cons list • Compare your choices and weigh which one is the best option for you. • Any car you evaluate MUST fit within your budget (STORY about guy
who couldn’t sleep)
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Lease vs. New vs. Used
LEASE NEW USED
• Agreement w/ dealer to use property (the car) for specified time and mo. payment
• Don’t own car, only renting • Car available for purchase at
end of lease term (at expected value at end of lease term)
• People can afford to lease expensive cars than they would be able to finance
• Advantage: No down payment, no trade-in to worry, new car for few years, BUT you own NOTHING and pay penalties for excess mileage, wear and tear
• More expensive
• Loses value when driven off lot
• Less maintenance and thus save a lot on repairs
• OWN vehicle
• No smog checks for 7 years
• Can save you money
• Likely to need more repairs
• Bought at actual value current for car
• Keeps Warranty (if within 3 years/36000 miles
**Don’t assume you have to buy a used car - if right new car, right price, and keep for a long time -
save hundreds in long run
PICKING A CAR
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• TEST DRIVE the car of your choice to see if the car lives up to your standards • Is it comfortable? • Does it drive smoothly? • How fast does it stop?
• Don’t window shop - try it on!
• Take your time - don’t be in a hurry when shopping for this purchase!
• Tip: It helps to leave your wallet
in the car (bring license only)
PICKING A CAR
• Not Enough Cross-Shopping • SETTLING for What is on the Lot • Skipping the Test Drive • Buying More Car than you Need
Common Mistakes when Picking a Car
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• Decide what price you think is fair before you make an offer for a car.
• Kelley Blue Book publishes a pricing guide for all models and all years.
• By looking up the model and year of the car you are considering, you can find an estimated fair price for it.
NEGOTIATING Determine a Fair Price
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Preapproval is the process of getting a new or used car
loan pre-arranged through your bank or credit union.
NEGOTIATING
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• Buying Unnecessary Add-Ons • (e.g. alarm, sound system, floor mats,
seat covers, nav) • Focusing on the Monthly Payment • Saying up front that you want to pay
Cash • Being Clueless about Financing • Negotiating Down from the Sticker
Price • Fumbling on the Trade-In
NEGOTIATING Common Mistakes when Negotiating
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• The sticker price on a car, or
manufacturer’s suggested retail price
(MSRP) is the price shown on the tag
in the car’s window.
• A fair price for a new car usually lies
somewhere between the sticker price
and the price the dealer paid for it
(the invoice price).
NEGOTIATING Determine a Fair Price
• According to the Automobile Association of America (AAA), the dealer’s
invoice is approximately 90% of sticker for compact and subcompact vehicles,
84-87% of sticker for luxury vehicles.
• A fair price is likely to be 3-6% over the invoice price.
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MSRP
STICKER PRICE
NEGOTIATING
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MSRP: Manufacturer Suggested Retail Price Sticker Price: Price shown on the window Dealer Invoice: The price the dealership pays Fair Price : The price you want to pay 3-6% under Sticker Price
**Sticker Price = 100%+taxes You pay = 94-97% Dealer paid = 90%
NEGOTIATING Terms
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NEGOTIATING Negotiating the Price
• Statements like, “This is the only car I want,” or “This is just what I
am looking for,” weakens your bargaining position.
• Don’t reveal emotions
• Make your initial offer lower than your top price, and then be
prepared to negotiate
• A car-buying service allows you to choose the vehicle features you
want, and the service will locate it, negotiate the price, and
arrange for the delivery (for a fee).
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Don’t want to Negotiate, go through other means
to purchase car
Also… try to ask for some freebies!
NEGOTIATING
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Financial Institutions
• Banks, credit unions and
even insurance companies
offer car loans for 36, 48,
60, or 72 months
• Longer terms mean lower
monthly payments, but
higher total interest paid
because you are using the
money for a longer period
of time
Car Dealers • Most new car dealers offer financing
• On particular models during particular
times of the year they may offer better terms than others
• GMAC (General Motors Acceptance Corporation) is an example of a finance company that makes loans on cars through dealerships
• Most other manufacturers offer similar programs
• You would make your payments to the finance company, not to the dealer
NEGOTIATING Financing Your Car
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a.k.a. TOTAL COST OF OWNERSHIP (TCO)
• The owner’s manual will tell you what
services your car needs and how often.
• Typically, you change the oil every few
thousand miles, have a major engine tune-
up every 20,000 to 30,000 miles, and
perform other maintenance at scheduled
intervals.
MAINTENANCE
• You should plan for unscheduled repairs, like flat tires, broken belts, and
leaky hoses that can be costly.
Maintenance and Repairs
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Fuel
• The cost of gasoline depends on the fuel efficiency of your car’s engine and
number of miles that you drive.
• Larger vehicles and more powerful engines require more fuel.
Cost of Operating a Car MAINTENANCE
Depreciation
• A decline in the value of property due to normal wear and tear.
• As a car ages, the number of miles driven increases, the physical condition begins to deteriorate, and mechanical difficulties arise.
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• Also, styles and consumer tastes change over time.
• All these factors usually cause cars to lose market value.
• Not all cars depreciate– very old vehicles in excellent condition or with
high resale value
• Depreciation is the single greatest cost of owning a car- the cost of
gasoline is second.
• A car will retain more of its value over time if it is well-maintained and
has fewer miles on it at the time of sale.
Cost of Operating a Car MAINTENANCE
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• You must pay title fees and sales taxes only at the time you buy the car. (e.g. $25,000 at 9% sales tax = $27250 (2250)
• However, you must pay a tag fee each year and pay for emissions testing in some states every few years.
• All states charge a fee to register a car title- the legal document that establishes ownership.
• A car title lists the legal owner (usually the lending institution) and the registered owner (you)
Registration, Title & Sales Tax MAINTENANCE
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1. Reliability - It does not break down often; will last at
least 10 years
2. A Car You Love - you enjoy getting the car and driving it
3. Resale Value - after 7 years, car still worth at least ½ of
its drive off price
4. Insurance - affordable (new more expensive than used)
7 Signs You Bought a Good Car
5. Fuel Efficiency - must I say more
6. The Down Payment - you placed a large down payment (saves on interest)
7. Interest Rate - a low and affordable interest rate means hundreds of dollars
in saving over the car loan
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The Key to Car Purchasing Success...
...is to know what you need, have done
the research, and don’t budge but be reasonable at the negotiating table
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★ Sethi, R. (2009). I will teach you to be rich. New York: Workman Publishing.
★ Gamm, S. (2013). More money, please: The financial secrets you never
learned in school. New York: Penguin Group.
★ de Paula, M. 10 common car buying mistakes. Retrieved from
http://editorial.autos.msn.com/listarticle.aspx?cp-documentid=1171403
Resources
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