4106 22865 05 C05 P132-172.Pdf

Topics: Price, Loan, Automobile Pages: 96 (30123 words) Published: May 14, 2013


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Making Automobile and Housing Decisions


Implement a plan to research and select a new or used automobile. Decide whether to buy or lease a car.

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Identify housing alternatives, assess the rental option, and perform a rent-or-buy analysis. Evaluate the benefits and costs of home ownership and estimate how much you can afford for a home. Describe the home-buying process.

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Choose mortgage financing that meets your needs.

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Buying an automobile is probably the first major expenditure many of us make. The car purchase is second only to housing in the amount of money the typical consumer spends. Because you’ll buy a car many times during your life—most people buy one every 2 to 5 years—a systematic approach to selecting and financing a vehicle can mean significant savings. Before making any major purchase, whether it’s a car, house, or large appliance, consider some basic guidelines to wise purchasing decisions. • • • •

Research your purchase thoroughly, considering not only the market but also your personal needs. Select the best item for your needs. Buy the item after negotiating the best price and arranging financing on favorable terms. Be sure you understand all the terms of the sale before signing any contracts. Maintain your purchase and make necessary repairs promptly. Exhibit 5.1 summarizes the steps in the car-buying process.

Choosing a Car
Sport utility vehicle (SUV) or pickup truck? Sedan, convertible, or coupe? Hybrid, diesel, or gas? Car buyers today have more choices than ever before, so more than one category of

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10 Steps to Buying a Car

These 10 steps summarize the car-buying process discussed in this chapter. 1. 2. Analyze how much car can you afford. Choose the best way to pay for your new car—cash, financing, or lease. Consult your insurance agent to learn the annual premium on various cars. Those with high premiums are likely popular with thieves, have poor crash worthiness, or are considered sports cars likely to be driven more aggressively. Select the right car for you in terms of size, performance, safety, and styling. Choose at least three “target cars” to consider buying. Decide on a price based on dealer’s cost for the car and options, plus a markup for the dealer’s profit, minus rebates and incentives. Test-drive the car at least once, both on local streets and on highways. Get a used car inspected by a qualified independent mechanic. Decide whether to trade in your used car or sell it yourself. Begin negotiations with three or more dealers as necessary. Hold firm on your target price before closing the deal. Review and sign contracts with the dealer’s finance manager, avoiding pressure to buy unnecessary extras. Consider alternate buying strategies such as Internet buying services, or faxing your offer to local dealerships for competitive bids.

3. 4. 5. 6. 7. 8. 9. 10.

Source: Adapted from Phil Read, “10 Steps to Buying a New Car: What Everyone Should Know,” Edmunds.com, http://www.edmunds.com/advice.

With Bankrate.com’s Auto Loan calculators, you can evaluate autofinancing options, then go to the rate page to find the lowest auto loan rates in your area. Link at http://thomsonedu.com/ finance/gitman.

vehicle may be of interest. A good way to start your research is by tapping into the many available sources of information about cars, their prices, features, and reliability. Industry resources include manufacturers’ brochures and dealer personnel. Car magazines, such as Car and Driver, Motor Trend, and Road and Track, and consumer magazines, such as Consumer Reports and Consumer Guide, regularly compare and rate...
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