Question 1

Which is better, buying or leasing my next car?"

Accepted Answer

It depends on factors such as 1) what kind of deal you can make with the dealership, 2) the typical mileage you put on your car, 3) how much you wear down a car, and 4) the primary use for the car.

To determine whether leasing or buying is best, compare the costs and other issues involved in a lease or purchase. The following factors should be considered:
Beginning costs
Continual costs
Total costs
Is there a possibility of deduction of any of the costs due to the car being used for business
How important is it to have ownership of the car

Question 2

When buying a car, how can I get the "best buy"?"

Accepted Answer

You first need to decide on the type, size and options of the car you would like (such as manual, automatic windows, airbags).

You then need to decide what the car dealer has to pay for the car of your choice - the "invoice cost". The difference between the sticker price and the invoice price can be negotiated.

You can obtain this information two different ways. The best way is to look at an auto pricing service supplied by a consumer group or an auto magazine. For instance, Consumer Reports New Car Price Service (800-933-5555), at a price of $12 per model will give you details of the invoice price and the sticker price that can be adjusted for options or rebates as well as tell you how to use the data for negotiating. This is the best way because it gives you the most recent information.

Another way is to use pricing guides that can be found on the Internet. Two popular sites are Intellichoice (www.intellichoice.com) or Edmund's New Car Prices (www.edmunds.com). You may also be able to obtain these books at the library and they will give you an idea about the information that you need instead of exact data.
 
If you have a trade-in, you will want to find the value of that car too. You can use the N.A.D.A. Official Used Car Guide (check your local library or www.nada.org) to look up your used car.

Now it's time to begin negotiating with dealers. Because you know the invoice price, you can use that information to bargain for the lowest mark-up from the dealer's cost.

An amount like $300 to $500 above the dealer's cost is a sensible mark-up, unless the car you want to buy is either difficult to get or very popular.

Any attempts by the dealership to sell you rustproofing, undercoating, or other extras should be refused. You may want to invest in an extended warranty, depending on the model's repair history.

Question 3

How can I negotiate for a new car?

Accepted Answer

Keep in mind that you are not just looking for a car. You also have to select a dealer with whom you will continue a long-term relationship with, as you usually have to service your car at the dealership. If you aren't comfortable with the dealership, go somewhere else.

A good time to try for a good bargain on a car is the last Saturday of September, October, or December.

Before you start looking for a car, learn about the financing options. You can be prepared when the dealer starts to discuss financing if you are aware of what the banks are charging.

Some points you will want to highlight during the negotiations are:
You are aware of the exact model and options you want
You are shopping around and will get quotes from other dealerships
You will not be talking about financing or trade-ins until the dealer has given an offer and make sure not to mention a trade-in until the price has been negotiated
You are fully aware of the invoice cost of the car
Lastly, go to other dealerships even if you think you have a great price.

Question 4

Do I negotiate on a car lease the same as I could on a car purchase?

Accepted Answer

Like a loan, the monthly lease payment is reliant on the term of the lease, the implied interest rate and the initial "purchase price" of the car. The "lease-end" or "residual" value varies from a loan, but is still important. This is the value that is expected at the end of the lease term.

You are paying the difference between the initial purchase price and the residual value in a lease. The lowest purchase price should be negotiated, which will lower the cost of leasing. If you don't intend to buy the car at the end of the lease term and it is closed-end, you might want to negotiate a higher residual value. Make sure that your expected mileage during the lease aligns with the allowed mileage in the agreement. If it doesn't, you may pay significant penalties when you turn the vehicle back in to the dealer.

Question 5

What is included in the initial costs of leasing a car?

Accepted Answer

Learn what the total initial costs will be when determining if you want to lease or buy. You will use this total amount to compare to the cost of buying.

Initial costs are the amount you will need to come up with for the down payment when you lease a car. The security deposit, the first and last lease payments, the "capitalized cost reductions," the sales taxes, title fees, license fees, and insurance are included. Usually the initial costs amount to less than the down payment that is necessary to purchase a car. During the bargaining with the dealer, all initial costs are open for negotiation.

The Lessor must disclose all up-front, continuing, and ending costs in a standard, understandable format according to the Federal Consumer Leasing Act.

Question 6

What should I ask about the car lease?

Accepted Answer

Here are a few questions that should be answered before you sign a car lease:
 
What types of leases are obtainable and what are their differences? (Two were explained previously, but dealers may have variations.)
What will the initial costs of leasing be?
What will the continuing costs of leasing be?
Will my initial cost or continuing costs decrease due to a trade-in?
Can I exceed the specific mileage in my lease?
If I take an early termination or a purchase option, how will my mileage allowance be enforced?
If I fall behind in my payments or want to stop leasing, can I sublease?
If I want to terminate my lease before the agreement is up, what happens?
Do I have options at the end of my lease?
What can I expect to pay at the end of the lease?

Financial Guide

Which is better, buying or leasing my next car?"

When buying a car, how can I get the "best buy"?"

How can I negotiate for a new car?

Do I negotiate on a car lease the same as I could on a car purchase?

What is included in the initial costs of leasing a car?

What should I ask about the car lease?

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