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 NEW CAR BUYING GUIDE

 
 

     Buying a new car is usually the second most expensive

purchase many consumers make, after the purchase of their home.

     This guide, which includes a checklist and a worksheet,

is intended to help give you the information you need to make a

smart deal on a new car.

Buying Your New Car

     Before you step into a dealer's showroom, it helps to know

what car model and options you want and how much you are

willing to spend. That way, you are less likely to feel

pressured into making a hasty or expensive decision and more

likely to get a better deal. To help you shop, you may want to

consider the following suggestions:

   * Check publications at a library or bookstore that discuss

     new car features and prices. These may provide information

     on the dealer's costs for specific models and options.

   * Shop around to get the best possible price by comparing

     models and prices at dealer showrooms. You also may want

     to contact car buying services and broker buying services

     and make comparisons there.

   * Plan to negotiate on price. Dealers may be willing to

     bargain on their profit margin, which is generally between

     15 to 20 percent. This is usually the difference between

     the manufacturer's suggested retail price and the invoice

     price. To help you do this, refer to the worksheet listed

     at the end of this brochure.

   * Consider ordering your new car if you do not see the car

     you want on the dealer's lot. This usually involves a

     delay, but cars on the lot frequently have options you do

     not want -- which add considerably to the cost.

Learning the Terms

     To give you a better sense of the negotiating room you

have when buying your car, it helps to understand the following

terms, listed here in order of increasing price:

     INVOICE PRICE is the manufacturer's initial charge to the

dealer. This is usually higher than the dealer's final cost

because dealers often receive rebates, allowances, discounts,

and incentive awards. The invoice price always includes freight

(also known as destination and delivery). If you are buying a

car based on the invoice price (for example, "at invoice,"

"$100 below invoice" "two percent above invoice") be sure

freight is not added to the sales contract.

     BASE PRICE is the cost of the car without options, but

includes standard equipment, factory warranty, and freight.

This price is printed on the Monroney sticker (see below).

     MONRONEY STICKER PRICE, which appears on a label affixed

to the car window and is required by federal law, shows the

base price, the manufacturer's installed options with the

manufacturer's suggested retail price, the manufacturer's

transportation charge, and the fuel economy (mileage). The

label may not be removed by anyone other than the purchaser.

     DEALER STICKER PRICE, usually on a supplemental sticker,

is the Monroney sticker price plus the suggested retail price

of dealer-installed options, such as additional dealer mark-up

(ADM) of additional dealer profit (ADP), dealer preparation,

and undercoating.

Financing Your New Car

     If you decide to finance your car, you have the option of

checking the dealer's rate against banks, credit unions,

savings and loans institutions, and other loan companies.

Because interest rates vary, shop around for the best deal and

compare the annual percentage rates (APR).

     Sometimes, dealers offer very low financing rates for

specific cars or models, but may not be willing to negotiate on

the price of these cars. In addition, they may require you to

make a large downpayment to qualify for these special interest

rates. With these conditions, you may find that it is sometimes

more affordable to pay higher financing charges on a car that

is lower in price or to purchase a car that requires a smaller

downpayment.

     Some dealers and lenders may ask you to buy credit

insurance, which pays off your loan if you should die or become

disabled. Before you add this cost, you may want to consider

the benefits available from existing policies you may have.

Remember, buying credit insurance is not required for a loan.

Trading in Your Old Car

     After getting your new car for the best possible price,

only then discuss the possibility of a trade-in. First,

however, find out the value of your old car. You may want to

check the library for references and periodicals that can tell

you how much your car is worth. This information may help you

get a better overall price from the dealer. Remember, too, that

though it may take longer, you generally will get more money by

selling the car yourself.

Considering a Service Contract

     Service contracts that you may buy with a new car provide

for the repair of certain specified parts or problems. These

contracts are offered by manufacturers, dealers, or independent

companies and usually initially run concurrently with the

manufacturer's warranty. Remember: a warranty is included in

the price of the car; a service contract costs extra.

     Before deciding to purchase a service contract, read it

carefully and consider some of the following questions:

   * What is the difference between the coverage under the

     warranty and the coverage under the service contract?

   * What repairs are covered?

   * Who pays for the labor? The parts?

   * Who performs the repairs? Can repairs be made elsewhere?

   * How long does the service contract last?

   * What is the cancellation and refund policy?

For Further Information

     In addition to checking publications about new car

features and prices when buying a car, you may find it helpful

to read other Federal Trade Commission brochures. These

include: "Car Ads: Low Interest Loans and Other Offers,"

"Service Contracts," "Warranties," "Buying a Used Car," and "A

Consumer Guide to Vehicle Leasing." For a free copy write:

Public Reference, Federal Trade Commission, Washington, D.C.

20580. For further information, you may want to write to:

Division of Marketing Practices, Federal Trade Commission,

Washington, D.C. 20580. Although the FTC generally does not

intervene in individual consumer disputes, it can take action

if there. is evidence of a pattern of deceptive or unfair

practices.

Checklist for Buying a New Car

     You are likely to get a better deal on a car if you know

beforehand exactly what you are looking for and what you are

willing to spend. Therefore, before signing a sales contract

with a car dealer, you may want to:

   * Decide which car model and specific options you want.

   * Find out the invoice price (the lowest price)of the model

     and each option you want.

   * Decide how much you are willing to pay the dealer, if

     anything, above the invoice price.

   * Compare final sales prices with other dealers and buying

     services.

   * Compare financing costs from various sources, such as

     credit unions and savings and loans institutions, with

     those of car dealers.

   * Find out the value of your old car, independent of a

     dealer's trade-in offer.

   * Decide if you need an optional service contract or credit

     insurance.

Worksheet for Buying a New Car

     To help you negotiate the price of your next new car, you

may want to use this worksheet to establish your bargaining

room before you talk with a dealer.

Model_______________________________________________________

Base Price                     Invoice Price*   Retail Price

Options:

Transmission:                  ______________   ____________

     Automatic                 ______________   ____________

     Stick                     ______________   ____________

Air Conditioning               ______________   ____________

Engine:                        ______________   ____________

     Size                      ______________   ____________

     Diesel                    ______________   ____________

Sound System:                  ______________   ____________

     AM-FM                     ______________   ____________

     AM-FM Cassette            ______________   ____________

Power Brakes                   ______________   ____________

Power Steering                 ______________   ____________

Power Locks                    ______________   ____________

Power Seats                    ______________   ____________

Rear Window Wiper/Washer       ______________   ____________

Rear Window Defogger           ______________   ____________

Luggage Rack                   ______________   ____________

Tires:                         ______________   ____________

     Full-Size Spare           ______________   ____________

     Steel Belted Radials      ______________   ____________

Mirrors:                       ______________   ____________

     Dual                      ______________   ____________

     Remote                    ______________   ____________

     Passenger Visor           ______________   ____________

Other:                         ______________   ____________

   * The invoice price may be obtained by looking at the

     dealer's invoice or by reviewing new car publications.

FTC Headquarters

6th & Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-2222

TDD (202) 326-2502

FTC Regional Offices

1718 Peachtree Street, N.W., Suite 1000

Atlanta, Georgia 30367

(404) 347-4836

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Boston, Massachusetts 02222-1073

(617) 565-7240

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Chicago, Illinois 60603

(312) 353-4423

668 Euclid Avenue, Suite 520-A

Cleveland, Ohio 44 114

(216) 522-4207

100 N. Central Expressway, Suite 500

Dallas, Texas 75201

(214) 767-5501

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Denver, Colorado 80202-2393

(303) 844-2271

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Los Angeles, California 90024

(213) 209-7575

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New York, New York 10038

(212) 264-1207

901 Market Street, Suite 570

San Francisco, California 94103

(415) 744-7920

2806 Federal Bldg., 915 Second Ave.

Seattle, Washington 98174

(206) 553-4656

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