How to Buy Your Next Car

Tips and Steps to Buying a Car

Like many of you, I get excited just thinking about buying a new car. The first thing that I consider is, what are the steps to buying a car?  Are there any car buying tips and tricks?  What car should I buy?  
First, you have so many choices. There are a lot of styles and types to pick from, so what do you want to drive? Do you want an SUV, truck, sedan, or coup? Maybe you've been saving for a convertible. Do you want a new car or a certified preowned? What about a classic car?
Next, you get to choose your favorite exterior color, heated and cooled seats, and what type of engine do you want. You start to fantasize about the places you'll go and the people who will see you driving your dream car, and based on your purchase, people get to see just how successful you appear to be.
Yes, depending on the brand of car you buy, people will decide they know just how much money you make a year. If you pull up in a Mercedes vs. a Chevrolet, people will make an immediate decision on who you are.
Seem's weird but, the automotive industry knows this all too well. Why do you think GM has Caddilac and Ford has Lincoln? The original idea was to get people into your car family by offering affordable automobiles, and as their customers grow in age, they should also grow in financial means. So if you start with a Chevy, you can work your way up through Buick to Caddilac and never leave the GM family. Ford did this too and used the now-defunct Mercury brand and then guided you up, and into a Lincoln.
Mercedes and BMW use the same approach but without the use of divisional brand separation. They use small and midsize cars with their brand cache' to get you in your first car and hope to entice you to move up in their product live as you grow in your finances.
The Japanese and Koreans use the same approach as GM and Ford and have separate divisions and standalone brands to distinguish their luxury brand from their value-based automobiles.
The next decision you'll have to make is how much you want to spend and if you'd like to buy or lease. This is no small decision, and there are benefits to both, depending on how long you plan on owning your auto. I'll review both types of purchases and give you the pros and cons of each.

Lease a Vehicle? 

Leasing is becoming more prevalent than ever. According to the New Your Times 27% of new car purchases in 2020 are leases. This number is up by 5% since 2012. Ultimately this may not seem like a lot, but in the auto industry, that 5% is a huge increase in leasing.
The benefit of leasing is that you don't have to pay the entire cost of the car. Based on your lease term (years you'll lease the car) you only have to pay the residual value of the car. Typically what the auto is worth on a 3 or 4-year lease. And in Illinois and 44 other states, you'll only have to pay the sales tax on the residual value (about 50% off the price of the vehicle), not the sticker price of the auto like in years past.
All of this leads to a lower monthly price tag compared to a full purchase. So, now you can start to look at more expensive cars that may have been previously out of your budget. Hello Mercedes Benz...
Finally, if you are the type of person that wants the latest in high tech and safety equipment and you trade your car in after just three years of ownership, leasing is a great option. You don't have to worry about selling or trading in your car. All you have to do is drop it off at the dealer and select your next new auto.
The downside of leasing is when the payment booklet is paid off, so is your lease, and you have to turn in the car. Also, any damage or milage over 10,000 to 12,000 a year, will be charged directly to you. All of this is a big part of your decision-making process as excessive mileage on a lease is very expensive. And, if you have a change in your financial situation, you may have to lower your expectations on the next car you lease.

Owning a Vehicle 

Let's talk about purchasing a car. I've mostly purchased cars outright because I prefer to keep them for more than five years. I also do a lot of research on the car I want and wait for exactly what I want, or I'll work with a dealer and do a custom order from the manufacturer to make sure I get everything I want.
So, If you're like me and keep your vehicle's for more than five years, purchasing a car will make better financial sense.  Also, mileage isn't an issue, so you can drive as much as you want, and any damage incurred is entirely up to you to fix. And if you get tired of the car or want to upgrade, you can do it anytime you want. All you have to do is trade it in or sell it outright.  The best part of buying an auto for me is that if you keep it for over eight years (the average is seven years in the U.S.) and you'll get the most value out of it before you sell or trade it. You have to take the initial hit of the depreciation of the car (see buying a certified pre-owned car), but if you took a three-year loan out, you've been driving for free (less the cost of maintenance) for five years. In a lease, you'll always be paying for that car.  The downside of owning is you have to pay the full price of the automobile, and depending on how long you keep it, you will have an outdated car with older technology. You'll also be responsible for selling it or trading it in for your next purchase. For a lot of people, this can be uncomfortable and a deal-breaker.  

Classic Cars

Over the year's I have seen a rise in the buying and selling of classic cars. Full discloser, I am personally a big fan of older Corvettes, Camaro's, and the Pontiac GTO. If you can buy at the right price, these cars can not only be a lot of fun to drive and own, but can also be a good investment.
Big auction houses like Barrett Jackson, Mecum, and Russo and Steele do tens of millions of dollars a year in promoting and auctioning these and every other type of classic (used) car, truck, SUV, motorcycle, and art. They usually travel across the country so it can be easy to find a city near you and attend in person. The online component is also a convenient way to find and purchase your dream classic.
The downside is you're purchasing an older car. In some cases, the car could be 50 years old. That means you'll have to make sure it isn't a car that was in a wreck and someone did a quick fix-it job to make it look nice but didn't fix the structural problems. You also have to make sure you're not paying for a vehicle that doesn't have its original drivetrain and doesn't have matching numbers (matching numbers on the car body and engine from the date of manufacturing). It is ok to buy cars without matching numbers, but the price difference and the resale are both affected if it is either-or.  
My advice is if you're going to buy a classic car and you don't have a lot of experience with them, hire someone who does, and let them represent you.  An unrestored 1963 split window Corvette with a numbers matching 327 cu. in. engine that is fuel injected can go for as much as $200K compared with a non-numbers Convertible Corvette of the same year could go for $50K. Trust me, this is an expensive lesson to learn if you get caught up with an unreputable seller.
The good news is these big auction houses do their best due diligence on the cars they offer and are not going to represent a car dishonestly. The down side is you have to pay to be a bidder, usually $500.00, which is applied to the purchase of any vehicle they sell you, but you also have to pay a buyers premium (10% of the bid) on top of the sales price.
In my opinion it is worth the extra cost because you don't have to do any of the leg work to find and negotiate for the car(s) you buy.  Convenience and ease is the key for auctions.  

What is The Right Choice for Buying a New Car? 

Buying a new car or truck is most likely the second biggest expenditure you'll ever make on an item. It is tricky sometimes and can be a bit of an adventure, but nothing beats that new car smell and the sense of pride you get from driving a great car. Try to remember not to overspend or buy something just to compete with the neighbors, and you'll be fine.
And remember to go out and enjoy the process!

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