How to Buy a NEW CAR

Black Collegian, Oct 2003 by Ward, Ed

If you're like most college students anticipating graduation, purchasing a new car is at the top of your to-do list. The good news is that car companies are aggressively vying for your business and offer special incentives for new grads. However, if you do not know how the car buying process works, you are not alone. There are many resources available on-line like Choicenerd.com that help explain the car buying process to first- time car buyers. This article is intended to give you the facts about the car buying process, which will equip you with the information needed to make a sound decision.

Before Entering The Dealership

Before you step foot on a dealership lot, there are several things you need to think about, including what type of vehicle you can afford, what type of vehicle is right for you, whether you should lease or buy, and what your credit history consists of.

What type of vehicle can you afford?

The first thing you must determine about your future new vehicle is quite naturally what you can afford. Start out by making a budget for all your projected monthly income and expenses. A "realistic" budget will identify how much money you can afford to spend on a car in relation to other obligations such as food, rent, and school loan repayments. As discussed below, the type of vehicle you choose should make sense when you consider your lifestyle.

As a quick reference point for determining how much a vehicle will cost each month, take the negotiated price divided by the number of months you finance. Then, for every $1,000 financed add $17. For example, a vehicle purchased at $16,000 for 60 months (5 years) will run you roughly ($16K/60 = $267) ($17*16= $272) = $539 per month.

Be aware of the additional expenses associated with a vehicle beyond your monthly payment. The cost of insurance coverage can make a reasonably priced vehicle unaffordable, based on the high premium associated with drivers under 25. Other factors besides age that will affect your insurance rate include the following: your driving record along with any roommate's, vehicle horsepower, city of residence, vehicle's government safety rating, and the national index of how frequently your desired vehicle is stolen. The fuel economy, or miles per gallon, which is posted on all new vehicle window stickers, must also be taken into consideration with the amount of miles you plan to drive each day. One way to improve fuel efficiency and lower your gas expenditure is to opt for a four cylinder or V6 over V8 and supercharged engines. Lastly, an estimate of repair cost must be factored into the overall expense equation. Choosing extended warranty plans, which prevent you from paying the full repair bill after your vehicle is out of warranty, will also raise your monthly payment.

Independent research companies frequently publish vehicle reliability reports that can be found periodically in local newspapers and consumer-oriented magazines.

What type of vehicle is right for you?

All major manufacturers offer a wide range of vehicles, from two-seater sports cars to eight passenger large SUVs. However, the vehicle type you choose should meet your needs. For instance, if you plan to get married and start a family right out of college, then buying a two-seater sports car wouldn't make a lot of sense, based on the space required to accommodate such things as a baby seat. As another example, if you live in an area where winters are very harsh, you should probably opt for a vehicle with 4X4 capability or at least front-wheel drive over a rear-wheel drive vehicle, based on the increased maneuverability in the snow. Most manufacturers offer special incentives on vehicle lines such as; compact four-door sedans and small SUVs that they target at the youth market, so keep these vehicle in mind.

Will you lease or buy?

The decision on whether you will lease or buy should be based primarily on the number of miles you intend to drive yearly. When you lease a vehicle you pay only for its use during a specific time (39 months), which will lower the monthly payment. The manufacturer calculates the estimated value of the vehicle after the lease is up. You are responsible for the difference between the purchase price and lease-end value. To arrive at a lease-end value, manufacturers determine the number of miles the vehicle should have on it at the end of the lease and normal wear and tear. Therefore, leases restrict the number of miles you should drive during the year (typically 12,000 miles). Any miles driven over the pre-set 39-month number will cost you extra per mile, a factor that can add up quickly. However, you can purchase extra miles up front for a lower cost. If you are considering leasing, make sure that you obtain a leasing guideline from the dealership. The guideline will spell out the expected condition the lease vehicle should be in at the end of the lease and will highlight any potential surcharges. Remember, anything outside of the guidelines will incur a surcharge. At the end of your lease you have the option to turn the lease in or to purchase the vehicle at the lease-end value.