4 Factors for Smart Car Buying

by Lithium Technologies ‎04-06-2015 11:05 AM - edited ‎06-12-2015 09:29 AM (937 Views)

Before you spring for new wheels, consider these four important points.

 

A new car is a big investment. Keep in mind these savvy approaches to auto buying, from price negotiation to extra costs, as you make your purchase.

 

Negotiating

Break the negotiations into four stages—car price, extras (like service plans), financing and trade-in—to keep the entire process straight in your mind. It also increases the likelihood of negotiations that work in your favor.

 

If you’re planning to trade in your current vehicle, it’s effective to discuss that only after you’ve agreed on every other point. Many dealers assume you’ll have a trade-in, and they might try to offset any price breaks on your new car by offering less for your old one. But you can sell it elsewhere if you believe you’re not getting a good offer.

 

Financing

If you need an auto loan, you’ll usually do better to get one from a financial institution rather than from the dealership—but not always. Sometimes, “zero percent financing” offers work in a buyer’s favor. After weighing dealer incentives and rebates against the final price tag, you might pay less over the long haul. It’s worth doing the math to be sure.

 

To be prepared, get loan preapproval from a bank or other financial institution before you visit the showroom. Knowing what you can afford can ease the stress of price negotiation. Preapproval is simple—ask your financial institution how to apply. It’s usually just an application and has no obligation unless you accept the loan offer.

 

Affordability

Consider costs beyond the purchase price of the vehicle, including insurance rates (ask your agent) and your estimated annual fuel and maintenance costs (check consumer websites and publications).

 

Are you planning to finance the vehicle? The longer your loan, the more you’ll ultimately pay, so don’t be swayed by monthly payments that seem small but are attached to long-term loans (72 or 84 months). Besides costing more over the years, they typically leave you owing more on your car than it’s worth if you plan to sell it. An online loan calculator will let you see your total cost, including interest, before you buy.

 

Gap Coverage

The value of a vehicle depreciates quickly after it’s driven off the dealer’s lot, so it might make financial sense to look into Guaranteed Asset Protection (GAP) coverage if you’ll owe considerably more than it’s worth. GAP coverage accounts for the difference between your outstanding loan balance and the vehicle’s actual value. This kind of coverage potentially could save you thousands of dollars out of pocket if the vehicle is totaled in a crash or stolen and not recovered.

 

Find advice on managing the cost of owning a car, including a video with more auto buying tips. To learn more about AAA’s auto buying services, visit AAA.com and click the Automotive tab.

 

A version of this story appears in the May/June 2015 issue of AAA Living magazine.

 

Image credit/source: Dan Page Collection/theispot

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