Buying A New Car? Don't Despair

(MarketWatch)  Thinking about buying a new car? Don't settle for just checking the Blue Book value and comparing sticker prices online. Here are five simple steps to becoming a savvier buyer:

Predetermine your monthly payment:
If you want to own a home some day, your car payment should be no more than 8 percent of your gross monthly income. Why? Because most mortgage lenders are reluctant to lend to people who spend more than 36 percent of their gross monthly income on debt. Fully 28 percent is expected to be put toward housing costs, leaving you with a margin of 8 percent. If you're shouldering other debts, such as student loans, the amount going toward your car payment should be further reduced.

Factor in other recurring expenses:
While it's important to find a car with good gas mileage, fuel is just one of the monthly expenses associated with owning a car. You should also budget in regular maintenance, roadside assistance coverage and, of course, insurance. Thankfully, pricing insurance has never been easier. To get quotes and compare rates, visit sites such as Progressive.com and Car Insurance.com.

Choose shorter loan terms:
They range from 36 months to an astonishing 96 months. Stretching out your payments as long as possible cuts your expenses in the short term, but costs you more as time goes on. Not only does your principal accrue more interest, but the value of your car begins to depreciate, leaving you owing more than the vehicle is worth.

Check theft rates:
Lower your chances of having your car stolen by researching which makes and models are most likely to get pinched. Older model Toyotas and Hondas get stolen most often, according to the National Insurance Crime Bureau. The least likely to be ripped off? The Ford Taurus and Pontiac Vibe. For more information, visit NCBuy or Esurance.com.

Shop around:
When visiting different dealers, remember the best sticker price doesn't necessary equate with the best deal. Keep in mind that advertised prices generally run $150 to $300 above dealer cost. Make sure to look for the lowest interest rate before signing on the dotted line.


By Marshall Loeb

[elliotorbit]

I disagree with the spend no more than 8% of your gross monthly income on a car payment. If you do the math---Gross Income of $4000 per month which is $48k per year=monthly payment of $320/month. That comes to $19k of payments which doesnt include interest in that total amount. I wonder what choices in cars that leaves you?

Like some of these other b.s. advice, these figures are great if you make $80k or more but for the typical middle class you are suppose to get use to driving a piece of *** and living in a box. give me a break....

[vince551]

Don't forget insurance.com - they seem to offer the most complete, unbiased info on several firms and then put you directly in touch with the firm you want when buying auto insurance.

[shanev137]

Another trick is wait until month end, quarter end, or year end. Most sales managers freak out on quotas during those times and are more willing to deal.

[ioweign]

billpl - You have 5 great tips - I came across the first 2 by accident back in 1988 - I got a great price when my 4 kids started "checking out" the cars in the Show Room.

[billpl-2009]

Here are my 5 tips.

1. Talk to but don't listen to the salesman.
2. Bring your kids with you. Give them lots candy and ice cream and let them play in the cars in the showroom.
3. Get your own financing first. Get a good deal on the car in lieu of a lousy loan....after you get the car...stick IT to them.
4. When you make your offer and the salesman goes to "talk to his boss", get up and leave. The phone deal, later on, will be much better.
5. Don't buy an American made/brand car. Those cars are marked up an extra $2000 each to pay for the retirements of the people who made a laughing stock and junkyard out of the our auto industry.

one extra (bonus) tip:. Don't buy an extended warranty (unless you have a good lawyer or own a gun and aren't afraid to use it)