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Car Buying Tips

Tip #1: Know the difference between Buy vs. Lease

There are advantages to both buying a car and leasing a new car. It is important to understand the differences between the two and realize which one is more appropriate for you. Different shoppers have different habits and interests when it comes to their car or truck and lease may be more fitting for you. For example, if you like to have a new car every 2-3 years, you will probably want to lease. Or if you enjoy making customizations to your car or drive a lot of miles in your vehicle, you may want to purchase the car or truck. Continue reading to see the differences between buying a car and leasing a car.

Why lease a vehicle?
So, why lease a car in the first place? The big advantage is freedom. You aren't making a long-term commitment. When the lease period is up, you can simply bring the car back and walk away, or you can buy the car or truck by paying off the remaining balance.

Since you are only "renting" the car, your total cash expenditure is typically much less. Your down payment will be much less than if you were buying the car or truck. And monthly lease payments are almost always less than payments would be if you bought the car or truck. Because leasing is less expensive than buying, you can usually afford to drive a more expensive car when you lease, since the monthly payments will be comparatively lower. This is one of the biggest single attractions of leasing for many people. A car or truck that might cost you $500-$600 per month to buy might be $100 per month less to lease.

Another benefit of leasing is that you're always driving a new or nearly new vehicle, and you won't have to worry about the major repair and maintenance problems that inevitably crop up as a car ages. The leased car will typically be under factory warranty for the duration of the lease, and many lease contracts have additional provisions that cover routine maintenance, such as oil changes.

Why buy a vehicle?
When you buy a car or truck you have the comfort of knowing that eventually the car will be paid for and it will be free transportation until it breaks down or you decide to sell the car or truck.

In addition, a person who owns their car or truck has built value in the vehicle. Even though it will depreciate with each passing year, it will always have some value. That value can be used as a trade-in, or the vehicle can be sold privately for the vehicle's current value. The person who leases must start from scratch every time.

There's also the concern for mileage. If you lease a vehicle, the lease agreement will undoubtedly dictate a maximum number of miles you're allowed before the end of the lease. If you exceed the mileage, there might be penalties. The person who owns their car can drive it as much as they like. They can change the stereo, add different wheels, change the exhaust system, etc. If you own your vehicle, the inevitable door dings and dents can be shrugged off.

When deciding between buying a car or leasing, remember the following tips:

  • Short-term customers should lease. Consider a lease if you get a new car more than once every three years; if you plan to drive your next car longer than three years, buy it.
  • New cars and trucks depreciate rapidly - buying a new vehicle every 2-3 years is a certain money-loser. Leasing will almost always save you money. On the other hand, a new car can be expected to last reliably with proper care for at least 8-10 years and 100,000-plus miles. If you keep the car long enough, it will pay for itself -- and you will save money over the long term.

Tip #2: How to get the most for your trade-in

Most car shoppers look up their trade-in's value online at sites like Kelley Blue Book or the National Auto Dealers Association (NADA) pricing guides. Consider these as ballpark figures, because it's easy to overrate your car's condition and so many other factors determine what it is worth to the dealership. It is important to keep in mind that resale values aren't an exact science. Different dealers' assessments could vary by a couple hundred dollars to $1,000.

The three biggest factors affecting your trade-in value are...

Car Condition
When it comes to condition, damage decreases the value because dealers must pay the reconditioning cost. While repairs are underway, the dealer's time and space are also wasted. These are very valuable resources to the dealership. Good maintenance means higher trade-in value. Worn tires, belts, wipers, and hoses indicate slack maintenance, as does a lack of maintenance records. Original paint is a positive selling feature to a Michigan dealership because the manufacturer warranties only original paint for untimely peeling. Your car's cleanliness can also sweeten your deal. Pets and smoking can cause permanent interior damage and evidence of either will dramatically reduce the chance that the dealer can resell the vehicle - which makes the car less valuable to a Michigan dealer. Spending $150 on detailing the car before bringing it into the dealership is worth the $300 of trade-in value that will result.

Market Supply and Demand
Something that's not in your control at trade-in time is the overall market. Nonetheless, understanding how trade-in prices fluctuate may make accepting a lower-than-expected trade-in price easier. Some cars are in higher demand than others. If everyone in your region wants an SUV, your compact car may not trade as high because it will be harder for the Michigan dealer to resell. The season also impacts demand. Convertibles receive a lower trade-in value in the fall and winter because Michigan dealers may have to ship the car to a different region in order to sell it.

In areas where leasing is very popular, your late-model trade faces competition. And now, with a lot of low-mileage trade-ins being generated by attractive new car deals, most markets have an abundance of off-lease used vehicles. In many markets, leased vehicles have created a surplus of well-taken care of vehicles. You're used car or truck is competing against the 36-month vehicle that has all the warranties on it and all the maintenance.


Tip #3: Understand the benefits of buying a Certified Used Car

For many shoppers, certified used cars have become affordable alternatives to new cars. "Certified" refers to a used car that is offered for sale by the original manufacturer, often with extended warranties beyond the initial coverage. The extended warranty typically takes effect when the original warranty expires. Like a new car warranty, it offers coverage for a certain number of years or miles, which ever comes first.

In many cases, a customer who purchases a certified used car will become eligible for benefits that a new car customer enjoys. Perks such as service loan cars, shuttle pick-up and drop-off service, roadside assistance, free maintenance and low-rate "incentive" loans can be one of many reasons to choose a certified used car over a less expensive used car bought from a private party or generic used car lot. Many certified programs will even offer longer warranties at an additional cost, but the real value lies in the factory-provided coverage that would be included in the purchase price of the car you're considering. The advantage to certified used vehicles is new car benefits at a used car price.


Tip #4: Know what to look for during your Test Drive

The test drive is one of the most time-honored of American car-buying traditions-and also one that gets far less attention than it should. You've been attracted by some combination of styling, features, price and image. Now it's time to find out if all of that adds up to a great car.

Step 1. The Dealership:
After you've purchased your new vehicle, you're probably going to be returning to the Michigan dealership at intervals for service and perhaps adjustments. So before you get down to the definitive test drive of the vehicle, it's a good idea to test drive the Michigan dealer first. Here are some suggestions:

  • What's the reputation of this Michigan dealership?
  • What's your impression of the sales staff?
  • Do the sales consultants really know the products?
  • Do you get the impression that the dealership has your best interests at heart?
  • Is the service department neat, clean, well-organized?

Step 2. The Drive:
The critical element here is taking your time. Try to spend at least 20 minutes with the vehicle. Try to make sure your route includes some freeway, as well as rough surface streets. So you can experience the car or truck in different conditions. Also use the following test drive checklist:

  • Quality: - Walk around some of the vehicles in the showroom and check the quality of the paint and assembly. Are the seams straight and uniform? Do exterior trim panels match up? Give the same eyeball test to the interior also.
  • Adjustability: - Before you drive, get in the vehicle and see how it fits you. Once you've got it adjusted to your preferred driving position, check the relationship between the pedals, seat, steering wheel and shifter. Can you adjust everything exactly as you like it, or do you have to make compromises? Can you reach and adjust all the controls easily? Are the gauges easy to read?
  • Roominess: - Get in the back seat. Is there enough room back there for adult passengers? If you're shopping small sport coupes, the answer is likely to be no, and the same applies, to a lesser extent, to small sedans. However, far too many new car buyers sign on the dotted line and then complain for several years about the lack of rear seat space. It takes only two or three minutes to find out what you're dealing with back there, and it's one of the contrasts that could move you into one of your alternate choices.
  • Engine response: - Be sure you're driving a vehicle equipped with the power train you want in your own car. Is acceleration satisfactory to you? How about 50- to 70-mph passing response? Does the engine produce uniform power across its rpm range, or only at higher engine speeds? Obviously, it's important to drive competing vehicles to develop a sense of perspective in this and subsequent test drive categories.
  • Transmission: - If your choice has a manual transmission, check the action of the shifter. Is it stiff? Vague? Does the clutch engage smoothly, or is it tricky? If the vehicle is a sport-utility with 4-wheel drive and a separate shifter for the transfer case, check the action of this feature. If it's an automatic, check the kick down for extra passing power by pushing the throttle down hard. Is it slow to respond? Does the transmission "hunt" between gears on uphill? How does it compare with competitors?
  • Noise - Most new vehicles sound quite civilized at urban speeds, but what happens when you apply full throttle? How are the engine and wind noise levels at highway speeds? Will the interior noise level be satisfactory over the long haul? Compare and contrast.
  • Handling - It's hard to get a definitive idea of how a car responds to quick maneuvers in a short drive. That's why it's important to make contrasts with other vehicles. But you can make a couple of basic tests. Hurry the car around a couple of corners to check body roll. Try some abrupt lane change maneuvers, to gauge responsiveness. Does the car change directions quickly? Is there undulating or wallowing as you make your maneuvers? A car that's slow to respond may not be your best ally when you're trying to avoid an accident.
  • Braking - Try at least two or three really hard stops. Does the front end dive excessively? Is directional control good, or does the car skew to one side or the other? If the car has antilock brakes, try braking hard and maneuvering at the same time. When you stamp hard on the brake pedal, you'll probably feel some pulsing, which tells you the system is working. Excessive pulsing, however, tells you that the test vehicle's ABS system may not be quite as advanced as some others.
  • Quality - This is a very subjective area, but trust your gut feeling. If the ride seems extra firm, and small bumps transmit sharp little jolts through the wheel and seat, it may be too stiff for your all-around comfort. Keep asking yourself the key question: Is this something I want to live with on a daily basis for several years? That's a relatively short checklist, but it covers a lot of ground. Again, the more time you can spend putting the vehicle through its paces, the more likely it is that you'll be satisfied with your purchase.


Tip #5: Understanding the difference between Rebates and Incentives


What is an incentive?
All incentives are price reductions offered by the factories either to increase sales on current slower-sellers or to reduce excess inventory. Incentives can take the form of cash back, low-rate financing, or a financing deal AND cash on the same model. National customer incentives tend to be in the $500 to $2,000 range. The pricier the car, often, the bigger the incentive.

Cash incentives can go directly to the consumer or to the Michigan dealer. Some go either to the dealer or the consumer, and that can vary regionally, it can be left to the dealer's discretion, or the discretion of the regional manager. Dealer incentives tend to apply to Japanese and European-made cars, and American luxury vehicles. Rebates vary significantly by region.

Best time for incentives?
For decades, new car model season arrived in fall, but now, new model year lasts all year long. Late summer/fall is still a time when Michigan dealers clear their lots for the new models, and a good time for incentives. Year end allowances given to Michigan dealerships or consumers to clear out last year's inventory, are not the rule anymore. These allowances don't kick in until the dealer actually has next-year's model on the lot.

Because new model season lasts all year, learn the 'life-cycle' of the particular model. If a car's due for a major redesign you may see incentives before or when the replacement model debuts. Some models have a 4-year cycle between complete redesigns, with a 'freshening' every couple years, but each make and model is on a different schedule.

Incentives tend to be contagious for manufacturers between competing makes and models. A rebate on a GMC truck can lead to similar deals on a rival Ford or Dodge model. Most rebates carry an expiration date usually in effect for 1-2 months. When an incentive program expires, they don't necessarily renew or change them right away. The time limit on incentive programs can create anxiety for consumers: if you don't buy now - you might miss out.

What exactly is a customer incentive?
These are generally the incentives advertised on TV and radio, but to make sure you're informed, always check the manufactures website before you buy. Customer incentives usually come as a choice of either cash or a reduced financing rate-or a combo of both. Customer rebate tends to be more publicized. They can be given to special kinds of consumers; college grads, first-time buyers, or repeat buyers, etc. They can be nationally set, but are more often regionally specific. Many of the super deals such as 0% and 1% financing are for a briefer 24- or 36-month term. This means stiffer monthly payments. It saves money overall, but it's a bad option if it's out of your monthly budget's reach.

What exactly is a dealer rebate?
Money given back to the Michigan dealer by the manufacturer to move certain cars. Information about dealer incentives tends to be more difficult to obtain, as well as more volatile time-wise, and much more regionally specific. Dealer incentives are often offered in tandem with other incentives that depend on the regional manager's specific judgment call. Don't become too paranoid about less public dealer rebate info. The factories offer them to heat up Michigan dealer sales contests to move inventory locally, so most of the deals become public knowledge. Check the date the vehicle you want was actually manufactured. If it's been in the showroom for 6 months or more, some kind of dealer incentive may be placed on it. Dealers pay money to keep cars on their lot (they are financed through a bank) especially after a car's been on that lot for more than three months, and the Michigan dealer has an increased incentive to sell.