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Illustration: David Vogin |
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Shifting Gears
Hank Davenport Barberís shopped like a man with a mission when it was time to replace his outgrown, outworn Nissan pickup truck. "I wanted a small pickup truck that could pack camping and hiking gear and tow a boat," says Davenport, 63, of San Diego. "It had to have a crew cab because my son, a teenager, was getting too big to fit into a jump seat like the old truck had." The truck also had to have a standard transmission, security system, and special trim package, and meet his monthly payment needs. Three car dealers and a test drive later, Davenport took home his dream truck-but not without negotiating the price and arranging financing through his credit union. Nobody says it's easy to get the best deal on a new car. It can take several months from picking a model to driving it off the dealer's lot. But experts agree that homework and planning put savvy buyers miles, and dollars, ahead. Sally Hurme of AARP's Consumer Protection office plans to be a savvy buyer. "I need to buy a new car," she says. "It's a big investment of time. You must comparison shop, and finding the right car is only one step."
A good car is a great friend, appealing to the head and the heart. So it's important to look at needs as well as desires. Manufacturers have begun paying special attention to older drivers' needs. At the Ford Motor Co., engineers test their designs wearing a "Third-Age Suit" that simulates the physical needs of people in their 60s and 70s. The suit was first used to design the 2001 Ford Focus. Ford avoids using red or blue on dashboard gauges because studies have shown those colors to be harder for older eyes to see. Options now include comforts and conveniences that were unheard of 10 years ago. Look for seats that have built-in warmers and lumbar support; navigation aids that give specific directions and maps; sensors that beep when a vehicle in reverse gets too close to an object; heads-up control panels that project the speedometer and other gauges against the windshield so the driver never needs to take his or her eyes off the road; and controls that are within easy reach. General Motors Corp. last fall unveiled its Sit-N-Lift option for minivans, a motorized seat that rotates out from the vehicle and lowers for easy access. GM is considering adding more grab handles to some models to make them easier to get into and out of.
A caution goes along with these conveniences. "Make sure that if you're not comfortable with technology, you're not buying a car that will intimidate you," says George Hoffer, an economics professor at Virginia Commonwealth University who specializes in consumer issues related to the auto industry. Some considerations never change. Is the vehicle big enough to carry the anticipated passengers and cargo? Do the windows provide enough daytime and nighttime visibility? Will the vehicle fit into a garage or parking area? What will the cost of ownership be, including insurance, maintenance, and fuel? Will the car be safe in a crash? Vehicle design is the most important factor in crash-worthiness, says the Insurance Institute for Highway Safety, an industry-funded agency that compiles accident data and conducts crash tests. In general, heavier, larger cars offer better protection than lighter, smaller ones. Air bags and seat belts generally work well if they fit properly, as do head restraints, which are mandatory on all new cars. The best way to buy Why the change? Industry surveys indicate that more than 13 percent of new-car buyers are Hispanics whose median household income tops $47,500. Add census figures that show a growing population of 38 million Hispanics in the United States, and the market potential looks rosy. The goal is still to sell cars-lots of them. Most experts agree that the best time to shop is at the end of the month, when salespeople are hungry to reach their monthly quotas. Years ago, the best times of year to shop were summer and winter, when sales were slow and deals were abundant. Now, there's no best time of year; deals arise based on customer rebates and dealer incentives. Rebates go directly to customers. Incentives are given to dealers by manufacturers and may be fully or partially passed on to customers. "Since September 11 [2001], the industry has adopted an attitude of 'Do what's necessary to sell the car today,'" Hoffer says. He adds, however, that it has become harder for buyers to negotiate with dealers because manufacturers have cut the markup percentage to dealers. The dealer discount for a Lincoln Town Car, for example, was 26 percent in 1977. Nowadays, it is 11 percent. "In the old days, the dealer had room to price adjust," Hoffer says. "Today, the manufacturer uses rebates to adjust the price." Buyers usually can get the best deals by shopping themselves rather than online or through a broker. "The basic strategy is to make dealers bid for your business," says Robert Krughoff, president of Consumers' CHECKBOOK/Center for the Study of Services, an independent, nonprofit consumer-information organization based in Washington, D.C. "We don't recommend negotiating. Negotiating is confrontation, and people don't like that. We recommend getting competitive bids." Here's the plan: once you decide on a make, model, and style, don't talk about the price with a salesman. Go home, call the dealer and ask to speak with the sales manager. Invite the manager to bid for your business, telling him or her that you're also extending the invitation to five other dealers. Ask how much below invoice the dealer is willing to go. "Do it all by phone, because it's much more believable that way, that you'll really go to five other places," Krughoff says. The difference between negotiating and competitive bidding can be worth more than $1,000 a car, he says. "When the Acura NSX first came out, we were getting prices $10,000 lower than customers were offered by a dealer." Buy or lease? Leasing offers advantages to customers who want to drive a more expensive car for a lower initial cash outlay and, possibly, a lower monthly payment; who like to drive a new car every few years; and who want to avoid the hassle of getting rid of a used car. But it may be disadvantageous for people who drive more than 15,000 miles a year, who want to modify a vehicle, and who want the flexibility of selling a car whenever they want. Not all lease contracts are equal. Variables may include the length of term, the down-payment amount, the maximum allowable mileage, whether insurance coverage is included, and the penalties for early termination. "You have to do the calculations for your individual circumstances, your needs and use," says Hurme of AARP. "You also must compare leases from different companies." From the dealer's perspective, the sales strategy for leases is simple, Hoffer says: "Every vehicle you lease today guarantees you another sale in three years." How will you pay for it?Some experts say the simple rule of thumb is your total monthly car payments-for all the cars in the household-shouldn't exceed 20 percent of your monthly income after taxes. Calculate before you shop. Several websites offer calculators that estimate monthly payments based on purchase price, down payment, interest rate, and length of loan. And don't fall for dealer come-ons. "The zero percent finance rate may be zero percent for three months or six months, but then it bumps up," Hurme says. The lowest rates go to customers with perfect credit, which few people have. Even opening a new credit-card account can lower a credit score as much as 12 points. Hurme recommends lining up financing through a credit union, if possible. Credit unions offer competitive rates and are more forgiving of poor credit histories. Because many Hispanics aren't familiar with credit, they have no credit history, says Beatriz Juliao-Mauersberg, Hispanic outreach coordinator for the Consumer Credit Counseling Service of Greater Atlanta and Palm Beach County/Treasure Coast. Without a credit history, they often seek loans at dealerships that also provide financing or they seek them from storefront lenders charging high interest rates, she adds. Juliao-Mauersberg urges car buyers to check their credit history about three or four months ahead of the anticipated purchase. "That will give you time to resolve any errors and time to shop for your own financing," she says. She warns that all potential lenders check credit histories. "Every time you apply for credit and someone checks your credit history, that's called an inquiry," Juliao-Mauersberg says. "Too many inquiries in a short period might be negative for the credit score. They could be seen as too eager to get credit." Bad credit takes time to repair; bankruptcies, for example, stay on the record for as long as 10 years in some states. Buyers with bad credit should find alternatives to taking out loans for new cars, such as paying cash for a used car, say both Hurme and Juliao-Mauersberg, urging such buyers to be realistic. "You don't want a surprise when you're sitting in front of a banker," Juliao-Mauersberg says. Remember to insure it "The minimum to drive legally in most states is very low," says Jeanne Salvatore, vice president and spokeswoman for the Insurance Information Institute, a nonprofit educational organization founded by property casualty companies. "Generally, 100/300 [$100,000/$300,000] is more realistic, and you may want higher limits, depending on your needs and financial situation." Collision and comprehensive coverage are optional. Collision covers collision damage to your car. Comprehensive covers non-collision damage from events such as natural disasters, riots, and theft. You can choose the deductible but not the price, which is based in part on the car's sticker price, the cost of repairing it, its overall safety record, and the likelihood of theft. Be sure to apply for possible reductions. These vary among insurers, but may include reductions for having air bags, anti-lock brakes, and anti-theft devices in the car; parking in a closed garage; having a ticket-free driving record; and taking a driver-safety course if you're over 55. Low-mileage drivers also may qualify for a discount. Where does a car buyer's ultimate bargaining power lie? Experts agree: It's the feet."I dug in my heels and told the dealer, 'You'll give me this amount for my trade-in and match this amount for the new truck's price, or I'll go home,' " Davenport says. "They knew they had a hot buyer and they didn't want to let me go." Hurme commented "while paying cash is a great idea, if someone has bad credit they probably don't have enough cash around to buy a car without a loan. The key point is to line up the financing before shopping for the car, because dealer financing may be the least attractive option. People should look for alternatives to loans from dealers. Now find out what to look for when test driving a car and get 10 tips to get the best deal on your new car. |
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