A new car is exciting, offers warranties, and requires fewer repairs. But a new car depreciates (loses value) the minute you drive it off the lot. Used cars depreciate more slowly and cost a lot less to begin with. Some even offer limited warranties.
New Cars A cool head and a game plan can save you thousands of dollars. Here are some tips:
1. Take your time. Don't let "special offers" or high-pressure sales tactics rush you into buying on your first visit.
2. Find the fair price. On the Internet, find the factory invoice price, which is the price the dealer paid for the car. This is not the "sticker" price on the car's window (a higher Manufacturer's Suggested Retail Price, or MSRP). Offer to pay that price plus a fair profit, usually 3 to 5 percent.
3. Get bids. Ask five dealers for written bids. Those bids are your bargaining edge.
Used Cars Check the Internet or newspapers for ads. If you're buying from a dealer, ask for names and phone numbers of previous customers. Contact them or the Better Business Bureau for any complaints against the dealer. Weed out the "lemons" with these tips:
• Drive the car, noticing odd noises and how it handles.
• Look at the title to see if the car was "salvaged." That means an insurer declared it a "total loss"; it probably has structural damage that could affect safety and performance.
• Have a mechanic you trust or the American Automobile Association (AAA) test the car. If the seller won't allow testing, don't buy the car.
• Ask to see receipts for recent repairs. Also get the vehicle identification number (VIN) (usually on the dash). At the CARFAX Web site, check the car's history.
The average annual cost of driving a new car in the United States is more than 56 cents per mile, including gas, oil, maintenance, tires, insurance, licenses, registration, vehicle depreciation, and finance charges. That's $8,410 a year!
Test Your Financial Fitness
1. Explaining What is the most important thing to consider when choosing a car? List three other important factors.
2. Listing List three things you can do to avoid getting a "lemon" when you buy a used car.
3. Describing Describe the process a smart car buyer would use before visiting a car dealer.
4. Defining What is the difference between the retail price and the factory invoice price?
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