How To Buy A Car
The New Year is just a few days away and car dealerships are in the process of introducing incentives to try to lure consumers into showrooms.
Purchasing a car can be exciting, but it can also be extremely stressful if buyers aren't properly prepared. Craig Thor Kimmel, an automotive consumer advocate and lemon law attorney, offers viewers of The Early Show advice on buying a car without falling for any tricks.
Normally at this time of year, Kimmel explains, there's an oversupply of vehicles on the market, and dealers have to get rid of cars. Traditionally, he tells co-anchor Harry Smith, the auto industry uses the time just after the holidays to jump start sales, beginning with international car shows that travel the country, and with incentives on purchases. The incentives usually consist of any combination of rebates, low interest rate financing, options packages at reduced prices and, in some cases, extended warranty protection.
Many times incentives make consumers forget about trying to get the best price so that dealers end up selling cars at higher prices than they would have without the incentives, Kimmel cautions. You have to be even more careful when a load of incentives obscure what you're really getting. Don't just assume that a rebate or low-interest financing offer is enough to get you to buy. There are other ways to determine that you're getting a true deal and not signing into a scam.
Kimmel stresses that the consumer has the most important tool in negotiations: the dollar. The bottom line is that car companies need to move product off of lots.
Kimmel recommends four main steps before you hit the road. If followed, these tips can prevent a consumer from getting caught in a car scam.
KNOW THE MSRP
The MSRP is the Manufacturers Suggested Retail Price and is reflected on the window sticker of the car (the sticker is government mandated). You can also find it out on Web sites such as Edmunds.com.
The word "suggested" is important, because dealers negotiate price in every transaction and that MSRP price is nothing more than a guide for the consumer, a jump-off point for starting negotiations.
Knowing the MSRP before going to the dealer will let you know what that car should cost, according to the manufacturer.
All itemized options for the vehicle must be listed, too, so it gives the consumer a way of comparing various cars on a lot without relying solely on what the salesman says.
For example, you may see a car with 4-wheel drive that is offered in 2-wheel drive as well. The MSRP will reveal the prices for both options. There are cases where the salesman might misrepresent the vehicle as having options such as a V8 engine, which is usually a higher-cost item when, in fact, the car has a smaller engine.
Because there is no shortage of mistakes made in car sales transactions by dealers, the consumer should always know the MSRP and compare prices and options only by using the MSRP. Consumers should be able to purchase for a price under the MSRP, especially at this time of year. If a dealer is unable to go under the MSRP, walk out.
KNOW YOUR CREDIT RATING
Buying a car is an expensive proposition.
Most consumers finance their purchases by taking out a bank loan. The problem is that banks lend money based on each individual's credit score. If your credit score is excellent, banks will lend money at the lowest interest rate available, and not just one bank, but any bank. A low credit score means that it is riskier for banks to lend money, and those great interest rates won't be available. The difference between a low interest rate and a high one can double or triple interest payments.
Consumers should know what to expect before shopping. Before even going to look at a car, buyers should visit their bank or go directly to GMAC, Ford Credit, or any other large lender to find out how they shape up. They should learn what their credit score is, and what the lowest interest rate they qualify for is, over the span of time they want to pay off your purchase. Consumers also have to see if the best rates apply to what they want to buy, and for how long the lenders want to finance the purchase.
Most consumers aren't aware that the dealer makes a large portion of its profits on the interest rate if you finance through the dealership. The higher the rate, the greater the profit. Knowing ahead of time what you qualify for will enable you to negotiate with the dealer and demand that you get the rate that you were expecting and no more. If the dealer won't give you the lowest rate, either go to another dealership, or finance through the lender that told you in the beginning of the process what you qualify for. You could save thousands of dollars. This is a consumer alert because, in many states, dealers do not have to disclose that they are making money on the financing. So do your homework.
CHECK THE CAR BEFORE YOU BUY IT
Test drive it and make sure every single feature is the way you want it to be. Examine the car in daylight, never at night. Look under the hood and make sure, for example, that if it's supposed to be a V8 engine, that it really is. Many times, consumers are misled because they are buying a feature, and the car doesn't have that feature. Most people think they are buying something fresh out of a box. Because that pressure to make a sale is on, the salesman will generally tell the consumer anything to get that signature on the dotted line. Once the contract is signed, it's generally yours, so it's necessary to check every single detail on and in the car to make sure it's what you wanted.
UNDERSTAND ALL THE DETAILS OF THE CONTRACT
Because there's such fierce competition for customers, dealers will do everything possible to sell a car right on the spot. They want consumers to sign papers immediately. One problem with this is that the dealer might say things to get the customer to sign without reading the contract.
They could say the customer is only bound to pay a certain interest rate for six months, when it's actually 60 months. Buyers need to understand that, in the contract, they are obligated to pay a specific interest rate for a certain amount of time. A consumer is bound when they sign, so they must read carefully.
Another scam that occurs often is when consumers buy a car and are contacted days or weeks later and told that, due to some unforeseen problem with their credit or with a bank error, they must come back to sign a new contract, always under terms that result in a higher priced car. This scam is called "Spot Delivery with Yo Yo," where the consumer is told to return the car at a later date.
Bring someone with you when you sign, and never rely solely on the dealer to explain the terms of the contract. Always read it.
Never relax when you buy a car. If the situation seems too easy and too relaxed, you may not be paying close enough attention, so go over the details again. It is a binding contract between you and the dealer. Buyers must read the terms and conditions. It is necessary to read what you sign because it tells you what you are obligating yourself to do and it tells you how you may enforce that contract if you need to.