BBB Tip: Buying a New Car
Milwaukee, Wis. – Buying a car, whether it’s a new one or a used one, can be scary and overwhelming. But it doesn’t have to be! Keep these tips from the Better Business Bureau in mind to make the process as easy and successful as possible.
Before Going to a Dealer
There is a lot you can do to get ready before you even set foot in a dealership. Here are some things you should do so you are an educated and prepared consumer:
- Consider payment options. Take time to consider your payment options. You often have two options: pay for the car in full or finance over time. Choosing to finance the car over time may mean less money upfront, but it increases the overall cost of the car if you are paying interest. If you do decide to finance it, be sure you completely understand the terms of the financing agreement before you sign. For example, ask if you will have to pay any fees if you pay off the loan early. You can shop around for the best loan through third parties like banks and credit unions. Consider being pre-approved for a loan so you have something to compare to the dealer financing. Having an offer in hand will also give you a bargaining point.
- Set a budget. Do not automatically spend whatever you qualify for in a loan. Decide how much money you can spend, based on the maximum amount you have saved up to spend or the maximum down payment and monthly payment you can afford if you are financing the car through a loan. When calculating the cost, be sure to include the price of the tax, title, registration, fees, and insurance. You are responsible for insurance as the purchaser of the car, and the dealer is not obligated to cancel a contract because you find out later you cannot afford to pay insurance. Do not forget to consider factors like how much gas the car will use and how much maintenance and repairs will cost when looking at what impact owning a car will have on your overall budget.
- Leasing? Determine whether buying or leasing the car provides the best value for your money. A lease offers lower monthly payments, little money upfront, and restricted mileage. At the end of the lease the car is returned and the process is repeated. Buying a car requires monthly payments and more money upfront, but once the loan is paid off, you own the car.
- Choose a car model. Check out various models to determine those that are the safest, most reliable, and otherwise suitable. Research and think about the equipment and options the car offers, the safety features you want, the conditions you will be driving in, and any other needs you have in mind for yourself or your family. Will you use it for commuting short distances or taking long road trips? How many passengers must fit comfortably? How long do you want to keep it? Consult resources like Consumer Reports. Consider additional factors like fuel economy, warranties, and operating costs. You should also look into theft rates as they can make your insurance higher. Investigate different cars’ accident history. Narrow your choices to several cars. Do not make the mistake of having your heart set on one car — it may reduce your bargaining power.
- Compare prices online. Look up the prices of different cars on websites like Kelley Blue Book and Edmunds. By doing a side by side comparison of a few models, you can see what each car has to offer for what price. This will also help you determine the value of your trade-in, if you have one. Obtain updated price lists to compare to the dealer costs displayed on the window sticker. You will know how much bargaining room you have on the basic car and individual options. It is important to know the difference between the invoice price (the price the dealer paid for the car) and the sticker price of the car (the desired price the dealer wants you to pay). When comparing prices, also consider different warranties, length of the warranty period and what items are covered by the warranty (this may vary). Check if the warranty includes parts and labor, and for how long. Ask if there are preconditions that you, the buyer, must maintain to qualify for the terms of the warranty.
- Look for rebates. Many rebates are available to all consumers, but some carry eligibility requirements like loyalty bonuses, military status, or trade-in bonuses. Make sure you understand these qualifications to avoid disappointment later.
- Find a dealership. Ask friends and family members for dealerships nearby that they trust and that provided a pleasant experience. Read Business Profiles at BBB.org to see BBB Accreditation status, ratings, reviews, and complaints. Search online for the dealers’ names and the words “complaints” or “reviews” to see what people are saying about them. The dealer should not be pushy. You want a dealer who will make you feel comfortable and informed with all of the available options. Be on the lookout for reviews that mention any bait and switch tactics.
At the Dealership
Remember that an ethical auto dealer will let you take the time you need to make a conscious and thought-out decision. If someone is rushing you and putting pressure on you, you may not want to do business with them.
Here are some things to do during your visit to the dealership:
- Take your time. If you don’t want to make a decision on your first visit, tell the dealer upfront. Let them know you want to take a test drive and will be making your decision on a purchase later.
- Go on a test drive. This is one of the most important things to do! Drive each model you are considering and try to do so in a variety of conditions (driving through traffic, on a highway, and on back roads). Take a test drive checklist with you to examine important characteristics of the car and check out all of the features. While driving, carefully check the brakes, steering, outward visibility, and gear shifting. Turn off the radio and listen to the engine for any noises. Try parallel parking to make sure the visibility is good and you can adjust all mirrors as needed. Ensure all of the dashboard lights are on and the instrument panel is easy to read. Test the back seat for comfort for passengers sitting there and the trunk for ample space and easy access to the spare tire. Don’t be afraid to ask questions. If anybody else will be driving the car regularly, take them with you to test it as well.
- Keep all negotiations separate. Consider questions about financing, service contracts, warranties, trade-ins, or other extras after you have settled on a price for the car. You can let the dealer know you have a trade-in, in order to initiate the appraisal process, but keep the focus on the new car first.
- Determine the price for car. The MSRP (manufacturer’s suggested retail price) sticker price taped to the car window is the amount the dealer is seeking and may be about 10-15% more than what the dealer paid for the car. Tell the salesperson exactly what car and options you would like, and ask for the best price. You may be less likely to get a good price on a more popular car that is in short supply. Make sure you discuss all the options you are interested in and that you are clear on any additional costs associated with the options. If the dealership allows it, consider bargaining for a better deal, and always get the final figure in writing. Shop around and see if other dealers will offer you better prices. Be patient when purchasing a new car. If the first or second offers are not desirable, you must be able to walk away.
- Decide if you are buying from stock or ordering from the factory. Sometimes you will get a better deal for a car already in stock, because the longer a car sits on the lot, the more expensive it is for the dealer. These cars may have expensive options that you neither need nor want. Ask the dealer to remove the option — and reduce the cost — or sell you the car without charging for the option. Sometimes the better deal will come with ordering a car because it is a sure sale and the dealer does not have to invest in the car. Discuss all options to see which works out best for you. Factor in the time you have to wait for a car from the factory into your decision-making.
- Discuss your trade-in. Once you have finalized the price for your new car, move on to discussing the trading in of your old car. Keeping that negotiation separate from the price of the new car will help you stay focused on the actual price of the new car.
- Ask about warranties and service contracts. Make sure the information on your warranty is detailed and includes whether the warranty is full or limited and what is covered, who covers it, and for how long. Read all the details about any additional service contracts and make sure you understand them completely before signing anything. If you are considering an extra-cost service contract, compare it to your warranty closely to check for duplication. Unless the service contract offers free scheduled maintenance or other services, it may not be economical to have a service contract while the warranty is in effect. If you decide to buy a service contract, do some comparison shopping. Buying a service contract through an insurance company, for instance, may save you money.
Signing the Contract
While some dealers may write a three-day cancellation into your contract, there is no blanket three-day cancellation rule (unless your purchase falls within the door-to-door rule because you received a promotion to go in for a test drive). Once you sign the contract, you are legally bound to buy the car unless the contract specifically states any options to cancel, so it is imperative that you read and understand everything before signing.
If a clause concerns you, ask to have it explained or changed. Double-check all the figures to make sure they are what you agreed to. Make sure there are no blank spaces on the contract and all verbal agreements are in writing in the contract, as oral promises may not be enforceable.
At the time of the purchase, make sure you take with you the bill of sale, purchase agreement, loan agreement, and registration papers. Make sure all guaranties, warranties, or service contracts are in writing and that you understand them. If there is a deposit due at signing, ask whether it is refundable, and under what circumstances, and be sure that is spelled out in the contract.
Before You Drive Away
Before you sign any final papers and drive away from the dealership in your new car, take a few minutes to inspect it carefully.
Check over the exterior of the car for any damage, such as “dings” or scratches. Look for a glossy and even finish and check that body panels are aligned evenly and the trim is secure.
Confirm that the spare tire and equipment are where they should be, that the tire is inflated to manufacturer specifications, and that all the hubcaps and body moldings are in place. Ask the salesperson to demonstrate each accessory — such as setting the clock or turning on the bright lights. Also, ask how to check the oil, coolant, transmission fluid, and battery. Check that all electrical items function properly and take the car for a quick test drive.
Check the Vehicle Identification Number on the car to ensure it matches the one on the contract. Make sure you have the owner’s manual, warranty forms, and all legal documents.
After the Sale
Be sure to keep all of your paperwork for the vehicle, including the warranty and loan papers, in a safe place.
In the United States, you may be protected by “lemon laws” in your state. You can contact your state’s Attorney General’s office to find out about the law where you live. BBB Auto Line also has information on the lemon laws in each state, as well as a dispute resolution program to help you with your lemon law complaint.
In Canada, there are no ‘lemon laws,’ but purchasers of new and late model cars can access CAMVAP – the Canadian Motor Vehicle Arbitration Plan. You can find more information about qualifications and exclusions for this binding arbitration program at www.camvap.ca.
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For more information or further inquiries, contact the Wisconsin BBB at www.bbb.org/wisconsin, 414-847-6000 or 1-800-273-1002. Consumers also can find more information about how to protect themselves from scams by following the Wisconsin BBB on Facebook, Twitter, Instagram and YouTube.
ABOUT BBB: For more than 100 years, the Better Business Bureau has been helping people find businesses, brands and charities they can trust. In 2019, people turned to BBB more than 183 million times for BBB Business Profiles on more than 5.8 million businesses and Charity Reports on 11,000 charities, all available for free at bbb.org. There are local, independent BBBs across the United States, Canada and Mexico, including BBB Serving Wisconsin which was founded in 1939 and serves the state of Wisconsin.