Before delving into the details, it’s important to realize that by doing your homework, you can save roughly $2,000 – money that can easily go to the dealer if you have not. This process will require about 20 hours of manageable work. Therefore, you will make about $2,000 for approximately 20 hours of work, or about $150 per hour (before taxes). If you were paid someone this kind of money to buy a car for you, you would expect a hardworking, dedicated person who did his research first. This is exactly what you should expect from yourself.

• There are two general categories that must be considered: “homework” and things to do “at the dealership.” The homework should be done in advance, and both the homework and the at-the-dealership items must be done in the order given in this kit, or you may lose control of the buy. Losing control of the purchase will cost you money.

The following homework must be done before your trip to the dealership. Research the vehicles you are considering. Start with Consumer Reports for facts on costs and reliability. Next, try Road & Track or Car and Driver to see expert opinions about the vehicle and what specific options and equipment they recommend. Look at other magazines and publications and go from there. Start your research as soon as possible. Some other sources you can use are: The Edmund Guides, Kelley Blue Book® Auto Market Report, commonly called the Blue Book®, and the N.A.D.A. (The National Automobile Dealers Association Dealers Association) Official Used Car Guide.

• Choose what car and options to buy. This part of your homework includes pricing options such as stereos and antitheft systems with outside sources. Make note of what you need versus what you want. Prioritize, then estimate what your payments will be and compare that with what you can afford.
• Get your financing in order. Go to a bank and get your financing in shape before you go into the dealership. Make sure you are approved for enough money at a good interest rate, and make sure it will be available when you need it. It can be frustrating to lose a car or pay top financing interest rates because your loan falls through or because you haven’t financed enough to cover the car you desire. It can also be exasperating if your loan falls through because you buy a car through an auction when your lending institution doesn’t give loans on auction purchases. Study all the details of your financing before you buy. More details on this later in Chapter 3.
• Price your trade-in. Chapters 4 and 9 will help you evaluate your vehicle. Don’t dismiss the idea of selling a car yourself without using this kit. You may save a serious amount of money sell your call yourself, even though it may not be for you.
• Pick the dealership. Initially, consider only those dealerships close to you and therefore convenient. It is important that these dealerships be large enough to offer discounts more easily. Also, check for longevity and reputation, and the success of the dealership in fulfilling repair warranties.
• Pick the time to buy and a buying companion. Your advantages as a buyer are strongly influenced by picking the best time (end of the month, weekdays, late in the day, before closing), and taking the right type of people with you. Go when it makes sense for you to get a great deal.
• Practice. If you have the opportunity, tag along with a friend when he purchases a car. Help him with his purchase, and use the experience gained for your benefit. If you make mistakes, at least they were made before your own purchase.

Below is a checklist of the things you will need to care of before you go to the showroom.

CHECKLIST 1: WHAT KIND OF CAR YOU WANT AND NEED?

Deciding what kind of car you want and need means searching your wallet, examining your dreams, your reasons and motivations. It is also the most crucial thing to do before you step into a dealership.

Winging it may be fun, but it is seldom profitable. One of the problems with going to a dealership unprepared is that if you aren’t settled on what type of car you want, the salesperson will certainly help you make up your mind! This means that he will sell you a car that is the most profitable for him. If the dealership offers incentives to sales staff for selling luxury cars, you can be certain that the salesperson will do his very best to sell you one. The best way to avoid this pressure is to know precisely what you want before you leave home. Here’s a checklist to help you:

I WILL USE MY CAR FOR:

____ driving to work

____hauling cargo

____transporting kids and groceries

____impressing my neighbor

____improving my social life (sports car?)

____long-distance commuting

____sales calls

____other___________________________________

I NEED A CAR WITH THE FOLLOWING CHARACTERISTICS:

____ economical

____luxurious

____powerful

____spacious

____holds __________people easily

____2, 4, 5 doors

____other_______________________________

WANT NEED COMMENTS (PRO/CON)

1. luxury car _________ _________ __________________

2. mini van _________ _________ __________________

3. RV's _________ _________ __________________

4. sedan 4-door_________ _________ __________________

5. sedan 2-door________ _________ __________________

6. sports car _________ _________ __________________

7. wagon _________ _________ __________________

8. truck _________ _________ __________________

9. other _________ _________ __________________

CONCLUSIONS ABOUT WHAT KIND OF CAR I NEED:

Here is an example of a completed checklist:

WANT NEED COMMENTS (PRO/CON)

1. luxury car yes no too expensive

2. minivan no no useful, but …

3. Rvs yes no too expensive

4. sedan 4-dr yes yes boring, but I need a 4-door,

family car

5. sedan 2-dr no no need second set of doors

6. sports car desperately no can’t afford

7. wagon no no not useful to me

8. truck yes no fun, but…

9. other

CONCLUSIONS ABOUT WHAT KIND OF CAR I NEED:

I need a four-door family car. I would love a truck or a luxury car, but the latter is way too expensive, and the former would only be used occasionally.

The following is a list of options to consider:

LIST OF OPTIONS WANTED

FEATURE SELECTION

Air bag yes/no

Air conditioning yes/no

Antilock brakes yes/no

Antitheft package yes/no

Color _____________

Cruise control yes/no

Door crash protection yes/no

Doors (number of) 2/3/4/5

Extended warranty yes/no

Exterior protection packages yes/no

Interior package yes/no

Interior protection packages yes/no

Life insurance yes/no

Light package yes/no

Motor size (number of cylinders) 4/6/8/12

Power features:

Doors yes/no

Mirrors yes/no

Seats yes/no

Windows yes/no

Roof rack yes/no

Rust protection yes/no

Sound system (buy elsewhere?) yes/no

Special features:

Center console yes/no

Other ___________ yes/no

Suspension type ___________

Tilt wheel yes/no

Top styles:

Convertible yes/no

Hard top yes/no

Moon roof yes/no

T-top yes/no

Towing package yes/no

Transmission type automatic/manual

Trim packages:

Drink holders yes/no

Exterior trim yes/no

Including special upholstery yes/no

Leather yes/no

Pockets yes/no

Other ____________ yes/no

Type of seats bench/bucket

Other specials yes/no

(such as a still higher level sound system, CD players, etc.)

Some of these options come only in an all-inclusive package. For example, you may not be able to get air-conditioning without a package that includes power steering, power door locks, cruise control, and a tilt steering wheel. There is usually no flexibility in these packages.

Now that you have decided what the car will be useful for, what type of car you need, and what options are essential to you, you can concentrate your effort on assessing the performance and availability of your choice and its options. The important point here is to find the areas of the car’s performance that are critical to you and to rate the car accordingly. For example, a person who needs a performance car and who trades in a car every year or two may be less interested in reliability than in acceleration and style. Likewise, someone who buys a family car and holds it for 10 years is likely to be more interested in reliability than in styling. Therefore, see how the experts rate your car, and see how their recommendations suit your situation.

You can find experts' ratings in car magazines such as Road & Track or Car and Driver, or other publications such as Consumer Reports and specialty books. It is also a good idea to talk to friends, relatives and neighbors who purchased cars like the one you are interested in.

Below is Checklist 2, where you should rate all your needs on a scale of 1(least) to 10(most). Then see how the vehicle you are considering fits this profile as rated by the experts. After, you will find Checklist Number 3 to calculate the vehicle's affordability.

CHECKLIST 2: PRIORITY-RATING CHARTS

Characteristic My Priorities Experts' Ratings

Acceleration _______________

Braking _______________

Bumpers _______________

Controls _______________

Cost _______________

Displays _______________

Driving position _______________

Emergency handling _______________

Front seating _______________

Fun to drive _______________

Gas mileage _______________

Heating _______________

Noise _______________

Rear seating _______________

Reliability _______________

Ride _______________

Routine handling _______________

Servicing _______________

Towing capability _______________

Trunk _______________

Value _______________

Ventilation _______________

SPECIAL ITEMS WANTED

Item Wanted Experts' Ratings

Air conditioning yes/no ________________

Cruise control yes/no ________________

Luxury package yes/no ________________

Moon roof yes/no ________________

Power brakes yes/no ________________

Power steering yes/no ________________

Roof rack yes/no ________________

Specialized engine yes/no ________________

Special exterior package yes/no ________________

Special interior package yes/no ________________

Special suspension yes/no ________________

Special tires yes/no ________________

T-top yes/no ________________

Tilt steering yes/no ________________

Towing package yes/no ________________

Other_________ yes/no ________________

SPECIAL RECOMMENDATIONS

Automatic or stick ___________________________________

Corporate twin available yes/no

Preferred model ____________________________________

Upgrade suspension yes/no

Upgrade transmission yes/no

Other_____________ yes/no

ADDITIONAL CONSIDERATIONS

Is the vehicle a first-year design of uncertain reliability? yes/no

Do the experts say this is important? yes/no

Do the experts think the styling is dated? yes/no

Is this the last year the car will be produced? yes/no

Is the vehicle in great demand? yes/no

FINAL LIST

Now look over all the data you have gathered, and list the cars (company and model) that fit the bill.

• _____________________________________________________________________
• _____________________________________________________________________
• _____________________________________________________________________
• _____________________________________________________________________

CHECKLIST 3: CALCULATING AFFORDABILITY

This checklist is designed to help you calculate how much you can afford to pay for a car.

1. Maximum total price you can afford to pay $_____________________

(Note: You can either input a number here or take the maximum monthly payments you can afford and multiply number of months you want to pay to get the maximum amount you can afford to pay for the vehicle. For example: $300 per month for 60 months = $18,000. Make this a realist figure, and use it as a guide above, in which you will not go, even under pressure.)

2. Maximum monthly payment you can afford $______________________

(Note: Do not reveal these numbers to the salesperson, because if you say, “I can only afford $325/month,” he will believe you can afford at least $350/month and probably more.)

3. Realistic price for a suitable type vehicle $_______________________

(Get this from your literature search.)

4. What is your trade-in worth? $_______________________

(Get this from your Blue Book® wholesale less $200-$400.)

5. How much cash can you put down? $_______________________

6. Taxes, licenses and other fees $_______________________

7. Transportation cost $_______________________

8. Extended warranty and other extras $_______________________

9. Factory rebates $_______________________

(factory-to-consumer or a piece of the factory-to-dealer rebates)

10. Premiums, an AMU or an ADMU $_______________________

(additional dealer markup, or extra profit)

11. Options, extras, special tires, etc. $_______________________

TOTAL TO BE FINANCED

Numbers 3+6+7+8+10+11-4-5-9= $_______________________

This calculation will give you a good approximation of the car’s actual price. Many times, people forget item number 6, the costs of the taxes, licenses and fees. If you don’t know the tax and fee situation in your area, contact your local Division of Motor Vehicles (DMV) or any local dealer.

Experiment with your calculation. For example, substitute various values of your trade-in. Take the Blue Book® wholesale, or auction price, or Blue Book® wholesale less $800, and see how this affects the total amount to be financed. For item number 9, see if the car becomes more affordable if Detroit gives a factory-to-consumer rebate of $1,000 on your vehicle.

(EXAMPLE) TOTAL TO BE FINANCED

$18,000+1,790+475+1.250+0+500-7,100-2.736-750 = $11,420

AMOUNT OF MONEY AVAILABLE TO SPEND ON A CAR

1. Expressed as total dollars $__________________

2. Expressed as monthly payments $__________________

This gives you the dollar amount to be financed. For an accurate monthly payment, go to a book of interest amortization tables, and calculate what your monthly payments would be.

(EXAMPLE)

Amount to be financed: $11,000.00

Interest: 14.5 percent

Term: 48 months

You would expect monthly payments of: $303.36

Which be a total payment of: $14,561.28

Or interest of: $3,561.28

So, from this example, it looks like you can stay within your $325 per month limit and afford an approximately $18,000 car. Now that you know how much you can afford for your vehicle, search for cars that fall into that price range. Whatever you do, though, don’t slink up to a salesperson and ask him, “What kind of car can I afford?” He will try his best to confuse you by doing fancy footwork calculations so you will be convinced to get a more expensive car than you really want.

Now with your decision made, your research done, and your financial calculations in front of you, you are ready to make a choice. You can easily decide if you can afford the car you want.

One other item of groundwork to consider is the two types of rebates: factory-to-customer and factory-to-dealer. You may be familiar with factory-to-customer rebate because they are widely advertised and automatically presented by the dealer to the customer. These are paid directly to you, the purchaser of the new car, by the manufacturer. Not so for factory-to-dealer rebates, which are hidden. These rebates come and go. It would be useful to get information about what types of cash and incentives are given from the factory to the dealers. If you get a strangely low price on your new dream car, this may be the reason for it. However, these rebates are not always passed on to the buyer. Nationwide Auto Brokers (810-559-6661) will give you current information on incentives and rebates.