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Buying a new car is usually the second most expensive purchase many consumers make, after the purchase of their home. This guide, which includes a checklist and a worksheet, is intended to help give you the information you need to make a smart deal on a new car. Buying Your New Car Before you step into a dealer's showroom, it helps to know what car model and options you want and how much you are willing to spend. That way, you are less likely to feel pressured into making a hasty or expensive decision and more likely to get a better deal. To help you shop, you may want to consider the following suggestions:
Learning the Terms To give you a better sense of the negotiating room you have when buying your car, it helps to understand the following terms, listed here in order of increasing price: INVOICE PRICE is the manufacturer's initial charge to the dealer. This is usually higher than the dealer's final cost because dealers often receive rebates, allowances, discounts, and incentive awards. The invoice price always includes freight (also known as destination and delivery). If you are buying a car based on the invoice price (for example, "at invoice," "$100 below invoice" "two percent above invoice") be sure freight is not added to the sales contract. BASE PRICE is the cost of the car without options, but includes standard equipment, factory warranty, and freight. This price is printed on the Monroney sticker (see below). MONRONEY STICKER PRICE, which appears on a label affixed to the car window and is required by federal law, shows the base price, the manufacturer's installed options with the manufacturer's suggested retail price, the manufacturer's transportation charge, and the fuel economy (mileage). The label may not be removed by anyone other than the purchaser. DEALER STICKER PRICE, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer mark-up (ADM) of additional dealer profit (ADP), dealer preparation, and undercoating. Financing Your New Car If you decide to finance your car, you have the option of checking the dealer's rate against banks, credit unions, savings and loans institutions, and other loan companies. Because interest rates vary, shop around for the best deal and compare the annual percentage rates (APR). Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. In addition, they may require you to make a large downpayment to qualify for these special interest rates. With these conditions, you may find that it is sometimes more affordable to pay higher financing charges on a car that is lower in price or to purchase a car that requires a smaller downpayment. Some dealers and lenders may ask you to buy credit insurance, which pays off your loan if you should die or become disabled. Before you add this cost, you may want to consider the benefits available from existing policies you may have. Remember, buying credit insurance is not required for a loan. Trading in Your Old Car After getting your new car for the best possible price, only then discuss the possibility of a trade-in. First, however, find out the value of your old car. You may want to check the library for references and periodicals that can tell you how much your car is worth. This information may help you get a better overall price from the dealer. Remember, too, that though it may take longer, you generally will get more money by selling the car yourself. Considering a Service Contract Service contracts that you may buy with a new car provide for the repair of certain specified parts or problems. These contracts are offered by manufacturers, dealers, or independent companies and usually initially run concurrently with the manufacturer's warranty. Remember: a warranty is included in the price of the car; a service contract costs extra. Before deciding to purchase a service contract, read it carefully and consider some of the following questions:
For Further Information In addition to checking publications about new car
features and prices when buying a car, you may find it helpful
to read other Federal Trade Commission brochures. These include:
For a free copy write: Public Reference, Federal Trade Commission, Washington, D.C. 20580. For further information, you may want to write to: Division of Marketing Practices, Federal Trade Commission, Washington, D.C. 20580. Although the FTC generally does not intervene in individual consumer disputes, it can take action if there is evidence of a pattern of deceptive or unfair practices. Checklist for Buying a New Car You are likely to get a better deal on a car if you know beforehand exactly what you are looking for and what you are willing to spend. Therefore, before signing a sales contract with a car dealer, you may want to:
Worksheet for Buying a New Car To help you negotiate the price of your next new car, you may want to use this worksheet to establish your bargaining room before you talk with a dealer. Model_______________________________________ Base Price Invoice Price* Retail Price Options: ____________ __________________ _________________ Transmission: ______________ ____________ ____________ Automatic ______________ ____________ ____________ Stick ______________ ____________ ____________ Air Conditioning ______________ ____________ ____________ Engine: ______________ ____________ ____________ Size ______________ Diesel ______________ Sound System: ______________ ____________ ____________ AM-FM ______________ ____________ ____________ AM-FM Cassette ______________ ____________ ____________ Power Brakes ______________ ____________ ____________ Power Steering ______________ ____________ ____________ Power Locks ______________ ____________ ____________ Power Seats ______________ ____________ ____________ Rear Window Wiper/Washer ______________ ____________ ____________ Rear Window Defogger ______________ ____________ ____________ Luggage Rack ______________ ____________ ____________ Tires: ______________ ____________ ____________ Full-Size Spare ______________ ____________ ____________ Steel Belted Radials ______________ ____________ ____________ Mirrors: ______________ ____________ ____________ Dual ______________ ____________ ____________ Remote ______________ ____________ ____________ Passenger Visor ______________ ____________ ____________ Other: ______________ ____________ ____________ * The invoice price may be obtained by looking at the dealer's invoice or by reviewing new car publications. FTC Headquarters, 6th & Pennsylvania Avenue, N.W. Washington, D.C. 20580 (202) 326-2222 TDD (202) 326-2502 FTC Regional Offices 1718 Peachtree Street, N.W., Suite 1000 Atlanta, Georgia 30367 (404) 347-4836 10 Causeway Street, Suite 1184 Boston, Massachusetts 02222-1073 (617) 565-7240 55 East Monroe Street, Suite 1437 Chicago, Illinois 60603 (312) 353-4423 668 Euclid Avenue, Suite 520-A Cleveland, Ohio 44 114 (216) 522-4207 100 N. Central Expressway, Suite 500 Dallas, Texas 75201 (214) 767-5501 1405 Curtis Street, Suite 2900 Denver, Colorado 80202-2393 (303) 844-2271 11000 Wilshire Boulevard, Suite 13209 Los Angeles, California 90024 (213) 209-7575 150 William Street, Suite 1300 New York, New York 10038 (212) 264-1207 901 Market Street, Suite 570 San Francisco, California 94103 (415) 744-7920 2806 Federal Bldg., 915 Second Ave. Seattle, Washington 98174 (206) 553-4656 |