New Car Buying Guide

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Buying a new car is usually the second most expensive purchase many
consumers make, after the purchase of their home.

This guide, which includes a checklist and a worksheet, is intended to
help give you the information you need to make a smart deal on a new car.

Buying Your New Car


Before you step into a dealer's showroom, it helps to know what car
model and options you want and how much you are willing to spend. That way, you
are less likely to feel pressured into making a hasty or expensive decision
and more likely to get a better deal. To help you shop, you may want to
consider the following suggestions:

* Check publications at a library or bookstore that discuss new car
features and prices. These may provide information on the dealer's costs for
specific models and options.

* Shop around to get the best possible price by comparing models and
prices at dealer showrooms. You also may want to contact car buying services
and broker buying services and make comparisons there.

* Plan to negotiate on price. Dealers may be willing to bargain on
their profit margin, which is generally between 15 to 20 percent. This is
usually the difference between the manufacturer's suggested retail price and
the invoice price. To help you do this, refer to the worksheet listed at the
end of this brochure.

* Consider ordering your new car if you do not see the car you want on
the dealer's lot. This usually involves a delay, but cars on the lot
frequently have options you do not want -- which add considerably to the

Learning the Terms


To give you a better sense of the negotiating room you have when buying
your car, it helps to understand the following terms, listed here in order of
increasing price:

INVOICE PRICE is the manufacturer's initial charge to the dealer. This
is usually higher than the dealer's final cost because dealers often receive
rebates, allowances, discounts, and incentive awards. The invoice price
always includes freight (also known as destination and delivery). If you are
buying a car based on the invoice price (for example, "at invoice,"
"$100 below invoice" "two percent above invoice") be sure
freight is not added to the sales contract.

BASE PRICE is the cost of the car without options, but includes
standard equipment, factory warranty, and freight. This price is printed on
the Monroney sticker (see below).

MONRONEY STICKER PRICE, which appears on a label affixed to the car
window and is required by federal law, shows the base price, the
manufacturer's installed options with the manufacturer's suggested retail
price, the manufacturer's transportation charge, and the fuel economy
(mileage). The label may not be removed by anyone other than the purchaser.

DEALER STICKER PRICE, usually on a supplemental sticker, is the
Monroney sticker price plus the suggested retail price of dealer-installed
options, such as additional dealer mark-up (ADM) of additional dealer profit
(ADP), dealer preparation, and undercoating.

Financing Your New Car


If you decide to finance your car, you have the option of checking the
dealer's rate against banks, credit unions, savings and loans institutions,
and other loan companies. Because interest rates vary, shop around for the
best deal and compare the annual percentage rates (APR).

Sometimes, dealers offer very low financing rates for specific cars or
models, but may not be willing to negotiate on the price of these cars. In
addition, they may require you to make a large down payment to qualify for
these special interest rates. With these conditions, you may find that it is
sometimes more affordable to pay higher financing charges on a car that is
lower in price or to purchase a car that requires a smaller down payment.

Some dealers and lenders may ask you to buy credit insurance, which
pays off your loan if you should die or become disabled. Before you add this
cost, you may want to consider the benefits available from existing policies
you may have. Remember, buying credit insurance is not required for a loan.

Trading in Your Old Car


After getting your new car for the best possible price, only then
discuss the possibility of a trade-in. First, however, find out the value of
your old car. You may want to check the library for references and
periodicals that can tell you how much your car is worth. This information
may help you get a better overall price from the dealer. Remember, too, that
though it may take longer, you generally will get more money by selling the car

Considering a Service Contract


Service contracts that you may buy with a new car provide for the
repair of certain specified parts or problems. These contracts are offered by
manufacturers, dealers, or independent companies and usually initially run
concurrently with the manufacturer's warranty. Remember: a warranty is
included in the price of the car; a service contract costs extra.

Before deciding to purchase a service contract, read it carefully and
consider some of the following questions:

* What is the difference between the coverage under the warranty and
the coverage under the service contract?

* What repairs are covered?

* Who pays for the labour? The parts?

* Who performs the repairs? Can repairs be made elsewhere?

* How long does the service contract last?

* What is the cancellation and refund policy?

For Further Information

In addition to checking publications about new car features and prices
when buying a car, you may find it helpful to read other Federal Trade
Commission brochures. These include: "Car Ads: Low Interest Loans and
Other Offers," "Service Contracts," "Warranties,"
"Buying a Used Car," and "A Consumer Guide to Vehicle Leasing."
For a free copy write: Public Reference, Federal Trade Commission,
Washington, D.C. 20580. For further information, you may want to write to:
Division of Marketing Practices, Federal Trade Commission, Washington, D.C.
20580. Although the FTC generally does not intervene in individual consumer
disputes, it can take action if there. is evidence of a pattern of deceptive
or unfair practices.

Checklist for Buying a New Car

You are likely to get a better deal on a car if you know beforehand exactly
what you are looking for and what you are willing to spend. Therefore, before
signing a sales contract with a car dealer, you may want to:

* Decide which car model and specific options you want.

* Find out the invoice price (the lowest price)of the model and each
option you want.

* Decide how much you are willing to pay the dealer, if anything, above
the invoice price.

* Compare final sales prices with other dealers and buying services.

* Compare financing costs from various sources, such as credit unions
and savings and loans institutions, with those of car dealers.

* Find out the value of your old car, independent of a dealer's
trade-in offer.

* Decide if you need an optional service contract or credit insurance.

Worksheet for Buying a New Car


To help you negotiate the price of your next new car, you may want to
use this worksheet to establish your bargaining room before you talk with a


Base Price Invoice Price* Retail Price


Transmission: ______________ ____________

Automatic ______________ ____________

Stick ______________ ____________

Air Conditioning ______________ ____________

Engine: ______________ ____________

Size ______________ ____________

Diesel ______________ ____________

Sound System: ______________ ____________

AM-FM ______________ ____________

AM-FM Cassette ______________ ____________

Power Brakes ______________ ____________

Power Steering ______________ ____________

Power Locks ______________ ____________

Power Seats ______________ ____________

Rear Window Wiper/Washer ______________ ____________

Rear Window De Fogger ______________ ____________

Luggage Rack ______________ ____________

Tyres: ______________ ____________

Full-Size Spare ______________ ____________

Steel Belted Radials ______________ ____________

Mirrors: ______________ ____________

Dual ______________ ____________

Remote ______________ ____________

Passenger Visor ______________ ____________

Other: ______________ ____________

* The invoice price may be obtained by looking at the dealer's
invoice or by reviewing new car publications.

FTC Headquarters

6th & Pennsylvania Avenue, N.W. Washington, D.C. 20580 (202)
326-2222 TDD (202) 326-2502

FTC Regional Offices

1718 Peachtree Street, N.W., Suite 1000 Atlanta, Georgia 30367 (404) 347-4836

10 Causeway Street, Suite 1184 Boston, Massachusetts 02222-1073 (617)

55 East Monroe Street, Suite 1437 Chicago, Illinois 60603 (312)

668 Euclid Avenue, Suite 520-A Cleveland, Ohio 44 114 (216) 522-4207

100 N. Central Expressway, Suite 500 Dallas, Texas 75201 (214) 767-5501

1405 Curtis Street, Suite 2900 Denver, Colorado 80202-2393 (303)

11000 Wilshire Boulevard, Suite 13209 Los Angeles, California 90024
(213) 209-7575

150 William Street, Suite 1300 New York, New York 10038 (212) 264-1207

901 Market Street, Suite 570 San Francisco, California 94103 (415)

2806 Federal Bldg., 915 Second Ave.
Seattle, Washington 98174 (206) 553-4656

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