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Volvo: Safety Beyond the Star RatingsTerms to Know to Become an Expert Car Buyer
Looking to buy a car but not sure where to start? We’re here to help with this rundown of the key terms to know to become a car buying pro.
Become an Expert Car Buyer
Buying a car can be a daunting experience, particularly if you’ve never done it before. Not only can it represent a lot of money, there is often a lot of language thrown around that may be new to you. And if you’re buying from a dealership, keep in mind you’re likely working with a professional who literally does this all day and is there to make money.
Fear not! This rundown of the key terms to know to become an expert car buyer will help make the process a whole lot less intimidating.
Car Buying Terms to Know When Researching a Vehicle
Most of the buying process should be spent researching your next vehicle. Look carefully at the vehicles that you are considering and the average cost in your market, remember it’s best to research different vehicle brands and models to find the ones that will meet your needs. To help with your research, take some time to become familiar with these terms:
New, Certified Pre-Owned, or Used
To begin with, make a decision on which of these three paths you want to take. New cars are just that, fresh from the factory with a full warranty and no previous owners. Certified pre-owned (CPO) means the car is used, but is backed by a specific CPO warranty. A used car captures everything else from the used car lot down the road to an ad on Carsforsale.com. New and CPO vehicles require buying from a dealership, while buying a used car generally means you’re working directly with the current owner or a “private party”.
Powertrains and Drivetrains
Gone are the days when all cars run on gas-powered internal combustion engines. Now, you can expand the field to include traditional hybrids, plug-in hybrids, and full-electric vehicles as we discuss here. You should also be familiar with the various drivetrains including front- and rear-wheel drive, all-wheel-drive, and four-wheel drive. You’ll need this information to help narrow the field.
Trade-In Value and/or Book Value
If you’re planning to trade-in your current car when buying a new car at a dealership, it’s important to know the trade-in value, which may also be called book value. Sites like Kelley Blue Book can provide these figures, which you’ll want to have on hand when it’s time to negotiate.
Pre-Approval
Calling your bank or preferred lender ahead of time for a letter of pre-approval showing how much they are willing to lend you will come in handy when it’s time to buy. This will indicate the loan terms with details on the interest rate you’ll pay, how long the loan lasts, and likely your current credit score. While most dealers can typically provide a loan for you, it’s always smart to have a reference point. We go deeper on dealer versus third-party financing here.
Manufacturer’s Suggested Retail Price
Also known as the MSRP, this widely advertised figure is the price that a car manufacturer suggests a dealer sells the vehicle for. But the dealer is legally allowed to sell it for more or less.
At a dealership, this will be displayed on the window sticker along with any options, and associated pricing, and the destination charge. That latter figure is what the dealer is charged to have the vehicle transported to their lot. It is usually $1,000 or more and is not typically included in the advertised MSRP.
Vehicle History Report
If you’re going the CPO or used route, be sure to gather a vehicle history report to avoid any surprises that the seller may not disclose. You can get a free report using the VIN number here on Carsforsale.com.
Out-The-Door Price
One of the last research steps is calling the dealerships that have the vehicle you want and asking for an “out-the-door” price, so you know what to expect when you arrive. Ask for the number, with any taxes and fees, to be sent via email so you can have it on hand when it comes time to negotiate.
Test Drive
Armed with all your research, it’s time for the fun part of buying a car – test drives. When you go to a dealership for this, to buy a new or CPO vehicle, the salesperson may or may not come with you and generally just needs a copy of your license and insurance. Ideally you would test two or three different vehicles to gain insight into what you like and don’t like about the vehicle you’re interested in.
Pre-Purchase Inspection
For those looking to buy a used car, it’s smart to have a pre-purchase inspection (PPI) performed. Unlike a new or CPO car, there is likely no warranty on a used car, so having a qualified mechanic perform a comprehensive PPI can help you avoid unexpected problems down the road. In either case, those new to the car-buying process should consider bringing an experienced friend along for the test drive and negotiations to lean on as needed.
Key Terms to Know When Negotiating a Vehicle Price
Okay, you have a binder full of research and some time behind the wheel of your target car. Now, it’s time to negotiate the sales price. It’s here where all that research comes into play as you can reference it during negotiations.
During this process, make sure to focus on the final price and not the monthly payment as the latter figure can get confusing as loan terms stretch out and interest rates start jumping around. Know your price ceiling and stick with it.
Add-Ons
Get ready to be pitched extra-cost add-ons at this stage. That could include floor mats and mud flaps to extended warranties and gap insurance. Generally, vehicle accessories are going to be more expensive at the dealership, so save money and shop around if you’re in need of mats and flaps.
Extended Warranty and Gap Insurance
Extended warranties are just as they sound, extensions of the factory warranty. This product is historically overpriced and unnecessary when buying new or used. The same goes for gap insurance, which is designed to cover the “gap” between your vehicle’s value and what you owe on it in the event it’s totaled in an accident. If you do want this type of insurance, check with your own insurance company first to compare pricing to the dealership. And in all cases, carefully read the fine print.
F & I Office
Sales folks love to say they have to go to the “F & I office” during negotiations. What this means for you is a lot of waiting while the dealership attempts to make you sweat their counter-offers. At this point, you need to stay cool and stick to your reasonable offer. If you’re not happy with how the dealership is running the negotiations, be prepared to walk away and look elsewhere.
Enjoy Your New Ride
Assuming you’ve successfully negotiated the sale price and have a loan lined up, the final step to enjoying your new ride is securing the title. If you are taking out a loan, the lender will hold the title – which is the piece of paper showing who owns the vehicle – until you finish paying it off.
