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With new-car sales having already bottomed out, buyers are finally returning to dealers’ showrooms, though with a different mindset than they may have had during the pre-recession boom years. Shell-shocked from the effects of a faltering economy and fluctuating gasoline prices, today’s car shoppers aren’t necessarily the same ones that passionately embraced big trucks and flamboyant luxury cars with an almost total disregard for rational thought and sound fiscal responsibility.

Today’s new-vehicle buyers are more value-conscious than ever, regardless of their financial situations. But while they might be looking to downscale their vehicular choices to save money or to get better fuel economy, they don’t want to downscale their expectations. Buyers in all automotive segments are seeking the best the industry has to offer in terms of new-vehicle design, build quality and the latest features, but they don’t necessarily want to overspend in the process of obtaining it.

Unfortunately, far too many new-vehicle shoppers will still throw caution and their hard-earned money to the wind by being ill-prepared to set foot in a dealer’s showroom. For every hard-nosed negotiator that haggles down to within the last dime of a new-car dealer’s profit margin, there are several more that simply sign on the dotted line without a clue as to whether or not they’ve gotten anything that even resembles a bargain.

Even if they do command an impressive initial deal, many motorists can fritter away their initial savings over time because the vehicle they’ve chosen has a higher rate of depreciation, is less fuel-efficient and/or is costlier to insure than comparable models. Some will accept far less than market value for their trade-ins or will wind up with a car or truck that’s fitted with all sorts of options they don’t otherwise need. Others will have obtained false value by chasing after bargains and settling for vehicles they’ll ultimately come to dislike. And they’re all squandering their hard-earned cash in the process.

To that end we present the Automotive Intelligentsia Money-Saving New-Car Guide. Here we’ll walk you through, step-by-step, what will be one of the largest purchases you’ll ever make, keeping a sharp eye on the bottom line at every turn. But that doesn’t necessarily mean we’ll automatically steer you toward buying only the cheapest models available. We’ll help you make the right choices, both practical and emotional, and get the best deal no matter which type of vehicle you ultimately prefer. Much as we love cars, we find little joy in paying too much money for a model that drains the wallet on a weekly basis and will wind up losing its luster long before the final loan payment comes due.

We’ll start out by helping you decide whether you really need to buy a new vehicle in the first place, or whether choosing a used model might instead be a wiser choice.

Assuming you decide to take the plunge and go shopping for a brand-new ride, we’ll help you decide which model is “right” for you, based on your needs and budget. We’ll take a close look at what you can expect to find in each of 11 separate automotive categories in terms of practicality, performance and accommodations. We’ve also included capsule reviews of all available models in each segment (as of the 2011 model year) to help jump-start your new-vehicle research.

We’ll also demonstrate how selecting a model that comes with lower operating costs can save bundles of money over the typical ownership cycle, and note which new-car features not only hold their value better over time, but will enhance your driving experience every single day. You’ll learn how to select a car that’s not only safer than others, but one that gets optimal fuel economy and is more environmentally friendly.

Once you know exactly what you want we’ll share our time-tested techniques on how to get an absolute killer deal on the new vehicle of your choice, honed by nearly a quarter-century’s experience in consumer automotive journalism. We’ll show you how to assemble a money-saving combination of standard and optional features, maximize the value of automakers’ cash rebates and other sales incentives, help you determine whether you’re better off buying or leasing a new car or truck and point out the wealth of pertinent data that’s presented in a vehicle’s window sticker.

Armed with a full arsenal of information we’ll escort you to a dealer’s showroom and see that you get down to business. We’ll tutor you in the fine art of taking a test drive to ensure that everything meets, and even exceeds, your expectations. Best of all we’ll demonstrate how to get the most money for your trade-in and negotiate the lowest available price on a new car or truck, based on years of interviews with consumers and former dealership employees. And just to make sure you’re protected every single step of the way, we’ll show you how to survive the often-overlooked “back end” of the deal, where an unsuspecting buyer can easily wind up being the dealer’s most profitable customer.

By following the astute advice presented here, you’ll not only keep a significant amount of cash in your pocket, but will wind up with an amenable accomplice in mobility that will provide years of faithful and thrifty service.

As an old advertising slogan used to say, “Getting there is half the fun.”

Part One:

Picking A Vehicle That Will Go The Distance

Buy A New Car Or Keep The Old One Running?

According to the market research firm R.L. Polk & Co. in Southfield, Mich., the median age for all passenger cars on the road is now up to 9.4 years, which is a record high. That means many more motorists are paying to keep their existing rides repaired these days than are replacing them.

But at what point does it become more economical to buy a new car instead of continuing to pour money into an old heap? Since the cost of repairing major vehicle components such as the transmission or engine can cot thousands of dollars, prudent motorists need to consider a number of factors when making that decision.

Be Mechanically Minded. For starters, it’s typically less costly to keep an existing car running than to purchase a new one. Even if you’re facing a catastrophic repair, it might be wiser to keep your mechanic happy than send it off to the junkyard and buy another car. Considering you’ll have to make at least a 10 percent down payment on a new vehicle, plus pay higher insurance rates and reset the clock in terms of making monthly loan payments, you’ll eat up the cost of all but the most-expensive fixes in short order.

Still, it’s prudent to consider the so-called “50 percent rule” when facing a particularly expensive vehicular renovation. By this yardstick, when the cost of a needed repair approaches 50 percent of a model’s estimated resale value it’s probably time to go car shopping.

You should also take into consideration a vehicle’s current condition and its history of reliability when deciding whether to repair or replace it. If a car looks good and has been maintained meticulously, having a mechanical problem fixed now might prolong its life for thousands of miles down the road. Given proper maintenance and occasional servicing, modern cars are highly reliable and can be safely driven for 150,000 miles or more.

On the other hand, if a vehicle has been ill cared-for and/or has been suffering from chronic mechanical problems you may be throwing good money after bad to keep it limping along until the next major repair. Also, replacing a steady stream of key wear-and-tear items and systems (tires, battery, starter, alternator, exhaust system, etc.) might be inevitable on a high-mileage older model, even one that’s otherwise in decent shape. What’s more, one has to consider both the cost and inconvenience of frequent trips to the repair shop, versus the peace of mind that comes with driving (an assumedly) trouble-free new model.

Other Considerations. A motorist’s lifestyle can likewise affect his or her decision whether to keep or replace their current mode of transport. For example, those who frequently chauffer clients or business associates might be sensitive about driving a car with well-worn upholstery or one that suffers from exterior cosmetic issues. Someone whose job involves a long-distance commute may not want to take a chance on an older model breaking down while en route. A growing family may find their current compact sedan becoming cramped or may want to seek a new model having added safety features, while recent empty nesters might want to switch to a more-economical or sportier ride.

And then there’s the pure emotional value of buying a new car or truck to consider, which some may value more than others.

Finally, you should consider the state of the economy in general and the new-car business in particular when deciding whether to repair or replace a car. Depressed sales mean that dealers are willing to give up larger chunks of their markups than normal to help winnow down their bloated inventories, and automakers will be employing generous sales incentives to drive traffic into their showrooms. (See the chapter on evaluating incentives to see how much more affordable choosing a cash rebate or cut-rate financing deal can skew a new-vehicle purchase.)

New Or Used?

Should you buy a new car or select a lower-cost used one instead? This is a decision that’s nearly as old as the automobile business itself, with far more motorists falling into the latter category these days out of sheer financial necessity. The average new vehicle now costs around $28,400, which is beyond the reach of many cash-strapped consumers. According to the Bureau of Labor Statistics, while 13,195,000 new vehicles were sold or leased in 2008, 36,530,000 used cars and light trucks changed hands.

For those who have only a modest amount of money to spend and/or other mitigating factors (like poor credit), an inexpensive used car will be the only way to go. Those enjoying more favorable economic circumstances can find themselves facing a more difficult decision, as monthly payments to finance a new car and one that’s only two or three years old might not be all that substantial, as we’ll detail below.

The Case for a New Car. A new car, of course is just that; it’s brand new and that alone carries an immeasurable degree of cachet for many consumers. What’s more, a new model may offer features that were either not offered or not as widely available three or more years ago. Some of these may be mere frills while others, like side-impact airbags and vehicle stability control, are now must-have items.

New-car buyers can typically choose from a full range of choices with regard to colors and equipment. Locating a particular color combination or feature set among locally available used models, which is limited to whatever happens to be on the market at that time, can be considerably more difficult if not downright impossible.

A new car’s retail price is set by the manufacturer, which makes it reasonably easy to compare costs among different makes and models. On the other hand, the price of a used car is set exclusively by the marketplace and is ultimately based on a wide range of variables, including a vehicle’s popularity, its condition, mileage, geographic location and so on.

New vehicles come with full factory warranties and often include value-added programs like roadside assistance and free scheduled maintenance plans. Some used cars come with warranties, but these may be limited to the costliest “factory certified” vehicles and/or may be for considerably shorter terms.

Risks and Benefits to Buying Used. Buying a used car generally carries a greater risk and not only in terms of a model’s mechanical condition. For example, the Federal Bureau of Investigation warns consumers to beware of a rise in online used-car sales fraud via classified ad sites like Craigslist.com. Here, a vehicle that’s often purported to be located out of state is advertised at a below-market price and those who respond are told to send payment to a third-party agent using a funds transfer service. Unfortunately the vehicle is never delivered and the “seller” is never heard from again.

Another growing problem is with used-vehicle “cloning,” in which thieves obtain legitimate vehicle identification numbers from cars matching the year, make, model and color of a stolen or scrapped vehicle and swap or duplicate the identifying digits.

But affordability issues typically drive a motorist’s decision whether to buy a used car instead of a new one and let’s see how those shake out.

For starters, new cars carry substantially higher price tags than comparable used ones and tend to take a larger hit over the first few years of ownership in terms of depreciation. Depending on the make and model, a new car can lose half or more of its resale value within just three years.

On the other hand, financing rates are lower and loan terms tend to be longer with new cars than used ones. New-car loans usually run as long as 60 or even 72 months from most major lenders, while used-vehicle financing may be capped at 36 to 48 months and limited only to recent-model cars. Longer-term loans and those for older used models can be found through some lenders and dealerships, but they typically carry much-higher interest rates.

Plus, slower-selling new cars often come with generous customer-cash incentives that, combined with or in lieu of automaker-sponsored low-rate financing, can occasionally make them more affordable for some buyers on a per-month basis than recent-model used cars.

As an extreme example, let’s say a given new model that retails for $32,100 is being offered with zero percent financing for qualifying buyers up to 72 months and a $2,500 cash rebate. We’ll assume a comparable used three-year-old model in excellent condition with 30,000 miles on the odometer retails for $18,540. While this sounds like the used version might yield a considerably lower car payment, as always the devil is in the proverbial details.

Putting aside dealer discounts, taxes and registration fees for the purposes of our example, if a buyer puts $2,000 down on the used model and finances the remainder with a 48-month loan at an assumed interest rate of 7.94 percent, the monthly payment would be $403.32. By comparison, choosing the new model with its cash rebate and zero percent financing for the maximum 72 months (also with $2,000 down) would result in a $383.22 monthly outlay.

Be aware, however, that the new-car buyer will ultimately shell out a lot more money over the loan term than one that picks the used model ($19,359 versus $27,600) though this will be for two additional years’ use.

While this isn’t necessarily the norm, it illustrates the need to work the numbers and examine a vehicular transaction from every angle to get the best deal on a model, whether it’s new or used.

Deciding Which Vehicle Is Best For You

Separating one’s wants from his or her true needs is likely one of the most difficult processes we face growing up. We want a candy bar after school, but what we really need is a healthy snack. We want ice cream after playing baseball at the park, but what we really need is a tall drink of water to replenish our bodily fluids. We want to spend all our birthday money on the most expensive toy we can afford, but what we really need is to put part of this windfall in the piggy bank. And so on.

While many of us grown-ups pretend to know what’s good for us by eating the right foods, getting enough exercise, managing our money wisely and so forth, we can easily fall prey to our baser instincts when we set out to choose a vehicle that we’ll live with for the next three-to-six years.

Staying Level Headed. Marketing in general and the art of selling new vehicles in particular are largely emotional pursuits. You may be stuck in a dead-end job, live in a nondescript suburban cul-de-sac and be saddled with the average 2.5 children, but the message is clear: Buying the proper vehicle will lift you from your doldrums and empower you to make great changes with its a life-affirming, life-changing, petroleum-powered aura. This is, of course, a lot of hooey.

If you want to garner the most value from a new vehicle purchase, you’ll have to rationally sort out your practical needs from your marketing-inflamed desires. Now this doesn’t mean you should automatically purchase the smallest and cheapest car on the road, particularly when what you really need is something to carry the family in relative comfort over long trips, or have enough passenger and cargo space for carpooling the kids to their various activities. Rather, you should choose a vehicle that’s not only to your liking, but will most efficiently perform the tasks you realistically require at the best price and with the lowest long-term operating costs.

To begin the vehicle-shopping process in a way that will maximize your vehicular investment, you’ll need to eschew any prior prejudices you may have with regard to makes, models or vehicle types. While you might find yourself leaning in a particular direction, don’t commit yourself to anything specific just yet. The idea here is to do your homework and whittle the universe of choices (from over 200 different cars and trucks on the market) down to a few select models upon which to conduct further research. It will be from this short list of vehicles that you will ultimately choose your next partner in transportation.

What Can You Reasonably Afford? With this in mind, the first step in shopping for a new vehicle is elemental to any type of purchase, namely to determine “how much” you can afford. If you’re fortunate enough to be paying in cash, you probably already know the answer to this question. Still, whether you’re financing the purchase or buying a vehicle outright, keep in mind that you can always pay less than what you can afford and pocket the difference. It might be more personally profitable to, say, sock an extra $50 or $100 more each month into a retirement or college-savings plan, or to help pay off credit card debt or a home equity loan than it would be to drive a more-expensive car.

If you’ll be financing the purchase, the first step in the process is to determine the amount of your down payment. This will consist of the available cash in your bank account earmarked for this purpose, plus the value of your trade-in, if you have one and any manufacturers’ rebate that may apply on a specific vehicle (a rebate is considered cash in hand and is usually applied to your down payment). Where one is available, don’t be tempted to use the rebate to buy a more-expensive model or blow it on extra features, some of which you may rarely use.

We’ll discuss getting the most for your trade-in in a later chapter, but at this point all that’s necessary is a ballpark figure, which would be the “wholesale” value of your vehicle in “good” or “average” condition as presented in any of the industry’s online used-vehicle pricing guides.

Next you’ll want to contact one or more local banks or, if you’re a member, your credit union to see just how large a loan you may qualify for, based on your down payment, income and credit rating. You needn’t worry about securing a loan just yet, just get an idea of what you can afford. Be aware that this figure might vary somewhat among lenders, depending on a number of factors, including their current loan rates and programs and their willingness to make higher loan-to-down-payment-ratio loans and/or to those having less-than-pristine credit histories.

If you have late payments or a damaged credit record you’ll probably have to pay a greater interest rate and/or be required to make a higher down payment than buyers who are in good standing. Generally, you’ll be required to put down at least 10 percent of the total cost of a new vehicle, including taxes and fees; again, this figure may vary from lender to lender and from one borrower to another.

Making the Difficult Decisions. Now it’s time to begin winnowing your choices down to a select few vehicles that meet your needs and are within your budget. Remember, to get the absolute most for your automotive dollars you’ll want to enter this process with an open mind, not an open wallet, and bear in mind all your possible choices. This means considering not only competing vehicles within a given vehicular category, but looking at what’s available in several other segments to determine what will best meet your needs at the lowest possible cost. To help get your research started, the chapters that follow closely examine the attributes and available choices in each of 11 new-car and truck categories, from subcompact cars to pickup trucks and the latest hybrid and electric vehicles.

Once you’ve gotten a general idea of what you like and how much you can afford, take a closer look at three or four different vehicles that meet your needs and are in your price range. Try not to become attached to a particular model at this point since you still have much homework to complete before deciding which car or truck is best for you. Check a published price guide or any of the online new-vehicle sites like Cars.com. Edmunds.com or Kelley Blue Book (www.kbb.com) to check prices, standard equipment, available options and equipment packages for every model under your consideration.

Be sure to note each vehicle’s specifications. While you shouldn’t automatically buy a car or truck “by the numbers,” such facts are a good indication of each model’s relative engine power, interior space, trunk volume and overall size. At the least you’ll be able to tell how well a given vehicle will fit in your garage. If you’re buying a truck or sport-utility vehicle for hauling or for towing a boat or trailer, be sure to check each model’s gross-weight limits and towing capacities and realize that these are maximum figures. Practically speaking, you’ll want such figures to be about 25 percent higher than what you’ll actually need, just to be on the safe side to avoid excessive wear and tear on mechanical components.

You should, of course, consult published reviews of any cars or trucks on your short list, but be sure to take such evaluations in their proper context. Enthusiast-oriented publications are typically more concerned with a vehicle’s flat-out performance than its value or long-term utility. Consumer-based magazines and newspaper reviewers tend to provide more-balanced reviews, but not always.

Be aware that people who test-drive and evaluate cars professionally, like anyone else, have their own biases and preferences, which often trickle down into their articles. Plus, as is the case with any critics who sample the best their field has to offer, whether it’s movies or restaurants, automotive reviewers tend to become fussy about the products they write about and may be considerably more demanding about certain elements in them than you would. Plus, they often tend to favor the latest models over those that have been relatively unchanged in recent years.

Don’t discount the experiences of relatives, friends and acquaintances that own current or past versions of vehicles in which you’re interested. Anyone who’s driven a car or truck day in and day out can be a wealth of information on its many quirks and qualities.

Kicking the Tires. It’s a good idea to visit automakers’ Web sites to compare available exterior colors and interior treatments. This information can also be found in the manufacturers’ brochures, but it’s not the best idea to visit a dealership this early in the shopping process. If you do, pick up the necessary printed material and get out as quickly as you can, before a salesperson can begin to work you over. Ditto for taking a closer look at a new vehicle in person. It’s actually a better idea to peruse a dealer’s lot or window shop on a day or at a time when the dealership is closed, so you won’t be distracted by a salesperson and perhaps even lulled into making a deal when you’re not yet ready to buy.

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Plain Text Ebooks: Free ebook sample of "Automotive Intelligentsia Money-Saving New-Car Guide" by Jim Gorzelany

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