When I tell people that I get paid to travel around the world, drive nice cars, then get paid to write about them, they invariably say, “How do I get that job?” The next thing they do is ask for advice about buying their next car, which they routinely ignore—because their minds were made up before they asked me. They wanted confirmation, not advice.
Fine, well, here I’m giving you advice whether you asked for it or not. Let’s say that your old clunker—after being bailed out by Tom and Ray Magliozzi a few times—is now on its last legs and you really do need to buy a new one. What steps should you take, and in what order? Well, try this—or don’t, and I’ll be there saying “I told you so” later down the long and winding road.
Decide how much you have to spend, and what kind of car you really need. The former is fairly easy, the latter hard. On the budget end, keep in mind that buying the actual car is only one facet of the cash drain—whatever you buy is going to need maintenance, and will require regular infusions for insurance and registration. It will also lose value the moment it’s clear of the dealer parking lot. That’s called depreciation.
People tend to buy more car than they actually need. It's a decision made from the heart, not the head. If you think you need a truck because you make once-a-year trash runs, think again. Borrow the truck and buy a car. All-wheel drive isn't essential if you make once-a-year ski trips, either. Don’t follow fashion. Just because everyone on your block (and 60 percent of the American public) bought an SUV or pickup doesn’t mean you have to follow suit. My neighbor, out walking his dog, told me his daughter wanted a SUV. I told him the model she wanted was rock bottom in every measure. Guess what? She got it anyway. "She loves it," dad said.
Having kids does not immediately require a Tahoe or Expedition with three rows of seats. We made do with a Honda Fit, and nobody complained. Big vehicles are expensive to buy and keep fueled, plus Mother Nature would rather you got something else that didn’t spew global warming gas. Test something smaller than the car you were thinking of and give it active consideration.
Do your research. Consumer Reports reliability ratings are one of best guides for how cars do over the long haul, and JD Power’s Initial Quality Studies measure how they come out of the factory. The most recent IQS survey says the Koreans are unbeatable, domestic brands (Ford, Lincoln, Chevrolet, Dodge and Buick) above average, and the Porsche 911 is the top scorer, for the second year in a row. This does not mean you should run out and buy one. An unmarried California plastic surgeon who subscribes to car magazines? It’s for you.
Most car purchases today start online, and in general that means that buyers entering the showrooms are more informed than they used to be. According to digital marketing agency Adtaxi, an amazing 86 percent of would-be buyers go on their computers before setting foot in a dealership. In addition to looking at the car ratings, look at the many sites that help you fit a car into your budget. Kelley Blue Book, for instance, offers Five-Year Cost to Own information. A sedan that cost $19,272 to buy will actually end up costing $35,998 over that period. Sobering, isn’t it? Some $13,365 of that is depreciation. In general, luxury cars depreciate the most in both the short and long term.
Get ready to negotiate. You need to be in a position of strength here, and that means looking up the target car’s invoice price, which is what the dealer paid for it. Here’s one of many websites that does that for you. The MSRP is the manufacturer’s suggested retail price, and you want to arrive at a price that’s closer to invoice than to MSRP. Also look up the average transaction price (ATP), which will give you a sense of where most purchases of that model are ending up. Check for incentives and rebates, and keep an eye out for hidden fees. Price creep is an issue. No, you don’t want Scotchgard or undercoating. Dealers will give you price quotes via email.
Kick the tires. Don’t literally do that, but most people who do their research online end up making the purchase at an actual dealership—because they want to see and drive before buying. You should know exactly what you want before you make that trek, and be prepared to visit several dealerships (at least electronically) looking for the best deal on it. And don’t feel confined to what’s on the lot (which is usually listed online). You can order the car in the exact configuration you want, and the salesperson can look around to find one in those specs at other dealerships. Waiting a little while for delivery is OK—don’t feel like you’re in a rush, even if you are.
What to do with Old Reliable? Check local Craigslist or Facebook Marketplace ads to get a sense of what comparable cars are going for, making sure the condition and mileage is close to yours. Often, the lower price with the trade in is about the same as the amount you could have negotiated without the car. Auto dealers make 25 percent of their profits from used cars, the same percentage as used cars. The difference between what they pay you and what they realize can be thousands of dollars. For that reason, I’d consider not offering a trade-in, and just drive a hard bargain. Sell your old car yourself, or get someone reliable to do it for you.
Pay the piper. A full discussion of sales versus leasing would take up too much space, but in general leasing makes sense if you prefer to drive new cars and not keep them all that long. Owners, on average, keep their chariots more than 11 years, by the way. AARP, my go-to source for all advice on happy living, says, “To pay the least over the long run, buy the car outright. But lease if you want to drive a better car than you can afford to own.”
Buy the car and take out an auto loan and on average you’ll pay it off in five years. After that the warranty will be up and you’ll get hit with all the repair costs. Leases, for three years on average, cover basic repairs (they own it, remember?) and can be less hassle. When the lease is over, you can buy the car (at the contract price) or just hand it in (it’s theirs, remember?) and lease another one.
People would rather get root canal than go to their local car dealer, but we haven’t yet progressed to the point where soup-to-nuts online buying has taken off. That time’s coming soon, though. Buying cars—indeed, everything about owning them—is about to change significantly. But for now, a hybrid showroom/online paradigm prevails. Happy hunting. On video, here's Edmund.com's eight steps to buying a new car: