Researching an Automobile

1
Researching an Automobile

• What should I look for?

2
Transportation

• Part of everyones life
• 15 20 of an individuals budget
• Automobile is the 2nd most expensive purchase,
  only after a home

3
Want to Buy a Vehicle?

• Consumers should plan their vehicle purchase to
  avoid any costly mistakes
• Any large purchases should be planned
• Places to purchase a vehicle
• Dealership, private owner, internet

4
Planned Buying Process

1. Prioritizing wants
2. Pre-shopping research
3. Fitting the budget
4. Comparison shopping
5. Negotiating
6. Making the decision
7. Evaluating the decision

5
Step 1 - Prioritizing Wants

• Assess transportation needs and wants
• Need something thought to be a necessity
• Want something unnecessary but desired
• Consider all automobile options as wants
• Prioritize the wants from low to high priority
• Prioritizing wants helps the consumer
• Consider costs and benefits of different vehicle
  options
• Consider the big picture of the vehicle
  purchase rather than a specific want (such as
  heated seats, color, engine size, etc)

6
Prioritizing Wants Questions to Think About

• How will the vehicle be used?
• Where will the buyer be living?
• How will the vehicle be stored or parked?
• How much will it be driven?
• What options would the buyer like in the vehicle?

7
Step 2 Pre-shopping Research

• Research should be based on transportation wants
• Complete this before visiting a car dealership or
  salesman
• Helps the buyer to be informed about
• What they are looking for
• Vehicles in their price range
• Available options

8
Ways to Perform the Research

• Family friends
• Experiences with different makes and models of
  different vehicles
• Likes, dislikes, and recommendations

• Periodicals
• Consumer Reports
• Federal Citizen Information Center
• Kelley Blue Book
• Motor Trend
• Car and Driver
• Access this information at the public library
  and/or the internet

9
Price Research

• Price
• Base price vehicle price with standard
  equipment, no extra options
• MSRP Manufacturers suggested retail price
• Includes base price, price of options installed
  by manufacturer, and their transportation charge
• Sticker Price
• Dealers initial asking price

10
Price Research continued

• Price continued
• Determine how much a dealer paid to help decide
  which vehicles to consider and to negotiate a
  fair price
• Consumer Reports, Kiplingers Personal Finance
  magazine, and Edmunds New Car Prices
• Used cars
• Blue book price dollar value given to the
  vehicle based on its year and model
• Used as a guide for car dealers and banks for
  pricing trade-ins
• Kelley Blue Book

11
Vehicle Options Research

• General type of vehicle
• Car, truck, 2-door, SUV, sporty
• Make and model
• Ford Taurus, Honda Accord
• Safety
• Braking and emergency handling, airbags
• Reliability
• Some specific models have high marks, may be
  higher priced but will save on repair costs

12
Vehicle Options Research continued

• Fuel economy
• Type of gas used, gas mileage
• Power and performance
• Driving on highways, steep hills, mountains,
  snow, muddy roads, or in a city
• Comfort and convenience
• Size of headroom and legroom, cargo space

13
Vehicle Options Research continued

• Insurance
• Chosen vehicle affects the price of insurance
  obtain a quote for the vehicles being considered
• Other options
• Power steering and brakes, manual or automatic,
  air conditioner, rear-window defogger, XM
  Radio/Sync/CD-MP3 player, type of tires, cruise
  control, sun roof, heated seats, power door locks
  and windows, etc.

14
New vs. Used Research

• New Vehicle
• Not pre-owned
• Warranty
• Manufacturer options
• Wide selection
• Expensive
• Depreciation
• Loss in the vehicles value due to time and use
  (greatest cost)

• Used Vehicle
• Cost less to buy
• Cost less to insure
• Avoid rapid deprecation
• Wide selection
• May offer warranty
• Returned leased cars
• Have an independent mechanic inspect any used car
  before purchase

15
Step 3 Fitting the Budget

• Can I afford it?
• Most important question
• Amount the buyer can afford in his/her budget
  dictates the vehicle price
• All costs must be taken into consideration before
  choosing a vehicle

16
Fitting the Budget continued
Vehicle price is not the only cost involved

• Fixed expenses
• Depreciation
• Insurance costs
• Loan payment and interest if financed
• Parking fees
• Licensing
• Registration

• Flexible expenses
• Maintenance
• Gas
• Oil
• Repairs

17
Step 4 Comparison Shopping

• Comparing services or products to determine the
  best buy or quality product at a fair price
• Allows the consumer to build upon the information
  learned in the pre-shopping research
• As the price of a vehicle increases, consumers
  are often not buying additional safety, capacity,
  or power, but instead style and prestige

18
Comparison Shopping continued

• Narrow the choices to a few specific makes and
  models with desired options
• Visit the appropriate store to learn more
  information about each choice to make comparisons
• Inquire about price, dealer incentives, financing
  options, leasing, warranties, and service
  contracts
• Test drive each potential vehicle

19
Comparison Shopping continued

• Goal of comparison shopping
• Narrow the choice even further to negotiate for
  the best deal

20
Step 5 - Negotiating

• Process of deciding the actual terms of the
  purchase and agreement between the seller and
  buyer
• Obtain a firm price before discussing any other
  aspects including a trade-in
• Compare prices from different dealers
• Let them know you have done your research and
  whether their price is high

21
Negotiating continued

• Keys to all negotiations
• Be able to say NO
• Take the purchase to another business

22
Step 6 Making the Decision

• The best place to decide on which vehicle to
  purchase is NOT the showroom where you are around
  the dealer
• Take the information home to compare all options
• After making the decision, return to the dealer
  to close the sale

23
Step 7 Evaluating the Decision

• Think about the things which went well and what
  did not
• This will be helpful the next time a similar
  purchase is made
• If the process was successful and you are happy,
  compliment the seller
• If you have a complaint, make the complaint known
  to the seller then move to the supervisor if
  necessary

24
Wisconsin Lemon Laws

• If the motor vehicle you buy or lease turns out
  to be a "lemon," the manufacturer has to replace
  it free or refund the price (minus a reasonable
  amount for mileage).
• What is a "lemon"
• A new vehicle - no more than a year old and still
  under warranty - is a "lemon" if
• It has a serious defect the dealer can't fix in
  four tries, or
• It has one or many defects that prevent you from
  using it for 30 days or more (the 30 days need
  not be consecutive)

25
Lemon Laws continued

• What is a defect?
• A defect covered by the Lemon Law must seriously
  affect the use, value or safety of your vehicle
  and must be covered by the warranty. An
  irritating rattle may not be "serious" enough to
  make your car a lemon. Stalling probably is.
• How long are you covered?
• The lemon law includes no deadline for filing a
  lemon law suit a court would decide if your case
  were too old.

26
Lemon Laws continued

• Is your vehicle a lemon?
• Your vehicle is a lemon if all of the following
  statements are true
• You bought or leased a new vehicle.
• The vehicle is a car, truck, motorcycle or motor
  home.
• The vehicle developed a defect or defects during
  its first year and before the warranty expired.
• The defect seriously harms the vehicle's use,
  value or safety.
• One of the following happened during the
  vehicle's first year and before the warranty
  expired
• The dealer failed four times to fix the same
  defect OR
• The vehicle was out of service for 30 days or
  more due to defects

27
Automobile Loans
28
Definitions

• Auto Loan borrowed money to purchase an
  automobile
• Terms of the loan will vary
• Lender a financial institution who offers loans
  to consumers
• Credit Rating evaluation of a persons credit
  history
• Based on repayment patterns, prior credit usage,
  credit history, length of employment

29
Definitions continued

• Cosigner a person who guarantees the loan for
  the original borrower
• Responsible for paying the debt back if the
  original borrower defaults
• Borrower fails to make payments of principle or
  interest when due and has not met other
  requirements of the legal contract
• A cosigner may be required for a loan if the
  original borrower does not have a credit history
  or has a bad credit rating
• Common for parents to cosign for young adults

30
Definitions continued

• Secured Loan requires a cosigner or collateral
• A loan with collateral means the lender has
  security interest in the property pledged as
  collateral
• Automobile loans are secured because the
  automobile is typically the collateral
• If the borrower fails to repay the loan, the
  lender can then seize the collateral by
  repossessing, or taking back, the property

31
Whats the Real Price?
32
Variables of a Loan

• Negotiated Price
• Price being paid for the automobile agreed upon
  by the seller and buyer
• Down Payment
• Amount of money being paid for the automobile at
  time of purchase
• Usually required

33
Variables continued

• Trade-In
• Amount of money received for trading in an
  automobile
• Trade-in amount is subtracted from the negotiated
  price of the automobile
• Principle Loan Amount
• Amount of the loan for the automobile after
  subtracting the down payment and/or trade-in
  price from the negotiated price
• Without interest and fees

34
Variables continued

• Annual Percentage Rate (APR)
• Measure of the cost of credit on a yearly basis
  expressed as a percentage
• Time Period
• Amount of time the loan will be repaid
• Usually expressed in months

35
Variables continued

• Total Cost of the Loan
• Total of the principal loan amount, interest
  paid, and other fees
• Total Purchasing Cost
• Total of the down payment, trade-in value, and
  total loan amount

36
Rules of Thumb

• The larger the down payment on an automobile, the
  lower the principle loan amount.
• The longer the time period of the loan, the
  smaller the payments. However, more interest is
  paid.
• The higher the APR, the more interest is paid and
  the larger the total loan amount.

37
Financial Calculator

• www.ecu.com
• www.bankrate.com
• Google car loan rates to search for the best
  interest rate. Look at the rate for the year of
  the car. Interest rates change from new vehicles
  to used vehicles.