Auto Purchase Basics

There are various options in regards to buying an automobile. When getting a new vehicle, the most common ways are to either purchase or lease the car. There are benefits and disadvantages to both methods but ultimately the decision should be based on what kind of car you want, how long you will keep the car, and how much you want to spend to maintain a car. We've put together a nice step by step guide in order to purchasing a new or used vehicle.

Decide what type of car you want

This is all personal preference as to how much money you are willing to spend on your vehicle. Gas mileage, overall car cost, maintenance, luxury, etc are all factors that you want to consider. Once you have decided on the car that you want, you will need to figure out if you want a new car or a used car.

New vs. Used

Some people love having brand new things and others don't mind saving a few dollars to get something used. Generally, most new cars will lose about 10-15% of their value the second they get driven off the dealer lot. Just because something is used doesn't mean it's damaged. A majority of the best deals you can get on cars are all to be found in the used car market.

You have a couple options for buying used. Most dealers now have "Pre-owned" vehicles for sale that they do a comprehensive look through to inspect it and bring it back to preset standards. Almost all car manufacturers will extend the warranty on the vehicle for you once it has been deemed a "Pre-owned" vehicle.

Another option is to buy the car from a private party. Buying private party requires a bit more effort when purchasing, but it is almost guaranteed to save you money than going through a dealer. There are certain internet sites that allow you to search for cars local to your area based on the model and year you are looking for. Prior to buying private party, be sure to ask the person who had the car before to give you a full list of all maintenance records. This is usually a great indicator of how the car was treated. Also, it is highly recommended to do a Carfax.com look up using the car's VIN number to see the vehicle history, and have an independent (or friend recommended) mechanic do a pre-sale inspection of the car. There are a lot of shops that will do this for $75-150.

Lease or Buy

While you might have heard that leasing is always bad, it's not necessarily the case. There are distinct advantages and disadvantages of both, but here are the nuts and bolts of it:

Buy

• Like the idea of "ownership" and plan on having a car longer for a longer than a few years.
• Properly maintain cars, and don't mind paying for maintenance when the car is out of warranty.
• Drive lots of miles yearly.
• Want to make after-market modifications to the vehicle.
• Don't mind a slightly higher monthly payment.

Lease Cars

• Plan on keeping the car for only a few years.
• Like having a new car every few years.
• Drive an average number of miles yearly.
• Want a lower monthly payment or want to get more car for the same amount as buying.
• Want to have cars that are always under warranty.

There is no right way to go, and leasing or buying will depend on your unique situation. The cost for ownership vs. lease will typically break even between 3-5 years. As a general rule to purchase the exact same car, it would be way more cost effective to lease it over short term and more if you were to keep the car long term.

Leasing has a whole other set of terms that you will need to be familiar with like "money factor" or "residual cost." If you aren't sure, there are plenty of people who can help you so just ask. Both new cars and used cars can be purchased or leased. Typically with leases the car will need to be brand new or only be a few years old.

Get Financed

Once you have a car that you've picked out and decided how you want to finance it, it's time to get started. A good place to start is the internet, like Lender411.com where you can get instant rate quotes and know exactly what kind of rates you qualify for. The rates will largely depend on the loan amount, your credit history, new/used car, and the term of the loan. Traditionally a new car loan will have lower rates than a used car loan.

Many times, the best rates that are available might not be from the dealers. Getting outside financing first is a great way to gauge what the dealer is offering. Knowing what your options are significantly increases your buying power when negotiating with the dealerships.

For a car lease, the rate is presented as a money factor. You can get an estimate for an equivalent purchase interest rate on a lease by taking the money factor and multiplying it by 2400.

How to Get a Great Deal

Remember, the key to getting a great car deal is to not be influenced by impulse or be rushed. It's easy to take bait, line, and sinker at a dealer but take these key points with you and you will get a great deal and the car that you want:

1. Do your research
   There are plenty of sites like Edmunds.com or KBB.com that will tell you how much cars should cost. Edmunds also has a section where people post what kinds of deals they have been getting at the dealer.
2. Understand the financing
   Remember you're the one paying for the car so don't be embarrassed to ask questions before you sign. You don't have to ask the sale person, just ask them for a copy of the contract and then show it to friends, colleagues, or family and get their opinion. The worst thing you can do is sign the papers without knowing exactly what the financial repercussions are. Be a smart shopper and know exactly what you are getting yourself into.
3. Know how to walk away
   You don't need to sign on the line when they ask you to. Car salesmen are trained to build your impulsiveness and then ask you to come in to their office. They get you comfortable to lower your guard and then try to get ink the deal before you realize what happened. DON'T think you have to sign then and there. The way to get exactly what you want is to be a good negotiator and great negotiators aren't afraid to walk away from a deal.