The First Steps in Buying a Car Online

You need at this point to think about several important questions. Do you want a new or used car? How do you choose and approach a dealer? What are your financing options? How can you avoid getting hit with "dealer-prep" or other last-minute extra costs? Should you consider an extended warranty? You don't need to make final decisions about many of these topics just yet, but they need to become part of your thinking. Consider this chapter, therefore, an introductory overview of topics that I cover in depth in later chapters. First, I look at one of the most fundamental issues: Is your car going to be new or used?

Choosing Between Brand-New and "Previously Enjoyed"

Car dealers employ all kinds of euphemisms for used cars: "pre-owned," "certified," "previously enjoyed," "golden opportunity" — anything but used. And yet used vehicles are often among some of the best, smartest auto purchases that you can make. In this section, I consider your options in purchasing a used car, starting with your worries.

Maybe, for example, that used car you're considering was found floating around for a couple of days in a river, but someone cleaned it up. Maybe it flipped down an embankment and was totaled, but then someone pounded back into shape with rubber hammers and repainted it. Did someone rewind the odometer at some point? Did it ever burst out in flames? How can you know for sure whether you're getting a good deal on such a vehicle or getting taken to the cleaners?

You can get answers to these questions via Carfax (at www.carfax.com) Carfax can provide you with complete reports on all used cars for a two-month period. The two-month subscription is only $19.95, and these reports can alert you to a variety of potential problems: flood damage, salvage history, odometer fraud, major accidents, and other such problems. You can have your questions and concerns. Was the car ever totaled? Did it ever catch fire? How many times has the car changed hands? Just enter the Vehicle Identification Number (VIN) and your ZIP code at the Carfax site. (You can locate a car's VIN on its dashboard, on the indurance or title documents, from the dealer, or online through services such as Autobytel.com and Autoweb.com.) And if you're selling a used car, the Carfax report can serve as a valuable selling tool that demonstrates the integrity of your own car.

The eternal question: Money
People never seem to resolve certain disputes: renting versus owning a house; leasing versus buying a car; buying a new versus a used car.., and whether the toilet paper hangs from the back or front of the roll.

You may think, as most do, that buying a used car is cheaper than buying a new car. Actually, the two can often turn out quite close in overall cost per year. Don't forget that a used car is likely to require higher maintenance, command a higher interest rate on a loan, and have less resale value if you trade it in. These factors are easy to overlook if you merely consider how much cash you're shelling out at the dealer's showroom (and in the monthly payments) for two otherwise comparable vehicles. And don't forget the hidden factors: Driving a four-year-old car is, for example, less impressive to the neighbors. It's also more annoying because things keep breaking down and you must either do without the radio, the heater, or some other feature — or spend the time and money to repair it.

-How expensive of a car can you afford?

- Should you buy or lease?

- What is your down payment going to be?

- What are your monthly payments going to run?

- Should you finance or pay cash up front?

- Should you consider getting a home-equity loan (and using it to pay for your car with cash up front) instead of getting a car loan at a higher effective interest rate? (Interest on a home-equity loan is the only tax-deductible interest available to most people.)

- How long of a loan period do you want?

- What about a cash rebate versus dealer-financing? Sometimes you have to calculate the better deal for you between a manufacturer's rebate and a special low finance rate.

I deal in-depth with these various issues throughout this book, but the AOL calculators are invaluable tools if you're close to a final decision and are ready to plug in actual numbers.

Reeking lemons and other new versus used issues

After you look coldly at the main money questions, you still want to consider a number of issues in determining whether a new or used car is the best choice for you.

Remember that a new car is new... if it's not a lemon, you don't need to worry about frequent breakdowns. And you have no nagging question about neglect or ill-treatment from a previous owner. And even if a new car does turn out to be a lemon, you have a fallback position: Lemon laws can assist you in getting satisfaction. You can also usually expect several leasing options and complete factory support with a solid, thorough warranty if you consider a new car.

TIP
If you think you have a lemon, you can try to follow Dear Abby's advice and just make lemonade. Or you can be proactive by going online to find out if your car is, in fact, a lemon. Your state's lemon laws can be accessed at Autopedia. Just go to the following Web address: autopedia.com/html/HotLinks_Lemon.html

As Autopedia announces on its home page, "Welcome to the most comprehensive Lemon Law information site on the Internet. Winner of Yahoo Internet Life's 4-Star Award, with complete coverage of all Lemon Law Statutes in all 50 states."

Know your rights. Fight, fight, fight! Don't take it anymore!

That special smell
Whenever you compare the benefits of buying a new versus a used car, one of the first qualities some people consider is the smell — that unmistakable new-car smell. Rumors that dealers use spray cans containing air fresheners of that smell aside, most people find something wonderful about a brand-new car's odor. (A used car may also have an odor, but you usually can't tell what it is. Maybe nasty mud from a river?)

For some people, however, the decision is already made: Buying something that strangers have already used is simply out of the question. And who can blame them? There's something special about owning a brand new car with all the latest goodies and a full warranty. If you possess the must-buy-a-new-car mindset — and the money to indulge it — skip to the section "Test-Driving in Real Time."

Other considerations
Used cars have their advantages: You have a much lower initial cash outlay, as well as lower monthly payments. That huge first-year depreciation hit was already absorbed by the poor chump who bought the car new. And used cars don't exhibit that strong, artificial new-car smell, although they may give off other smells that you can't identify.

Finding a Dealer

Whenever you're ready to buy, you ideally want to find a dealer near enough to your home that you don't experience any inconvenience if you need to take the car back in for maintenance. Just about every large dealer has a Web site — you should visit a few, as most describe the services the dealership offers. Check also with the Better Business Bureau and ask around to see what kind of a reputation the dealer has with ordinary people. Finally, check out the poli cies of the dealership's service department. It may be important to you, for example, that the service department provides a shuttle service to get you to work after you drop off your car in the morning and then pick you p at the end of the day. if so, make sure that you know whether this service is available before you settle on a certain dealership to make your purchase.

Test-Driving in Real Time

As great as the Internet is for research, for timeliness, and for its depth of information, you simply must get off your chair and actually drive the car you're considering. No virtual reality substitute exists (yet) that can replace getting the total feel of the actual car on a road.

In Previous chapters in this site so far, I tell you how to listen to the opinions of other owners in newsgroups or chat rooms; I also tell you how to conduct comparisons by using various online resources such as Consumer Reports and Edmund's reviews. In the preceding sections of this chapter, I show you methods of calculating whether to get a new or used car. After you think carefully about these and many other issues, you're likely to narrow down your search for a vehicle to one or two models. At that point, you need to actually sit down in the driver's seat and go for a spin.

What seems to me to be a solid suspension with good, tight steering may well come across to you as a bumpy ride that requires a wrestling match to parallet park the car. So instead of simply following my recommendations, expert as they may be (ahem!), you want to go to a local dealer and start your own relationship with a salesperson as soon as possible.

I suggest that you form such a relationship relatively early in your quest because you may well return to this same dealer to buy your car. But during the test drive phase, you want to establish a couple things with your contact as that dealer. Tell the salesperson that you're researching your purchase on the Internet and that you aren't buying anything today; make sure that you add, however, that you do intend to ask for that salesperson by name if you decide to return to this dealership to buy. This tactic may head off some of the more dramatic sales tactics you may otherwise face during a test drive.

Another major point: Concertrate during your test on getting the feel of the car. Does it suit your physical needs? (The new Volkswagen Beetle, for example, has a headspace limitation in the rear seat — a fact that your must consider if you have a couple of really tall basketball-playing teenagers.) If the salesman is distracting you from experiencing and feeling the car, say so. Ask whether you can just focus on the driving experience at this point and talk later. Some dealers even permit customers to take test drives alone! Finally, make sure that you parallel park and that you drive the car on all kinds of roads (bumpy, curvy, hilly, freeway, and wherever else you're likely to use this vehicle). In other words, put the machine through its paces. After all, you want to make sure it can handle all the driving conditions that it will be subjected to if you ultimately buy it.

Getting the Cash for Your Car

After you decide on a car, you must figure out how to pay for it. Part 3 goes into this topic systematically, but I consider it briefly here, too.

Rule #1: Try to secure your financing before you haggle over the actual price of the car you want. Some of the nicest buildings in your town are the banks. Why? Because lending money can be a very lucrative endeavor. Auto dealers, too, understand that they may not make much on the actual sales price, but they can indirectly make up for it with a dealer-friendly financing agreement.

You can generally expect that the more the car you're buying costs and the better your credit history, the lower the interest rate you will be able to get. So you want to obtain a copy of your credit report to ensure that all the information contained in it is accurate. If you find any errors in the credit report, you want to contest them immediately. (Surprise - credit ratings can contain errors.) You can get a free credit report (if you sign up for a trial membership in the CreditCheck Monitoring Service) at FreeCreditReport.Com (www.free-creditreport.com).

You can also pay $7.95 for a report from Experian, or pay $29.95 for a merged triple-source report from three major credit bureaus: Equifax, Trans Union, and Experian. These reports are available at QSpace (www.qspace.com).

As is the case with other aspects of buying a car, you want to try various lending sources to comparison shop for the best deal. If you belong to a credit union, see what its best deal is. Try your bank. Head online and visit LendingTree.Com (www.lendingtree.com) and PeopleFirst.Com (www.peoplefirst.com). Ask the dealership what it can offer. You might even want to consider a home-equity loan so that you can possibly deduct the interest on that loan from your taxes; bear in mind, though, that with a home-equity loan, you risk losing your home if you default on the loan.

Similarly, figuring out just what shipping and handling ("S&H") means if you try to buy something online or through a catalog can often prove confusing. Something very small or lightweight can cost a lot to have shipped to you. Over time, though, you just get used to the retailer adding on such extra costs whenever you buy something.

Tacking on extra charges is rampant in America. You expect it these days. But to avoid a last-minute surprise in buying a car, insist on getting the dealer's best price, including all charges, before you agree to the deal.

Refuse to accept any dealer's last-minute attempt to tack on any extra costs for ADP (additional dealer profits) or ADM (additional dealer markups), a "dealer prep," a "market adjustment," or any "jack-up boosters." And believe it or not, all these items (except the last one, which I made up) are real.

Some dealers claim to give you their best price, but then, just as you're ready to sign the contract and drive the car home (and you're probably in love with it by that time), they casually mention that, of course, you also owe them the modest ADP, ADM, dealer prep, or whatever they're calling this extra fee. Such charges, however, simply amount to additional dealer profit — and your loss.

Many dealers and salespeople are, of course, fine, honest, and direct individuals. Others are highly adept at shifting things around and care little about integrity. (In this section, I'm talking about those who fall in the second category and not the good, honest people.)

Remember, too, that some car salespeople practice their more questionable "skills" on customers; many of them practically go to school to learn how to vague out, slide around, fog, and otherwise work psychological ploys to get money out of you. You, however, didn't go to school to learn how to buy a car.

Many salespeople are willing to do whatever's necessary to get their hands in your wallet. They'd twirl around in their chair or set fire to your shoe if such ploys could get them extra money. If you object to an ADP charge, the sales-person may look at your wife or significant other with a slight smirk or a raised eyebrow as if to say, "Are you with this cheapskate?" If you offer less than the suggested retail price, some salespeople may even start yelling at you. But often that smirk alone does the trick. You don't want to appear as if you don't know that an ADP is "always" part of the cost. You don't want to seem cheap.

Well, just go ahead and seem cheap. Refuse any extra charges that show up at the last minute — no matter what the salesperson calls them — after you already ask for and agree on a price with the dealer up front.

Many people, on the other hand, pay whatever the dealer asks them to pay. They never haggle; they don't know what the car is worth; and they have more dollars than sense. They haven't read this site or any other site like it. They're the big spenders, and they make the dealership thrive and the salespeople's commission fat. Such folks consider bargaining beneath them, unpleasant, and vulgar. Don't be one of these people.

Another group of buyers is somewhat more savvy and willing to engage in some haggling. But they still agree to dealer prep, undercoating, sealant, or rustproofing costs or otherwise don't get the best possible deal. Stay out of this group, too.

The best group (the one in which you want to count yourself) comes armed with enough smarts and information to get the lowest price possible. The dealership doesn't get as much of money from these people as they do from those in the other two groups. If you place yourself in such company, you're likely to find the salespeople smirking at you. But for my money, getting smirked at to save $800 is just fine with me.

Warranties and Services Contracts

These days, the most common new-car warranty lasts for 36 months or 36,000 miles, whichever comes first. This kind of warranty covers almost everything, except such items as tires that usually require more frequent replacement. Warranty information on all new-car models can be found at most of the major car-buying sites, such as CarPoint (www.carpoint.com) and cars.com (www.cars.com).

Your problem is to decide whether to extend the original warranty by purchas-ing what's usually known as a service contract (or extended warranty). Generally speaking, you don't want one of these extensions. You may notice that whenever you buy a DVD player, a washing machine, or some other electronic item or appliance, the salesperson usually asks whether you want an extended warranty. Does the salesperson offer you this option because he's your friend and wants the best for you? Think again. Salespeople make lots of money on these "insurance" policies. So do car dealers. Unless you get very good coverage for a reasonable price, avoid the extended warranty cost. The dealers do their homework. The odds, as they almost always do, favor the house. (In other words, you generally lose money on such "deals.")

Insurance against fire damage to your house or against huge medical expenses or a liability lawsuit — these kinds of major insurance offer you rational and valuable protection. They can protect you from being wiped out financially in a disaster, and the cost of those kinds of insurance is generally quite reasonable. Nothing that's likely to fail in your new automobile, on the other hand, is likely to destroy you financially. So consider any extended warranty that a dealer offers you strictly on its merits. If you can get thorough coverage for a good price, so much the better. It may be worth your consideration. If not — and that's usually the case — don't.