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A new car is second only to a home asthe 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 as of June 1998 was $23,480.

Thats why its 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 youre willing to

spend. Do some research. Youll 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 at a library or

bookstore, or on the Internet, that

discuss new car features and prices.

These may provide information on the

dealers 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 manufacturers suggested

retail price (MSRP) and the invoice

price.

Because the price is a factor in the

dealers 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

dont see what you want on the dealers

lot. This may involve a delay, but cars

on the lot may have options you dont

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 youre talking price.

● Invoice Price is the manufacturers

initial charge to the dealer. This usually

is higher than the dealers 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 youre

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 isnt 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.

 Buying

A

New Car

Automobiles

Facts

for Consumers

Federal Trade Commission Toll-free 1-877-FTC-HELP

 www.ftc.gov For the Consumer

March 1999
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● Monroney Sticker Price (MSRP)

shows the base price, the manufacturers

installed options with the manufacturers

suggested retail price, the manufacturers 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 (ADP), dealer

preparation, and undercoating.

Financing Your New Car

If you decide to finance your car, be aware

that the financing obtained by the dealer,

even if the dealer contacts lenders on your

behalf, may not be the best deal you can

get. Contact lenders directly. Compare the

financing they offer you with the financing

the dealer offers you. Because offers vary,

shop around for the best deal, comparing

the annual percentage rate (APR) and the

length of the loan. When negotiating to

finance a car, be wary of focusing only on

the monthly payment. The total amount you

will pay depends on the price of the car you

negotiate, the APR, and the length of the

loan.

Sometimes, dealers offer very low financing

rates for specific cars or models, but may

not be willing to negotiate on the price of

these cars. To qualify for the special rates,

you may be required to make a large down

payment. With these conditions, you may

find that its sometimes more affordable to

pay higher financing charges on a car that is

lower in price or to buy a car that requires

a smaller down payment.

Before you sign a contract to purchase or

finance the car, consider the terms of the

financing and evaluate whether it is

affordable. Before you drive off the lot, be

sure to have a copy of the contract that both

you and the dealer have signed and be sure

that all blanks are filled in.

Some dealers and lenders may ask you to

buy credit insurance to pay off your loan if

you should die or become disabled. Before

you buy credit insurance, consider the cost,

and whether its worthwhile. Check your

existing policies to avoid duplicating

benefits. Credit insurance is not required by

federal law. If your dealer requires you to

buy credit insurance for car financing, it

must be included in the cost of credit. That

is, it must be reflected in the APR. Your

state Attorney General also may have

requirements about credit insurance. Check

with your state Insurance Commissioner or

state consumer protection agency.

Trading in Your Old Car

Discuss the possibility of a trade-in only

after youve negotiated the best possible

price for your new car and after youve

researched the value of your old car. Check

the library for reference books or

magazines that can tell you how much it is

worth. This information may help you get a

better price from the dealer. Though it may

take longer to sell your car yourself, you

generally will get more money than if you

trade it in.

Considering a Service

Contract

Service contracts that you may buy with a

new car provide for the repair of certain

parts or problems. These contracts are

offered by manufacturers, dealers, or

independent companies and may or may not

provide coverage beyond the manufacturers warranty. Remember that a warranty

is included in the price of the car while a

service contract costs extra.

Before deciding to purchase a service

contract, read it carefully and consider these

questions:

● Whats the difference between the

coverage under the warranty and the

coverage under the service contract?

● What repairs are covered?

● Is routine maintenance covered?

● Who pays for the labor? The parts?

● Who performs the repairs? Can repairs

be made elsewhere?

● How long does the service contract last?

● What are the cancellation and refund

policies?

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Worksheet for Buying a New Car

Before you negotiate the price of your next new car, use this worksheet to establish the bargaining room.

Options:

Transmission: Automatic ___ Manual ___ __________

Air Conditioning ................................ __________ ____________

Engine: Size ________ ...................... __________ ____________

Audio System:

AM-FM ___w/cassette ___ w/CD___ __________ ____________

Brakes: Antilock ___ Power-assisted ___ __________ ____________

Power Locks .................................... __________ ____________

Seats: Power ___ Heated ___ Leather ___ __________ ____________

Rear Window: Wiper ___ Defroster _____

Wheels and Tires:

Alloy Wheels ............................. __________ ____________

All Season Tires ......................... __________ ____________

Mirrors and Lights:

Illuminated Dual Vanity Mirrors ...... __________ ____________

Map Lights ................................ __________ ____________

Exterior Power Mirrors ................ __________ ____________

Alarm System ................................... __________ ____________

Cellular Telephone ............................. __________ ____________

Remote Keyless Entry ......................... __________ ____________

Sunroof .......................................... __________ ____________

Other: _____________________________ __________ ____________

__________________________________ __________ ____________

__________________________________ __________ ____________

__________________________________ __________ ____________

Totals ............................................ __________ ____________

Base Price_______________________

*You can get the invoice price by looking at the dealer's invoice or reviewing car publications.

Model____________________________

 Invoice Price* Sticker Price

For More Information

The FTC publishes a series of auto-related

brochures. For a free copy of Best Sellers,

a complete list of FTC publications, contact:

Consumer Response Center

Federal Trade Commission

Washington, DC 20580

Toll-free: 1-877-FTC-HELP (382-4357)

TDD: 202-326-2502

www.ftc.gov

To File a Complaint

You can file a complaint with the Federal

Trade Commission by contacting the

Consumer Response Center by phone: tollfree at 1-877-FTC-HELP (382-4357);

TDD: 202-326-2502, by mail: Consumer

Response Center, Federal Trade

Commission, 600 Pennsylvania Avenue,

NW, Washington, DC 20580, or by e-mail:

use the complaint form at www.ftc.gov.

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