In my last column, I teased six key tips for car buyers. The following, addressed to the prospective buyer, is what AFIP will be sharing with them. I welcome the feedback of AutoSuccess readers.
1. Vehicle Purchases Are Negotiated Transactions
In our free market economy, you have the right to negotiate the seller’s asking price of high-dollar purchases such as houses, vehicles, furniture, jewelry and other items. It’s a consumer advantage.
The window sticker on a new car doesn’t tell you how much it costs. It tells you the manufacturer’s suggested retail price — a common price point to start the negotiation.
The internet is a treasure trove of information that can put you on equal footing at the dealership. Kelly Blue Book (kbb.com) and Edmunds.com, among others, provide trade-in value assessments, vehicle financing and leasing incentives and the benefits of owner protection products. The more research you do, the better your chances of getting a good deal.
2. State and Federal Consumer Agencies Enforce Your Rights as a Car Buyer
State and federal agencies:
• maintain consumer-oriented websites that provide helpful information;
• enforce regulations that protect consumers in a vehicle purchase; and
• penalize dealers who violate the rules.
3. Dealer-Assisted Financing Does Not Increase Your Cost of Credit
You don’t pay more for credit (a higher APR) when the dealer assists in financing your vehicle. Regardless of who arranges the credit transaction — the selling dealer, a local bank, credit union or online lender — the same expenses apply.
• The dealer’s primary objective is to sell the vehicle. The dealer may be able to offer a manufacturer-backed low- or zero-APR or extended term. Most dealers also work with national lenders, local banks and credit unions as credit sources.
• The dealer can send your credit request to multiple finance sources with only one “hit” to your credit file. The dealer also has access to auto-weighted FICO programs that may boost the credit scores of buyers with good car payment histories.
4. Products and Services Offered in Conjunction with the Sale Are Optional
When you buy or lease a vehicle, the dealer will offer “voluntary protection products” — GAP, VSCs, tire and wheel protection, among others. They are “shared risk” programs to protect you from unexpected expenses.
Voluntary protection products are:
• completely optional — not required to obtain financing or purchase a vehicle;
• available for individual purchase, even if offered as part of a multi-product menu; and
• potentially of significant benefit.
Many programs let you choose a level of protection, term and deductible to satisfy your personal needs and budget. Most are cancellable. Keep in mind that the cost of the product should be consistent with its potential value.
5. Wants vs. Needs — the Monthly Payment Is Only Part of the Equation
For most of us, the key question is, “Can I afford to make the monthly payment?” However, there are other considerations you should factor into your purchase decision.
• Does your trade-in have negative equity? Negative equity occurs when the amount you still owe on your trade-in is larger than its appraised value. If, after deducting the cash down payment, a portion of the negative equity still exists, it’s added to the amount financed for the vehicle being purchased. In effect, you’ll be paying for your trade-in until your new car is paid off. Plus, it likely will extend the length of time until you can trade out of the new vehicle.
• Extended repayment terms, such as 84 months or longer, may make payments lower, but you’ll pay more in interest over the term of the agreement. Plus, it extends the length of time before you’ll be able trade in the vehicle currently being financed.
6. You Currently Possess the Most Powerful Consumer Protection Devices Known to Man – Your Feet
Any time you find yourself in a purchase situation with a salesperson who can’t or won’t answer your questions, is pressuring you to buy now or is asking you to pay more than you can afford, simply stand up and walk out the door.
In today’s retail environment, there isn’t anything for sale that isn’t also available online or at a competing merchant down the street.