02.Buying Tips


Buying Tips

1) Do your homework
Study the make, model, options, and price of your prospective vehicle. The manufacturer’s web site is a good source of information as well as Consumer Reports Magazine, which publishes its yearly report card on all models.

2) Know what you want
Decide what car you’re looking for before visiting the dealership. Make a check list of:
• What you’ll use the car for (commute, taking kids to school, pleasure, etc.)
• Desired options (automatic transmission, sun roof, bluetooth, navigation, etc)
• Type of car you’re looking for (American, European, Asian, etc.) with consideration of maintenance costs
o Maintenance costs vary depending on the type of car. For instance, imported car parts and repairs can be more expensive than domestic cars. The same applies to European and Asian cars, respectively. On the other hand, American cars tend to break down more often than imported vehicles.

Knowing what you want will keep your search focused on what you need instead of allowing a salesperson’s agenda to influence you otherwise.

3) Read the fine print
When responding to advertisements, always read the details to ensure that you know what is being advertised and what you’ll actually get. The fine print might include phrases like, “Only one at this price” or “Plus dealer added options.” Additionally, never assume that the advertised car has all the options you want. The final cost of the car might end up higher than the advertised cost if various options are added on.

4) Visit several dealerships
Avoid making a decision at the first dealership you visit. Ensure that you get the best deal by comparing your desired vehicle with matching options at multiple dealerships. Leave your checkbook/credit cards at home if you might feel tempted or persuaded to buy on the spot.

5) Document your quote in detail
When negotiating a price, request the quote in writing or write it down as you negotiate and confirm it with the salesperson. This prevents salespeople from reneging on the quote. Do not accept vague statements like “We can work something out,” or non-specific quotes. A good, detailed quote should include vehicle model, model year, freight/destination charge*, options, selling price, documentation fee, taxes, DMV fees, and used car trade-in if you have one.

*A common trick is to give you the quote without the freight/destination charge which reduces the quote about $800. It’s usually added back on the sales contract and attributed as part of the DMV fee.

6) Bring an extra set of keys to a trade-in
Disappearances of keys are known to happen after the value of your car is checked. If this happens, use your spare key and drive away. Entire cars, not just keys, have also been reported missing or unaccountable at dealerships. If the salesperson says they can’t find your trade-in car, get their attention by calling the police immediately in their presence.

7) Decline requests for a deposit
Regardless of what a salesperson says, you might not get your check returned without further negotiations.

8) Check and verify all figures before signing a contract
If the figures differ from what was discussed (like the freight/destination charge previously mentioned), refer back to your notes and ask them why until you understand completely.

9) Be aware of common sales tactics
Knowing what to expect when you visit a dealership will reduce your chances of becoming confused or stressed out once you’re there. Here are common situations that you may encounter during your dealership visit:

• “This is the only car with these options so you’d better buy it today”
The dealership always wants you to buy what is in stock. Each manufacturer builds various selections for each model; unless the vehicle is an exotic car, there will always be another one.

• “There is another deal on this car but if you would like to buy it today, I’ll get permission from our manager to secure it for you.”
This is just a sales strategy. There is never a deal on a car until the car is driven off the lot.

• Salespeople barraging you with leading questions
Always remember that the moment you walk into a dealership, the salesperson’s only goal is to convince you to buy. They will ask questions meant to move you closer to committing to a purchase, like:
o “This is a nice car, don’t you agree?”
o “How much is this car worth to you?”
o “You’re plan on buying today at that price, right?”

• “I think we can do that. Let me talk to my manager”
Be aware that this could just be another sales tactic. While it might appear that the dealership is working with you on a negotiation, there is no guarantee that the salesperson is actually speaking with the manager.

Additionally, salespeople are trained to play on emotions in order to land a sale. Don’t be persuaded to purchase a car because: you feel bad not buying after extensive negotiating; the salesperson was nice; you don’t fully understand the salesperson’s pitch or package options; or you feel obligated in any way. If you start feeling guilty, remember the salesperson is just doing their job, and ultimately it’s your money and your decision on how you want to spend it.

10) Remember that you can walk away at any time
You have the biggest power of all. If at any point you feel that the salesperson is being unfair, dishonest, or that something just doesn’t feel right, simply walk away. The single most important thing to remember when you visiting a dealership is to not get yourself cornered into buying a car.


1) Determine if leasing is the best option for you
There is no tax advantage to leasing, but it yields a smaller monthly payment. Remember that leasing does not give you the legal title of the vehicle. This means that at the end of the term you will have nothing to trade in for your next car.

2) Learn the terminology
• Subvented/Subsidized lease
These are usually the lowest monthly payments offered by manufacturers who use below-the-market interest rates. The manufacturers also achieve the low fee by setting a higher residual figure and lower finance amount. As with all advertising, if a deal seems too good to be true, there’s a high chance that the car offered in a special program is not the exact one you’re looking for.

• The lease components
a) MSRP: Cost of a car
b) Dealer discount: Dealer deduction
c) Cap cost reduction: Down payment
d) Capitalized cost: MSRP minus the sum of the dealer discount and cap cost reduction (a – (b c))
e) Residual: Projected resale value at lease end
f) Depreciation: MSRP minus residual (a – e)
g) Lease term: Lease period (months)
8) Monthly payment: Payment
h) Money Factor: Interest
i) Wear & tear adjustment: Additional charge at the end of term

3) Understand how a lease contract works
Unlike the conventional auto loan where you finance the car in its entirety, a lease contract is designed so that you pay only for the usage. The lease contract first estimates the residual value (value of the car at the end of the lease) then deducts it from the MSRP. After, the balance (depreciation) is financed through the contract period which results in a substantially smaller financed amount compared to an auto loan.

4) Review points of caution
• Lease/loan programs that advertise low monthly payments
If something says “OAC” (“On Approved Credit”), it means those with good credit will receive special prices. You may not qualify for this deal if you don’t have good credit but the salesperson might try to sell you on a separate, albeit more expensive program instead.

• Warranty
Never lease a car longer than its factory warranty period. You don’t want to spend money repairing what isn’t even yours.

• Excess Mileage
Each lease contract specifically states how many miles you are allowed to drive without penalty. Check your recent history of how many miles you drive per year (the average is about 15,000 miles).

Although it may not seem like much at first, penalties add up quickly. A 36 month lease based on 12,000 miles per year with a penalty of $0.15 per mile will add up to an extra $1,350 for someone who drives the average 15,000 miles. Some European fancy car has 5,000 miles per year allowance and hefty $0.30 per mile penalty – that’s $9000 penalty at the end of lease if you drive 45,000 miles in 3 years.

• Return Procedure
Check what your responsibilities are at the end of lease. There may be a $300-400 disposition fee on the contract and any visible damages to both outside and inside of the vehicle are subject to surcharge. Make sure the lease contract explicitly states what your obligations are at the end of the term.

• Early Termination
Know the procedure for an early termination. In almost every case, you won’t be able to walk away without paying some penalty. You will either be asked for the full payment for the remainder of the lease, or charged the difference between the re-sale value and the remaining value of the contract.

5) Know who underwrites the lease
Once the contract is signed, it is usually handled by a financial institution and not the dealer. This makes it difficult to make complaints any time later since the finance company will have no knowledge of the conversations that occurred during negotiations at the dealership. They will only refer to what’s written on the contract, so make sure all details are stated explicitly.

6) Determine your insurance costs
Make sure you figure all the costs of owning a car when you purchase or lease a new vehicle. Your insurance premium can vary depending on age, gender, and the type of car you choose. For example, the insurance premium for a single male under 25 years old will yield a high insurance premium. Leasing and financing require you to carry a certain amount of minimum coverage so it’s important to know your insurance costs in advance.

7) Don’t mention a lease when negotiating a price
Negotiate the price of the car first, then ask for a monthly lease figure based on the price (cap cost). Note that many lease contracts don’t show the cap cost so you will have to request the information.

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