If you're going to borrow money to buy a car, the best advice (see item #3 below) is not to borrow from the dealership. You'll get a less costly loan overall and a better interest rate from a credit union or bank. And this story about dealerships passing on finance "acquisition fees" to buyers is another good reason not to borrow from the dealer.
An acquisition fee is something the dealer pays the lender that actually finances the purchase. Some dealers are passing this fee along to buyers. Unsuspecting buyers may pay thousands of dollars more for their new cars because of this. Those thousands can turn a deal into a steal – for the dealership that is.
Other than buying a house, a new car is one of the most expensive purchases you may make. It can be exciting and rewarding, especially if you feel like you got a bargain. It's not much fun being "taken," though.
One of the reasons people feel "taken" by car dealers is because they aren't prepared and let the dealer make the calls. You, the consumer, should be making the calls. There are many things you can do to give yourself an advantage in the car buying process.
10 Things to Do before You Buy a Car
Research, research and then research some more:
- Look at consumer information such as Consumer Reports and Recalls.gov to see which makes and models you're interested in have had any problems
- Talk to your family members, friends, neighbors and co-workers about their experiences with the cars you're interested in
- Take test drives
- Look for information on local dealers and their prices
2. Know Your Budget
Figure out how much you can spend on a car long before you visit a dealership. Don't forget to factor into your budget the costs of:
- Maintenance, such as gas and regular oil changes, etc.
3. Check Your Credit Report
The vast majority of us can't pay cash for a car. Be sure to check your credit to get an idea of your chances of getting a car loan with a good interest rate. If possible, arrange financing through your bank or another lender before visiting the dealership.
4. Look for a Deal
Contact AAA or other groups for additional savings on insurance and roadside assistance, for example. Also, check Kelly Blue Book for prices to expect for used cars. Dealers offering incentives and rebates can save you a lot of money, too.
5. Call Your Agent
It's important to stay in touch with your insurance company through out the process:
- Once you have an idea of the make and model you're interested in, call your agent and ask for an estimate on how much your insurance will be
- After the deal is made, call to make sure the car is added to your policy before you drive off the lot
6. Read the Sales Contract
- Make sure the price in the contract is the same as the one you negotiated
- Check for a waiver or release where you agree not to sue the dealer if something goes wrong with the car
- Does the contract give you any time or a grace period where you can return the car if you're not happy with it?
7. What's Included in the Sales Price?
Don't assume that costs like license and registration fees and sales taxes are included in the sales price of the car. Usually, they're not. Try negotiating with the dealer to have it cover these costs for you. Otherwise, call your local motor vehicle agency before you make the deal to find out how much extra money you'll need to cover these costs.
8. Know What the Warranty Cover?
Many cars come with some sort of warranty. It may be for 30 days or 3 or six months if it's used, maybe longer. It may be for a certain number of miles, like 2,500 or 5,000 after you leave the lot. If it's new, it may be for 3 years or 36 months, whichever comes first. Know exactly how long the warranty lasts.
Also know exactly what it covers. It may be "bumper-to-bumper," meaning practically everything's covered. Or, it may cover only certain systems or parts. Ask questions about anything in the warranty you don't understand.
9. Ask about the Car's History
New cars aren't a problem, but you never know what has happened to a used car before it landed on the dealer's lot. Ask the salesperson about the car's past. Has it ever been in an accident? Who made any engine or body repairs? Are there any maintenance records?
The dealer may not know any of this. There are companies, such as CARFAX, that can give you a history report on the car you're interested in. Many dealers offer these or similar reports for free. Ask your dealer for one. If it refuses, consider paying for one on your own before buying the car.
10. Inspect the Car
With or without a vehicle history report, don't sign anything until after you've inspected the car carefully. The last thing you want is costly repairs soon after you drive off the lot. While you're with the salesman, take notes on any damage or problems you can see.
Contact a mechanic if you don't have the automotive training or experience to know what to look for. Most dealers will give you time to take the car to your mechanic for a once-over. To speed things up, ask the mechanic to meet you at car lot.
In the end, it's important to remember that the car dealership wants your business. The ball is in YOUR court, so to speak. Take your time and make sure the car you've found is right for you and your wallet.
Questions for Your Attorney
- What should I do if I find a dent on car when I go to pick it up and the dent wasn't there the day before when I signed the sales contract?
- Are there any fees I can deduct on my income tax return when I buy my car?
- If I ask, does the dealership have to show me how much it paid for the car?