Buying a Car

Don't think of a car as a status symbol or a personal statement. The best car is the one that suits your needs—and that you can afford.

A car is one of the biggest purchases you will make. With a small investment in time and effort, you can learn what you need to make a sensible decision—and get a good deal.

Getting the Best Deal on a New Car

Most car-buying guides recommend that you identify the invoice price of the base model of the new car you want. Then request bids—in writing—from five dealers in your area, asking them how much above or below that price they will sell the car for. Save time and avoid hassling with dealers by communicating by fax if you can. Once you have received all the bids, approach the second-lowest bidder to see if he or she will beat the lowest bid.

When purchasing your car, know in advance which options you want. Don't let a dealer talk you into spending more for options than you can afford. Be especially wary of important-sounding but unnecessary add-ons such as fabric protection, paint sealant, rustproofing, and an extended warranty. An extended warranty is a service contract purchased from the dealer by the buyer. Do not confuse it with the manufacturer's warranty that comes with the car. Extended warranties are expensive and often cover repairs already covered by the manufacturer's warranty.

Financing

Before you buy your car, research the costs of auto loans at banks and other lending institutions. Compare the annual percentage rates they offer with that of the financing offered by your car dealer. Consider how much of a down payment you can afford to make. The more money you can put down, the less you have to borrow. (For more information on loans, see Credit and Debt on pages 512–515.)

Used Cars

Automobiles quickly depreciate, or lose their value. The new car you drive off the lot today will be worth half what you paid for it in three years. After three years, the rate of depreciation slows down. By the sixth year, it is down to 3 percent per year. You might consider buying a car that has already depreciated substantially. That way, not only will you pay a lot less for it, but it will retain its value a lot longer than a new car.

You can buy used cars from many sources: dealers, rental and leasing companies, or individuals.

To make sure the car you're buying is reliable, try to obtain all service records on the car.

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