|
|
1) Where do Car Dealerships get their used cars?
2) Is it better to buy a New Car or a Used Car?
3) Should I "BUY" or "LEASE" my next vehicle?
4) Should I buy my vehicle "AS IS" or should I buy a Warranty or Service
Contract?
5) What are the different types of financing available to me?
6) Is it better to buy an "American Car" or "A Foreign Car"?
7) Is it better to trade my old car in, or sell it on my own?
8) How can I negotiate the price and get the "best deal"?
9) How can I know if I'm buying someone else's "lemon"?
10) Is it true that you can get a great deal by buying at a Public Auto Auction
or Drug-Seized Auction or Bank Repossessions?
11) Should I consider buying a vehicle that has been previously "leased" of
"rented"?
12) Is it safe to buy a vehicle on the Internet?
1) Where do Car Dealerships get their used cars?
Used Car Dealerships get most of their used cars from New Car Dealerships. When a
Franchised New Car Dealership sells a brand new car, they usually take a used car on
trade. Often, the dealer doesn't want to sell this trade-in on his own lot because it
is much cheaper and takes away from the sales of his new cars. Also, the New Car
Dealer usually has a short period of time to pay for the new car after he sells it, and
if he takes a trade-in, he must sell this trade quickly in order to pay for the new car
he has just sold. For this reason, he takes this car to a local Car Auction and sells
it to a Used Car Dealer who specializes in the re-sale of used cars. Another major
source of used cars is lease companies. They are selling the vehicles that have
reached the end of the lease term. These are the vehicles customers return back to
the Lease Company at the end of the lease. Most lease companies are banks that
are not in the business of re-selling cars, so they take these cars to a local Car
Auction and sell them to Used Car Dealers who specialize in re-selling used cars.
Other sources that Used Car Dealers may buy vehicles from include private individuals,
banks, insurance companies, corporations and government agencies.
TOP
2) Is it better to buy a New Car or a Used Car?
This is a complex question. The answer depends on many variables; your financial
situation, the type of use your vehicle will receive and how many miles you will drive.
Other questions you need to ask yourself is; how long do you plan to keep the car,
your short-term and long-term financial goals, whether you are planning to finance
the vehicle or pay cash and your own tolerance for risk versus savings? Some people
prefer to buy a new car so they have the protection of the "bumper to bumper"
warranty and the "emotional appeal" of owning a "brand new" car. There's no doubt
that it's great to have a new car sitting in your driveway, but the next morning, you own
a used car, just like everyone else! When you finance a new car for 4 - 5 years, you
eventually have to deal with scratches and dents and repairs just like the person
who bought a used car. If you didn't put very much money down, or if you owed a
lot of money on the vehicle you traded in, then you will probably be "upside down" in
the equity in your new car. This means you owe more on your car than what it is
worth, which makes it hard to sell or trade in for the next 3 - 4 years. This is
particularly bad if your circumstances change down the road and you need something
different than the vehicle you have. You're stuck with the vehicle and the payments.
The advantages of buying a used car are many; the price is generally lower, so the
payments can be lower. You can finance for a shorter term, or maybe pay cash, so
you aren't tied to this vehicle for as long a period of time. If you buy a lower priced
car, you may not need full coverage insurance, which can be a substantial saving for
some drivers. A new car can depreciate thousands of dollars in the first 1 - 3 years
and you may lose a lot of money if you trade during this time. You can typically buy
a used vehicle that is 2 - 3 years old and save thousands of dollars compared the
price of a new one. An extended warranty can help take some of the risk out of
buying a used car and give you the peace of mind you need to buy used. This saves
a lot of money and you still have a safe investment.
TOP
3) Should I "BUY" or "LEASE" my next vehicle?
Leases have a few advantages, but a lot of disadvantages. The advantages of
leasing may depend on your unique situation and the intended use of your vehicle.
The cost of the lease may be fully tax deductible, depending on the use and your
financial situation. Often, leases have lower down payments and lower monthly
payments than an outright purchase of the vehicle. You don't have to worry about
selling or trading your lease, because at the end of the lease, you just turn the
vehicle back in to the Lease Company. The disadvantage to a lease is the fact that
you don't build up any equity in the vehicle. You pay a down payment, state taxes
and licensing fees, monthly payments, insurance and repairs. Then you turn the
vehicle back in to the Leasing Company after paying thousands of dollars, and walk
away with nothing! Other disadvantages of leasing are the limit on the amount of
miles you are allowed to drive during the term of the lease. If you exceed this mileage
limit, you pay a high penalty for the extra miles! You also have to turn the vehicle
back in "good" condition and the Lease Company decides how much you will have to
pay for "excessive" wear and damages to the vehicles mechanical condition and
appearance. All original equipment, like stereo, wheels, trim packages etc., must be
original when you turn the vehicle back in at the end of the lease. If you buy the
vehicle, you may be able to build up equity for your future sale or trade. The amount
of equity depends on the size of your down payment, monthly payments, miles and
condition. You can drive as many miles as you want, sell or trade the car whenever
you want. You can also change factory options or appearance any way you wish,
because you own it and have complete control, over the vehicle. If you make wise
decisions in the purchase and maintenance of your vehicle, you should have plenty of
equity to sell, trade or just keep the vehicle until it is "paid in full". Then just enjoy
driving with no payments!
TOP
4) Should I buy my vehicle "AS IS" or should I buy a Warranty or Service
Contract?
The answer to this question depends on your financial situation and tolerance to
risk. Warranties and Service Contracts are carefully designed to make a profit for
the company that is selling the contract. These contracts work just like insurance
policies. They spread the risk out over many users and only benefit those
customers who use them. If your vehicle doesn't experience one of the mechanical
breakdowns covered by the contract, then you lose your money at the termination
of the contract. A "Warranty Contract" covers the basic "Power Train" of the
vehicle, the engine, transmission and drive axle assembly. This contract usually
covers only the "internally lubricated parts" of these major components and may
have a deductible you have to pay toward each repair. Check the contract for
specific details to see what is covered and what is excluded. It is also a good idea
to find out if you can get the vehicle repaired at the shop of your choice, or if they
decide where it will be repaired. Also, check on the deductible, the financial limits
of the policy and whether it provides for towing and rental car under a "covered"
repair. "Service Contracts" work the same way, but generally cover more
components of the vehicles' mechanical systems and cost more depending on the
coverage limits. If you are on a limited or fixed income, and could not possibly
afford to pay for a major repair on very short notice, then you should definitely
consider buying the warranty or service contract. These contracts can also take
away some of the uncertainties of buying a used vehicle, especially when you know
little about the vehicle or the dealer you are buying it from. Try getting the dealer
to include a warranty in the selling price of the vehicle. Even a 30, 60 or 90 day
warranty would give you time to find out if the vehicle has any major problems
before you have to bear the cost of hidden defects in your new purchase. You
should be able to purchase an additional 12-month to 36- month contract,
depending on the year and miles on the vehicle at the time of purchase. Make sure
and check all of the terms and conditions of the contract before you decide to buy
one. There are hundreds of Warranty Companies that offer contracts and you can
check the "ratings" of these companies to make sure you are buying from a
reputable company that will be there when you need them. Also, you need to
remember the price of the warranty contacts are "negotiable" just like the price of
the vehicle, and the savvy negotiator can often save hundreds of dollars on the
price of one of these contracts. Buying a vehicle "AS IS" can save you money and
should be considered as an option for those who can afford to pay for a major
repair on short notice if it should happen. Doing some research on the vehicle's
history, getting to know the dealer you purchase the vehicle from and having a
thorough mechanical inspection performed by a trustworthy, independent mechanic
can help you to make your decision about an "AS IS" purchase.
TOP
5) What are the different types of financing available to me?
If you have already established a good credit rating, then your own bank or credit
union will probably give you the best interest rate. Remember interest rates are
"negotiable" just like the price of the vehicle, and even a saving of � percent can
lower your total interest paid by hundreds of dollars during the life of the loan!
Your finance source will usually offer insurance products to protect you during the
repayment of the loan. This can include life insurance, disability insurance, gap
insurance (pays the amount you owe above the vehicles' book value in the event
of a total loss), work loss insurance (pays the payments if you are off work for a
certain period of time) and other various insurance products. Remember these
"extras" raise the monthly payments and are designed to make a profit for the
company that is selling them as well as for your protection. Consider buying only
the insurance you need and shop around for these products to get the best price.
If you can afford to pay the payments, or have other life insurance policies to
protect your heirs who would have to pay for your debts, then you may want to
consider not purchasing these "extra" policies. If you have not established a good
credit rating yet or if you have a negative credit history and you cannot meet the
normal credit criteria, such as income to debt ratio, job time, residence time etc.
Then you may want to consider getting a loan from a finance company or asking
someone with established credit to co-sign with you for the loan. A finance
company is similar to a bank, but usually has a more liberal lending policy and higher
interest rates to compensate for the higher risk. You may also want to consider
"BUY HERE, PAY HERE" which is where the dealer finances the vehicle "in-house"
without the use of a bank or finance company. In this case you pay the payments
directly to the dealer, either weekly, bi-weekly, bi-monthly or monthly. The dealer
may also have other "sub-prime" lenders who are willing to make the loan to a "high
risk" buyer that doesn't meet the normal criteria for a conventional loan. They will
charge a higher interest rate for the higher risk they are taking. If you have no
other choice than a "high risk, high interest" loan or financing source, you should
work hard to pay all payments "on time" or "early". This establishes a good credit
rating so you will be able to get a better finance source or interest rate the next
time you borrow for a vehicle.
TOP
6) Is it better to buy an "American Car" or "A Foreign Car"?
Much of the answer to this question depends on personal preferences, but here are
a few facts to consider: A few years ago, compact Japanese imports got better
gas mileage and the powertrain outlasted most American compacts. The downside
to these imports was the fact they were more expensive and the bodies didn't hold
up as well to the harsh weather and road conditions of the northern United States
winters. Much of this has changed in the 21st century! Many of the Japanese cars
are now made in the United States under trade agreements and alliances with the
"TOP FOUR" U.S. auto makers. Germany and Korea have entered the market with
many excellent compacts as well as regular sized cars, trucks, vans and SUV's.
Also, the U.S. manufacturers have made giant improvements in the quality and
durability of their compacts, as well as all other categories of vehicles. They offer
competitive models in every arena with the imports and compete well in style,
longevity, gas mileage and price. Imports have made improvements in the durability
of the bodies and prices of their vehicles, as well. Vehicles that are still imported
are usually higher priced because of higher import taxes designed by our government
to protect our American companies and preserve American jobs. Many imports
tend to hold their value very well, especially Honda, Nissan and Toyota. Buyers that
purchase 1 - 3 year old vehicles in these categories don't see as much of a saving
off the price of a new car as the buyers of 1 - 3 years old "used" American cars.
Imports have fewer advantages over American made vehicles in today's market and
often a buyer purchasing a used American built car can save hundreds of dollars
over the price of a similar import product.
TOP
7) Is it better to trade my old car in, or sell it on my own?
When you trade your car in to the dealer, he will offer you the "wholesale" or
"trade-in" book value for it, adjusted for mileage and condition. The dealer has to
be able to recondition the trade to meet his standards for re-sale and then make
his standard profit from the sale. Often, you can sell your trade-in yourself and get
a higher price for it from a private individual, especially if it is someone who knows
that you took exceptional care of it. The dealer may also give you a better price
on the car you are buying if you don't have a trade. If you negotiate a "cash"
price first, and then tell him you decided you have a trade-in, he will give you even
less for your trade because he has a smaller profit margin left to deal with the trade.
Remember that the dealer has to sell two cars and make a profit on both sales
when he takes a trade-in from you. Selling a car on your own can be a big hassle,
also. You don't have the cash from the trade at the time of the new purchase, or
you may have a lien against the title if you have a loan on it. You may have to run
advertisements that cost money and field calls from all kinds of people, at all hours.
You will have strangers coming to your house and will want to drive your car on
your license and registration. They may need financing or have a trade-in they need
to deal with before they can buy your car! You may have more trouble than you
expect, getting the price you want out of your car, or it may take much longer than
you expect to sell it! This process can be very unnerving for the inexperienced
seller or very exciting for the adventuresome entrepreneur. You need to decide
which category you fit in to before you make the decision to trade your old vehicle
or sell it on your own. The dealer is well equipped to sell your trade. He has
special dealer license plates and insurance for test-drives, trained licensed sales
staff, financing and a notary to handle the motor vehicle licensing and title transfer.
He can also accept trade-ins. He is also able to help you if you have a payoff on
an existing loan on your trade-in and can often save you sales tax on the value of
your trade against the purchase of your new vehicle.
TOP
8) How can I negotiate the price and get the "best deal"?
Most dealers offer the buyer a "negotiable" price on their vehicles. There are many
factors that affect the final price you can negotiate with the dealer. Usually the
dealer has "packed" the retail selling price to accommodate a possible trade, offer a
warranty, provide financing or rebates and allow him room to "negotiate" with the
buyer. If you have a trade-in, most of your negotiating will be on the amount the
dealer is willing to give you on your trade-in. Make sure your trade-in is in the best
possible condition and appearance when you present it for an appraisal. Be honest
with the dealer about the condition of the trade-in, just as you expect him to be
with you about his vehicle. This develops a long-term relationship of trust that will
be beneficial for both parties! If you don't have a trade-in, ask the dealer for his
best price on a "cash" deal, without a trade. If you are willing to buy the vehicle
"AS IS' without a warranty and without repairing anything, if any, that you may find
wrong with the vehicle that you are trying to buy. Ask the dealer to give you a
special "AS IS" price. The dealer is willing to make less profit on an "AS IS" sale
with no trade-in, because he knows all of the variables before the sale. Then he
doesn't need to "escrow" any profit for losses on the trade-in or repairs after the
sale. Look up the Kelley Blue Book Value of the vehicle and research the vehicle
history and use this information to help you negotiate the price. Shop other
dealers on the Internet to find comparable vehicles and then compare prices.
Show the dealer the results of your research. Remember that the dealer has to
make a profit to stay in business and has a "bottom line" below which, he will not
be able to sell the vehicle at. There is no set amount you can expect the dealer
to come down on the price. It depends on how much mark-up he has in the price,
how much investment he has into the vehicle and how long he has had the vehicle.
Also the market demand for the vehicle and the amount of consumer interest he has had.
Additionally, any previous price reductions or adjustments he has already
made and any special "promotions" or "Red Tag Sales" that he may have running on
that particular vehicle. Also, remember that Warranties, Service Contracts,
insurance products and loan interest rates are all negotiable. This could mean
considerable savings for you in the long run, if you get a good price! Take your
time, shop around, make sure you like the vehicle you are negotiating on and
develop a good, long-term relationship with your dealer. This will benefit both of
you! The bottom line is not always price! Consider the integrity of the dealer,
service and satisfaction of your purchase after the sale!
TOP
9) How can I know if I'm buying someone else's "lemon"?
You can use Internet sites like "Car Fax" to check the vehicle's history. Many states
have "Lemon Laws" and this site will tell you if this vehicle has ever been
re-purchased under that states' Lemon Law. Check the title to see if it has any
"Title Brands" such as Reconstructed, Flood Damaged, Police Use, Taxi Use, Rental
Car, Stolen and Recovered, Salvage Title, True Miles Unknown, Not Actual Miles or
Over Mechanical Limits of Odometer etc. Research the explanation of these title
brands and ask to contact the previous owner, if available. Some car sources are
inherently trouble, such as buying from body shops, repair facilities, bank
repossessions, public auto auctions and daily rental cars. You should be very
careful and have any vehicle checked thoroughly by a certified mechanic when they
comes from these sources! Ultimately, it's possible to do all the research and still
buy a lemon. The best prevention is to get a good warranty and know your
dealer well enough to be confident that he will not leave you stranded with a bad
vehicle!
TOP
10) Is it true that you can get a great deal by buying at a Public Auto Auction
or Drug-Seized Auction or Bank Repossessions?
It is true the prices can often be lower from these sources. However there are a
lot of dangers in purchasing from these kind of sources! People selling at Public Auto
Auctions often go to great lengths to conceal serious problems that exist in the
vehicle. They have no concern for the buyer, repeat business, customer satisfaction
or compliance with normal rules that protect consumers. You waive these rights
when you purchase from an auction source. Drug-seized vehicles can have
undisclosed loans, liens and deficiencies you will only find out about after you own
it! Also, in many cases the keys are not available to you so you can start the car
and listen to the engine or drive it. It is an "As Is" sale. Drug dealers are not well
known for careful service and care of their vehicles! Bank Repossessions are also
high risk because, if the previous owner couldn't make the payments, they probably
couldn't afford to service their vehicle either. You may find out after you buy the
repossession, sadly too late, why the previous owner no longer wanted that vehicle! None of these sources offer any type of guarantee, financing, trade-ins or service after the sale. Normal state laws that govern car dealerships are designed to protect the consumer and are not required for most of the sources we have just mentioned. You might get a good deal.........but you might lose your money..........or worse........Beware!
TOP
11) Should I consider buying a vehicle that has been previously "leased" of
"rented"?
Leasing a car, instead of buying it, has become very popular in the last 5 - 10 years.
There is really no difference between a lease car and a non-lease car. You should
take all of the normal precautions you would when buying a non-lease car.
Corporate leases are a little different. Companies provide them to their managers
and salespersons that have to travel as part of their job. Because of this, they
often have higher "highway" mileage on them and may sell for greatly reduced prices
at the end of the lease. These vehicles are generally well maintained by either the
company or the leasing agency, who want the vehicles to be reliable and have a
good reputation in the resale market for future lease liquidations. Often, you can
buy a much newer or nicer vehicle for the same money as an older one with lower
miles. High miles don't usually hurt a well-maintained newer vehicle. The miles are
put on quickly and mostly on the open highway. Frequent starting, stopping, turning
and aging hurt a vehicle more than highway use. However, there are some
concerns that should be considered when
purchasing a "daily rental" vehicle. These vehicles have a different driver almost
every day. There is much less loyalty on the part of the short-term renter to take
good care of the vehicle or to treat it well. Almost daily cleaning with harsh
chemicals, inside and out, greatly affects the long-term appearance and quality of
the vehicle. Problems resulting from rough use may not surface until the vehicle is
2 - 3 years old. Great consideration should be given to the decision to purchase a
daily rental car for long term personal use.
TOP
12) Is it safe to buy a vehicle on the Internet?
Buying and selling on the Internet has become very popular in the 21st century and
can be an excellent way to comparison shop and find the perfect vehicle for the
best price. Great care and caution should always be exercised when buying on the
Internet. It is important to know the seller and have confidence in their integrity.
You should never buy a car that you have not seen unless you are able to have an
independent appraisal or thorough mechanical inspection performed by a certified
mechanic you trust. Or if you get a well-documented warranty by a dealer that will
guarantee you are getting what you paid for. Make sure you understand the sales
tax and title laws that govern your vehicle purchase. Also that you are buying from
a legitimate, licensed business that is willing to guarantee the transaction will meet
with your complete satisfaction. Buying a car on the Internet can be fast, easy,
safe and competitive! Please check out the great deals that
www.LiteHouse
Auto.com has to offer and experience the best that the web has to
offer! Our site is "Virtually, the easiest way to buy a car!"
|
|
|
|
