Buying and Maintaining a Car | State of California – Department of Justice

Buying and Maintaining a Car

Buying a car – whether new or used – is one of the biggest purchases we make. It is important to take your time in deciding which car to buy and not be pressured by anyone who simply wants your money or your signature on a contract. Once you decide on the vehicle that best fits your needs and budget, shop around for the best price, know the vehicle’s history (if used), and be prepared to walk away from the deal if your questions are not being answered. Before you buy or lease a vehicle:

  • Know the value of the vehicle by checking vehicle pricing guides, newspaper ads, the Internet, or by comparison shopping. Popular publications include the National Automobile Dealers Association’s (NADA) Guides, Edmunds, Kelley Blue Book, and Consumer Reports. Some may charge for this information.
  • Always read and understand your purchase contract. Carefully review the vehicle’s price, fees, and finance charges. Don’t sign anything you don’t understand.
  • Make sure you understand the manufacturer’s warranty or any extended warranties offered by the dealer at extra cost. Because the cost of an extended warranty can be expensive, you should find out what it covers before you buy it.
  • When getting a loan, compare interest rates. You may pay more money when a dealer obtains a loan on your behalf than if you go directly to a bank or lender.
  • Protect yourself from fraud and unsafe used vehicles. The National Motor Vehicle Title Information System (NMVTIS) provides important information about a used vehicle’s history. You can obtain a NMVTIS report at www.vehiclehistory.gov. Licensed dealers selling used cars must have a NMVTIS report to show you.
  • Understand the restrictions when buying an out of state vehicle: the car must be certified to meet California smog laws to be registered in California. See Buying an Out of State Vehicle on the California DMV website.
  • Find out if a vehicle has a safety recall notice and whether it has been repaired by checking the National Highway Traffic Safety Administration and Center for Auto Safety websites.

Car Buyer’s Bill of Rights

The Car Buyer’s Bill of Rights gives you certain protections when you buy a new or used vehicle from a licensed California dealer:

  • Buyer Disclosures. No charges may be added to your contract without full disclosure and your consent. Dealers must give you an itemized price list for optional “add-on” items such as service contracts, insurance, anti-theft devices, or other products.
  • Credit Score Disclosures. If you are obtaining financing from the dealer, the dealer must provide you with your credit score and a written explanation of how it is used.
  • Limit on Markups. When a dealer obtains financing on your behalf, it sometimes adds a hidden markup to increase the interest rate on your loan. The law caps the amount of compensation a dealer can receive from the lender.
  • Certified Used Cars. Used cars advertised as “certified” must meet specific requirements. Dealers must perform a complete vehicle inspection and

Buying a New Car | FTC Consumer Information

A new car is second only to a home as the most expensive purchase many consumers make. According to the National Automobile Dealers Association, the average price of a new car sold in the United States is about $30,000. That’s why it’s important to know how to make a smart deal.

 

Buying Your New Car

Think about what car model and options you want and how much you’re willing to spend. Do some research. You’ll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal.

Consider these suggestions:

  • Check publications and websites 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 in ads and at dealer showrooms. You also may want to contact car-buying services and broker-buying services to make comparisons.
  • Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, often between 10 and 20 percent. Usually, this is the difference between the manufacturer’s suggested retail price (MSRP) and the invoice price.
  • Because the price is a factor in the dealer’s calculations regardless of whether you pay cash or finance your car — and also affects your monthly payments — negotiating the price can save you money.
  • Consider ordering your new car if you don’t see what you want on the dealer’s lot. This may involve a delay, but cars on the lot may have options you don’t want — and that can raise the price. However, dealers often want to sell their current inventory quickly, so you may be able to negotiate a good deal if an in-stock car meets your needs.

Learning the Terms

Negotiations often have a vocabulary of their own. Here are some terms you may hear when you’re talking price.

  • Invoice Price is the manufacturer’s initial charge to the dealer. This usually is higher than the dealer’s final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you’re buying a car based on the invoice price (for example, “at invoice,” “$100 below invoice,” “two percent above invoice”) and if freight is already included, make sure freight isn’t added again to the sales contract.
  • Base Price is the cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker.
  • Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed options with the manufacturer’s suggested retail price, the manufac-turer’s transportation charge, and the fuel economy (mileage). Affixed to the car window, this label is required by federal law, and may be removed only by 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 markup (ADM) or additional dealer profit

Guide to Buying a Used Car

Just because a car isn’t new doesn’t mean it can’t be new to you. Buying a used car can be just as exciting as purchasing a brand new model. Unfortunately, getting a used vehicle can also be just as complicated as figuring out which new car would suit you best. That’s why we’ve compiled this guide to help you.

Set a Budget

Before you can start used car shopping, you should figure out your budget. This will help your process in many respects—including setting the right expectation for the types of used vehicles you can purchase.

There are a few key factors to keep in mind while you’re number crunching.

Personal Budget Factors

It’s very important to have a realistic idea not only of what you can spend, but also of what you should spend on a used car. Just because you can afford it doesn’t mean it’s a good option for you.

It’s generally suggested to spend no more than 20% of your monthly take-home pay on a monthly auto payment. However, this is just a broad recommendation and may not apply to every circumstance.

Keep all your other monthly expenses in mind, such as:

  • Rent or mortgage.
  • Utilities.
  • Groceries.
  • Phone and Internet bills.
  • Student loans/other debts.

If your monthly budget is mostly spent after taking care of necessary bills, it may be more prudent to keep your car payments on the lower side.

Used Car “Hidden” Costs

Owning a vehicle entails more than paying for the vehicle itself. There will be costs associated with your used car other than your monthly auto payment, such as:

  • Your car insurance rate.
  • Various taxes and fees.
  • Your car’s depreciation rate.
  • Gas, oil changes, and other maintenance.

Don’t forget to keep these factors in mind when determining your used car budget.

For more help on putting together the best payment plan for you, check out our used car taxes and fees calculator and browse our guide to creating a budget.

Once you have a solid idea of how much money you can spend on your used car, you can start determining which type of car within that price range will be the best option for you.

Types of Used Cars

There are plenty of used vehicles to go around, and several ways to generally categorize them. When you begin your shopping process, consider these options:

  • Certified pre-owned (CPO) vehicles—The purpose of CPO programs is to alleviate concerns about the condition of a non-new vehicle. Still, the inspections, repairs, and warranties involved in each program vary greatly. Make sure to read our guide on certified pre-owned vehicles for more information.
  • “Second tier” vehicles—These cars may not be the biggest sellers on the lot, but can still be reliable—and much cheaper—regardless of their less-popular manufacturers.
    • i.e. the Honda Accord and Toyota Camry are comparable in quality to the Chevrolet Malibu or Nissan Altima, but can cost much more.

Usage Considerations

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Buying Wrecked Cars To Rebuild And Make Money

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