Are you driving a lemon car, truck, van, SUV, motorcycle, boat or dealing with a lemon consumer product?

New Car Buying Guide

A new car is second only to a home as the most expensive purchase many consumers
make. According to The Auto Channel online, the average price of a new car sold
in the United States as of January 2005 was over $30,000. That’s why it’s important
to understand how to make a smart deal on your new purchase.

---

Buying your new car:

Think about what car model and options you want and how much you’re willing to spend.
Spend time doing some research. You’ll be less likely to feel pressured into making
a hasty or expensive decision at the showroom and more likely to get a better deal.

Consider these suggestions:

• Check publications at a library or bookstore or on the Internet that discuss new
  car features and prices. These may provide information on the dealer’s costs for
  specific models and options.
• Shop around to get the best possible price by comparing models and prices in ads
  and at dealer showrooms. You also may want to contact car-buying services and broker-buying
  services to make comparisons.
• Plan to negotiate on price. Dealers may be willing to bargain on their profit
  margin, often between 10 and 20 percent. Usually, this is the difference between
  the manufacturer’s suggested retail price (MSRP) and the invoice price.
• Because the price is a factor in the dealer’s calculations regardless of whether
  you pay cash or finance your car — and also affects your monthly payments — negotiating
  the price can save you money.
• Consider ordering your new car if you don’t see what you want on the dealer’s
  lot. This may involve a delay, but cars on the lot may have options you don’t want
  — and that can raise the price. However, dealers often want to sell their current
  inventory quickly, so you may be able to negotiate a good deal if an in-stock car
  meets your needs.

Learning the terms

Negotiations often have a vocabulary of their own. Here are some terms you may hear
when you’re talking price.

• Invoice Price is the manufacturer’s initial charge to the dealer. This usually
  is higher than the dealer’s final cost because dealers receive rebates, allowances,
  discounts, and incentive awards. Generally, the invoice price should include freight
  (also known as destination and delivery). If you’re buying a car based on the invoice
  price (for example, "at invoice," "$100 below invoice," "two percent above invoice"),
  and if freight is already included, make sure freight isn’t added again to the sales
  contract.
• Base Price is the cost of the car without options, but includes standard equipment
  and factory warranty. This price is printed on the Monroney sticker.
• Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed
  options with the manufacturer’s suggested retail price, the manufacturer’s transportation
  charge, and the fuel economy (mileage). Affixed to the car window, this label is
  required by federal law, and may be removed only by the purchaser.
• Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker
  price plus the suggested retail price of dealer-installed options, such as additional
  dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.
  

Financing your new car

If you decide to finance your car, be aware that the financing obtained by the dealer,
even if the dealer contacts lenders on your behalf, may not be the best deal you
can get. Contact lenders directly. Compare the financing they offer you with the
financing the dealer offers you. Because offers vary, shop around for the best deal,
comparing the annual percentage rate (APR) and the length of the loan. When negotiating
to finance a car, be wary of focusing only on the monthly payment. The total amount
you will pay depends on the price of the car you negotiate, the APR, and the length
of the loan.

Sometimes, dealers offer very low financing rates for specific cars or models, but
may not be willing to negotiate on the price of these cars. To qualify for the special
rates, you may be required to make a large down payment. With these conditions,
you may find that it’s sometimes more affordable to pay higher financing charges
on a car that is lower in price or to buy a car that requires a smaller down payment.

Before you sign a contract to purchase or finance the car, consider the terms of
the financing and evaluate whether it is affordable. Before you drive off the lot,
be sure to have a copy of the contract that both you and the dealer have signed
and be sure that all blanks are filled in.

Some dealers and lenders may ask you to buy credit insurance to pay off your loan
if you should die or become disabled. Before you buy credit insurance, consider
the cost, and whether it’s worthwhile. Check your existing policies to avoid duplicating
benefits. Credit insurance is not required by federal law. If your dealer requires
you to buy credit insurance for car financing, it must be included in the cost of
credit. That is, it must be reflected in the APR. Your state Attorney General also
may have requirements about credit insurance. Check with your state Insurance Commissioner
or state consumer protection agency.

Trading in your old car

Discuss the possibility of a trade-in only after you’ve negotiated the best possible
price for your new car and after you’ve researched the value of your old car. Check
the library for reference books or magazines that can tell you how much it is worth.
This information may help you get a better price from the dealer. Though it may
take longer to sell your car yourself, you generally will get more money than if
you trade it in.

Considering a Service Contract

Service contracts that you may buy with a new car provide for the repair of certain
parts or problems. These contracts are offered by manufacturers, dealers, or independent
companies and may or may not provide coverage beyond the manufacturer’s warranty.
Remember that a warranty is included in the price of the car while a service contract
costs extra. Before deciding to purchase a service contract, read it carefully and
consider these questions:

• What’s the difference between the coverage under the warranty and the coverage
  under the service contract?
• What repairs are covered?
• Is routine maintenance covered?
• Who pays for the labor? The parts?
• Who performs the repairs? Can repairs be made elsewhere?
• How long does the service contract last?
• What are the cancellation and refund policies?

---

Worksheet for buying a new car

Before you negotiate the price of your next new car, use this worksheet to establish the bargaining room. Download New Car Worksheet (PDF) You will need the free Adobe Reader Software to view these documents. You can download Adobe Reader by clicking here.

Subcompact	Compact
Hyundai Accent Mazda MX-5 Miata MINI Cooper BMW Z4 Hyundai Tiburon Volkswagen Beetle	Hyundai Elantra Audi A4 BMW 3-Series Honda Civic Nissan Sentra Toyota Corolla Volkswagen Golf/Jetta Volvo 40 Series
Intermediate	Large
Lexus ES 300 Toyota Avalon Acura TL Honda Accord Hyundai Sonata/Kia Optima Lincoln LS/Jaguar S-Type Mazda 6 Toyota Camry Volvo 60 Series	Lincoln Town Car Ford Crown Victoria/Mercury Grand Marquis Chrysler 300/Dodge Magnum Mercedes-Benz E-Class Volvo 80 Series
Minivan	SUV Mid
Dodge Caravan/Chrysler Town and Country SWB Ford Freestar/Mercury Monterey Chrysler Town and Country/Dodge Grand Caravan SUV Small Subaru Forester Hyundai Santa Fe Toyota RAV4	Acura MDX Infiniti FX Lexus RX330 BMW X5 Toyota Highlander SUV Large Chrysler Pacifica