Auto Buyer’s Guide

Before you buy, review our complete auto buyer’s guide

Auto Buyer’s Guide

What Can You Afford?Before you start looking for a vehicle, find out how much you can afford by getting pre-approved. Once you know this, examine your personal finances further and determine whether or not you should really purchase a vehicle priced at the top of your price range.

Keep your total monthly payments, including your rent or mortgage, below 40% of your take-home pay.

Already being pre-approved will give you an upper hand during negotiations. However, do not reveal the amount you are pre-approved for to prevent the dealer from inflating the price to match your loan limit.

Auto Buyer’s Guide

New or Used?New cars depreciate in value the second you drive them off the car lot. On average, 20% of the original value is lost in the 1st year and over 35% by the end of the 5th year. After 5 years, the depreciation levels off, so try and keep your car at least that long to reduce the financial hit.

If you want the peace of mind of a factory warranty with the lower used car price, consider a certified pre-owned vehicle.

Before you buy a used vehicle, research its history on sites such as AutoSmart and CarFax.com as well as your local Department of Transportation office.

Auto Buyer’s Guide

Auto Terms To KnowMSRP can be thought of as the suggested price. Dealers can of course sell vehicles for higher or less than MSRP.

Optional Equipment refers to special packages and features you will pay extra for. Decide what optional equipment you really need instead of what just seems nice to have.

Destination-Charge Fee is the cost of delivering the vehicle from the factory to the dealership. This is typically a non-negotiate fee and is usually the same for all models within a certain brand.

Market Adjustment is a fee that dealers add on for vehicles that are in high demand. It’s a way for dealers to make extra money, and it may be difficult to negotiate this fee down much.

Auto Buyer’s Guide

Auto Terms To Know

Sticker Price is the total retail price for a vehicle including the MSRP, extra options, destination charges, and potential market adjustments. Dealers will typically try to sell their vehicles at as close to sticker price as possible or offer you a manufacturer discount or token discount.

Rebate is a direct buyer incentive from the manufacturer, not the dealer. You should disregard the rebate when negotiating with a dealership because you’ll get it no matter what.

Dealer Incentive is the money manufactures agree to pay dealers to sell certain models, often slow selling ones. Some dealers pass these savings on to the buyer and others keep it as extra profit.

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Auto Buyer’s Guide

Auto Terms To Know

Holdback is a percentage of the MSRP that manufactures offer to dealers as a refund when the vehicle is sold. It is often 2% to 3% of the price. Even dealers that sell for “invoice” can still make a profit from the holdback refund.

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Auto Buyer’s Guide

Pricing & Negotiation

The dealer’s true cost is not on the widow sticker. The true cost is the dealer’s invoice price less any holdbacks and incentives. A good estimate of the dealer’s true cost can be found in the Consumer Reports’ “New Car Price Reports.”

A good starting point for negotiations is about 4% to 8% over the dealer’s true cost.

The true market value is the price others are paying for the vehicle in your area and can be found at http://www.edmunds.com/car-buying/how-to-use-tmv.html

Instead of negotiating down from the sticker price, negotiate up from the dealer’s true cost.

Auto Buyer’s Guide

Best Time to Buy

A great way to save money is by buying out-of-season vehicles or models that have an upcoming body style change.

Consumer incentives are usually higher in the winter and summer months.

Consider buying either at the end of the month when dealers are trying to meet monthly quotas, or at the end of the year when dealers are trying to clear out their inventory for tax purposes

Auto Buyer’s Guide

Know Your Trade-In Value

Used cars drop in value between October and December, so try and avoid trading a vehicle in during this time period.

Negotiate the price of your new car before talking about your trade-in. Otherwise, the dealership may try to please you with a great trade-in value for your old car while making up for it by inflating the price of your new car.

Over half of new car buyers end up trading in their old cars simply because it’s more convenient. Before trading in a vehicle, find out the trade-in value at AutoSmart, Edmunds, or KBB.

Auto Buyer’s Guide

Warranties & Service Contracts

A bumper-to-bumper warranty doesn’t always cover everything like it implies. Find out the details on all warranties.

Service contracts are often priced at twice the actual cost and often do not cover anything that isn’t already covered in the warranty.

Warranties can be good options to consider when purchasing a vehicle. Before you purchase a warranty though, you should find out exactly what it does and does not cover.

Auto Buyer’s Guide

Leasing

A standard lease allows the vehicle to be driven up to 15,000 miles a year without a penalty. If you typically drive more than this, a lease may not be your best option.

The price of a lease can be negotiated just like an actual vehicle purchase

If you like to drive a new car every two to three years, you may want to consider leasing. Monthly lease payments are typically lower than a normal auto loan payment. However, you may have other upfront costs such as the 1st month’s payment, a security deposit, taxes, registration, and itemized cost reductions.

Auto Buyer’s Guide

Auto Insurance

You may want to also purchase gap insurance. This is optional insurance that insures the difference between what you owe on your vehicle and what your insurance company says it’s actually worth. If you were in an accident, you would have to cover the difference yourself without gap insurance.

Gap insurance is usually just available on new vehicles and is not usually appropriate for all vehicle purchases.

Get the best insurance quotes directly from Mountain America Insurance Services. Mountain America Insurance Services offers affordable auto insurance policies to protect you and your family on the road of life.

Auto Buyer’s Guide

More Information

For additional tips on getting the very best auto deals, please visit AutoSmart or BalanceTrack.