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Car Buying and Leasing
Years ago when I was preparing to purchase my first new car, I came to realize that buying a car is quite different than buying a refigerator from Sears.
I discovered that the price paid was not the price on the window sticker and that customers could pay different prices for the same car, depending on how knowledgeable they were about car buying, and how skilled they were at haggling.
I learned that there are good dealers and bad dealers, and they don't put signs in their showroom windows saying which kind they are.
I also learned that car salespeople were better experienced, skilled, even trained, to make sure I was one of the customers who paid the highest price — and yet make me feel I got a great deal.
I found that it was easy to make regrettable mistakes for which there was no recourse. I realized the dealer wasn't going to help me avoid mistakes. This was my job.
I also found that friends and associates, who proclaimed experience and knowledge about car buying, were full of misinformation, limited knowledge, and bad advice. I learned not to depend on them.
Skip ahead to 1995, after many years of car buying and leasing experience combined with business, finance, and automotive industry knowledge, I began sharing my expertise by way of the Internet. I created my first, and most popular web site, LeaseGuide.com, to teach consumers about car leasing.
New Table of Contents
My Intentions Are Good
What This Lens is About
Although my lens will take on the characteristics of a tutorial about how to intelligently buy and lease automobiles, it will not be especially structured or neatly ordered, and I may even take off on a wild tangent or two as the mood occurs.
My only objective is to produce something useful and worthwhile, and maybe have a little fun too. If you happen to learn something you didn't already know, that's great. If you also enjoyed it, that's even better.
My only objective is to produce something useful and worthwhile, and maybe have a little fun too. If you happen to learn something you didn't already know, that's great. If you also enjoyed it, that's even better.
Common Misunderstandings About Car Buying and Leasing
I thought I would start by making a list of some of the most common myths/misunderstandings about car buying and leasing. These come from years of participating in automotive consumer discussion groups and emails/comments/questions to my web sites and blogs. I'll discuss each item further in later posts.
1. Invoice price is what a car costs a dealer
2. Dealers finance loans and leases, and approve customers' credit
3. Car buyers have a 3-day grace period to get out of deal
4. Leases are based on sticker price and can't be negotiated
5. Leases are a dealer scam and are more profitable than loans
6. Dealers pay off upside down loans and leases on trades
7. Insurance companies pay off upside down loans and leases if a vehicle is totaled or stolen
8. Most cars are about the same in quality, reliability, workmanship, and cost of ownership
9. Car leasing is about the same as apartment renting or car rental
10. Dealers give big discounts to cash customers
11. A $300/month lease is better than a $600/month loan for the same car
12. A dealer can't take your car back a month after you signed papers
13. Car dealers are owned and operated by car manufacturers
14. The best time to buy a new car is at the end of the month, or end of the model year
15. The best finance rates come from banks, loan companies, and credit unions
1. Invoice price is what a car costs a dealer
2. Dealers finance loans and leases, and approve customers' credit
3. Car buyers have a 3-day grace period to get out of deal
4. Leases are based on sticker price and can't be negotiated
5. Leases are a dealer scam and are more profitable than loans
6. Dealers pay off upside down loans and leases on trades
7. Insurance companies pay off upside down loans and leases if a vehicle is totaled or stolen
8. Most cars are about the same in quality, reliability, workmanship, and cost of ownership
9. Car leasing is about the same as apartment renting or car rental
10. Dealers give big discounts to cash customers
11. A $300/month lease is better than a $600/month loan for the same car
12. A dealer can't take your car back a month after you signed papers
13. Car dealers are owned and operated by car manufacturers
14. The best time to buy a new car is at the end of the month, or end of the model year
15. The best finance rates come from banks, loan companies, and credit unions
A Dealer's Best Deal is Never His Best Deal
But How Do You Know?
When a new-car dealer tells you he's giving you his best deal, it is almost never his best deal. Other customers may have already gotten better deals than you because they were more knowledgeable or had better negotiating skills.
Dealer's will always make you feel that any deal you get is an outstanding deal. It's part of the game.
Car buyers should always do price research before meeting with a dealer about a car. One of the best strategies is to get free price quotes from a number of online pricing services, such as Edmunds, CarsDirect, Yahoo! Autos
, and Automotive.com
.
By getting price quotes from multiple sources, you can get a good feel for the price you'll have to pay. Of course, you might be able to negotiate and get even better prices.
Dealer's will always make you feel that any deal you get is an outstanding deal. It's part of the game.
Car buyers should always do price research before meeting with a dealer about a car. One of the best strategies is to get free price quotes from a number of online pricing services, such as Edmunds, CarsDirect, Yahoo! Autos
By getting price quotes from multiple sources, you can get a good feel for the price you'll have to pay. Of course, you might be able to negotiate and get even better prices.
What is an "Up" ?
You Are an "Up"
Car dealer sales people have their own language. For example, a "roach" is a potential customer with bad credit, who will never get approved to get a car loan.
So what is an "up", in salesman vernacular?
I'm sure you've noticed all the salespeople hanging around the front door of a dealer's showroom as you drive up. As soon as you get out of your car, one of them pounces on you. How do they decide which one?
It's a fair and democratic rotation process. They take turns and the next guy in line is up for his turn with the next customer. By some twist of logic, the potential customer then becomes his "up."
"Hey Joe, your up don't look like no roach to me. Bet you can talk him into a full pop deal."
So what is an "up", in salesman vernacular?
I'm sure you've noticed all the salespeople hanging around the front door of a dealer's showroom as you drive up. As soon as you get out of your car, one of them pounces on you. How do they decide which one?
It's a fair and democratic rotation process. They take turns and the next guy in line is up for his turn with the next customer. By some twist of logic, the potential customer then becomes his "up."
"Hey Joe, your up don't look like no roach to me. Bet you can talk him into a full pop deal."
"We'll Pay Off Your Old Car Loan"
What's the Catch?
Car dealers often advertise that if you buy a new car from them and trade in an old car, they will pay off your old loan.
This may be true, but what if you owe more on your old car loan than the car is worth. This is a trap that inexperienced car buyers frequently get themselves in to. It's called being "upside down."
The difference between the loan balance and the value of the vehicle is called "negative equity."
What your dealer may not tell you is that he simply adds the negative equity amount into the loan for the new car. In a sense, you end up paying off two loans at once.
So what's the problem? For one, your new payments are higher. But, more significantly, you are going to be upside down on your new car for most of the time of the loan. This makes it more difficult to sell or trade again in the future. Worse, if your car is stolen or totaled in an accident, you will be responsible for paying the negative equity after your insurance has paid for the value of the car. Ouch!
In short, it's not wise to trade a vehicle for which you are upside down on your loan. Dealers are not doing you any favors by paying off your old loan and rolling the negative balance into your new loan.
This may be true, but what if you owe more on your old car loan than the car is worth. This is a trap that inexperienced car buyers frequently get themselves in to. It's called being "upside down."
The difference between the loan balance and the value of the vehicle is called "negative equity."
What your dealer may not tell you is that he simply adds the negative equity amount into the loan for the new car. In a sense, you end up paying off two loans at once.
So what's the problem? For one, your new payments are higher. But, more significantly, you are going to be upside down on your new car for most of the time of the loan. This makes it more difficult to sell or trade again in the future. Worse, if your car is stolen or totaled in an accident, you will be responsible for paying the negative equity after your insurance has paid for the value of the car. Ouch!
In short, it's not wise to trade a vehicle for which you are upside down on your loan. Dealers are not doing you any favors by paying off your old loan and rolling the negative balance into your new loan.
List of Links
Web sites of interest to smart automotive consumers
- Car Lease Guide
- Learn how car leasing works and how to get good deals.
- Used Car Buying Advice
- Learn how to find and buy cheap used cars. Learn about choosing the right car, financing, and scams.
- First Car Guide for Firt-Time Car Buyers
- Teens and other first-time car buyers learn how select, buy, and finance the right first car. Learn about credit, loans, leasing, insurance, and maintenance.
by ahearn
Al Hearn is author, consultant, and expert advisor to automotive consumers. He creates and produces web sites, blogs, and information p... (more)
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