One of the trickiest things we've had to do was buy a car. Most of the Filipinos we know were excited to buy their first car even before their first paycheck arrived. That's because it's relatively easy to buy a car in the US compared to the Philippines, where capacity to pay and a very strong credit history is usually needed to buy a new car and cash up front when buying a used one. Although a lot of websites already offer a lot of advice on how to buy a car with savvy and smarts, I will simply summarize below some of the things we learned along the way. ...
1. Research, research, and research. We found out earlier on that Asians who look younger than their age are usually the target of a lot of sellers, particularly those they realize have zero credit history and are fresh off the boat, so to speak. To compensate for our seeming "gullibility", my husband and I have taken to researching. Our sources were invariably the internet, local newspapers, and friends (both new American friends and Pinoy friends). Some of the best sources online for car buying tips for first-time car buyers are the credit union and bank websites, Kelly Blue Book, MSN Autos and, someone told me, Carbuyingtips.com.
2. Brand-spanking new vs. used car. If you're a first-time buyer with no credit history at all, it's actually better to buy a used car rather than a brand new one. For one thing, your total loan will be lower, insurance coverage on the vehicle will be lower, and if you're just a newbie driver fresh from driving school from the Philippines, there's more peace of mind to practicing your driving with a car that won't break your heart (or pocket) when you ding or, God forbid, crash it. Your credit and insurance companies will also consider you a better risk if you buy a secondhand car and give you lower rates.
If you're planning on buying a used car and are patient enough with research, MSN Autos gives you the lowdown on maintenance patterns by car brand based on customer surveys. It shows you the year at which most commonly bought car models will start requiring heavy maintenance due to parts breakdown. This means that you'll have to start looking around for a new car by the time your model car reaches the age MSN Autos' surveys shows it's most likely to start breaking down. Their website also includes common hourly labor rates and the prices of the part(s) that commonly deteriorate by that time, so you have a rough idea how much you will be needing to spend later on. It doesn't take long to realize that there is a correlation between how quickly a car brand starts needing maintenance heavily and its resale price. Cars that have low re-sale values by 3, 5 and 10 years are usually those cars that break down easily. No wonder some say, "Buy Japanese" when it comes to used cars.
Here, as in the Phils., knowing a good mechanic or auto body shop is key, especially if you plan to buy a car from a used car dealer or a private owner. Ask the mechanic to accompany you to look at the cars on the used car lot or the one in the private seller's garage and give you a recommendation about them. Since that may be a bit impossible for the new immigrant, talking to Pinoy and American friends, neighbors and office workers for advice, suggestions and referrals would be helpful. Otherwise, your best bet is to go to a car dealership (not an authorized used car dealer) and buy a certified used vehicle that just got off a lease (as opposed to a plain certified used car). (For more about leasing a car, read no. 3 below.)
Certified used vehicles are probably the best used cars you can buy because there are usually warranties that come with the certification. What a certification basically says is that the used vehicle you are planning to buy has been inspected thoroughly, repaired of any minor breakdowns, and worn parts have been installed with brand-new ones. These vary by car manufacturer, and you can find out what items or parts and others are certified by each if you just go on to their websites and click on their "Certified Used" car link. Before you finally decide on a specific car, though, make sure you have researched the warranties included so you'll know what exactly it covers. (You can do this online or ask the dealer for a copy of the actual warranty.) Sometimes you could get lured by a salesperson's canned talk about the warranty on the certified used car that you end up thinking the warranty covers everything that will eventually break down when it actually doesn't.
You can also research any used car's VIN (vehicle identification no.) on Carfax.com and find out the previous owner(s) of the vehicle(s) you are considering to buy. Carfax will show you whether the car came off a lease, how many previous owners there have been, whether the car has been involved in an accident, if it was part of a fleet or not, etc. In our case, before buying our first car, we bought a month's membership on Carfax so we can search unlimited VINs before making a final selection. For $29.99, it was a worthwhile investment. Carfax includes VINs of certified used cars, so this is also one way to check if the dealer is telling the truth when they tell you the car came off a lease. Alternatively, you can also ask the dealer to print you the Carfax reports on all the cars in their lot that you are interested in, because dealers have their own Carfax membership and can provide you with the reports at no cost to you.
After reading the above and you still prefer to buy a brand new car, read on.
3. Lease vs. owned. If you still prefer to buy a new car, then you might want to consider leasing vs. owning one. A new car lease typically lasts 3 years. Leasing a car requires a minimum downpayment; however, the monthly payments are considerably lower than if you bought the car. As with any car, you are still required to pay insurance on it, gas and regular maintenance. You cannot drive the car for more than the annual no. of miles the dealer specifies, or else you have to pay any overage in miles. In short, you need to really take good care of the car, sometimes even better than if you had bought the car to own. After 3 years you return the car, or you have the option to buy the car if you want, by continuing to pay the regular loan rate towards ownership. The advantage to leasing a car is that you can drive a new car every 3 years; the total 3-year payment you make is essentially the depreciation in value the car incurs for the 3 years that you have it. However, the original market value of the car less the depreciated value that you're supposedly paying with your lease payments does not equal the resale price the dealer can sell the car at, especially if the dealer certifies the vehicle and especially if you bought Japanese. Hence, my advice here is to buy American if you're leasing because you'll be losing considerably more if you buy Japanese, specially since the resale value of Toyotas and Hondas are high. The dealer will make a huge profit off the lease as well as the resale of the car later on.
Finally, if you still opt to buy a new car, then just make sure you negotiate a good loan interest rate with your credit union or bank. Getting your car loan at the dealer isn't advisable because they usually offer higher rates. Moreover, if your credit history is new or isn't good, and the dealer you are approaching promises credit approval in spite of that, prepare to be saddled with a higher loan interest rate than normal. Coming up with a downpayment is still a good way to go: your bank or credit union will realize that you are a good credit risk (thrifty) if you can come up with a downpayment and, hence, will lower the rates. A downpayment can also reduce the number of years you have to pay for the car. So consider saving some money for a new car downpayment before actually buying one.
4. Don't be pressured by the dealers or sellers into signing or buying anything if you don't like the terms. Do not sign anything or buy anything until you understand all the warranties, loan rates, amortization payments, and all the terms and fine print for the car you are buying. Most car dealerships play the "good cop, bad cop" routine with first-time car buyers, particularly those with zero or bad credit history. This routine happens when you have finally made up your mind about what to buy, and the salesperson (usually the supervisor of the one who showed you around the lot) suddenly comes up with all these requirements you never heard of when he was just showing you around and you were just test driving the cars. The salesperson you are actually dealing with will act sheepish or apologetic when he/she tells you that, unfortunately, your credit history is not good enough and you need to come up with blah, blah, blah. Or sometimes it will be the sales supervisor who will approach you and say that you have to come up with blah, blah requirements. When you say that the other salesperson did not tell you about these requirements, this second person will say that the first person you spoke with probably didn't know, is probably new, or didn't check everything in your background/credit history, etc. This technique is designed to make you scramble to come up with the requirements so you can buy the car you covet. As you try to make up your mind or ask for more time to decide or even come up with the requirements, you will probably receive numerous calls that are designed to pressure you into making a decision, some of them to tell you that if you don't make a decision now you won't get the car you like, and some of them with supposedly new or better or lower offers if you decide now or come up with said "requirements". These 2 sales personnel know the classic signs when a buyer is ready to cave in to their demands, and you're not even aware of it. This good-cop, bad-cop routine happens right to the very end when you finally sign on several dotted lines that resulted in any or all of the following: higher loan interest rates; $5,000-$10,000 added to the original price of the car; additional warranties that, in retrospect, you find are unnecessary because if you computed the actual prices of these add-ons, you'll find they only amount to something like $1,000 instead of the $5,000 or more that was added to your loan amount as a result of buying the warranties; made your monthly payments more than 50% higher as when the bank or credit union had originally illustrated for you; saddled you with more debt that you can actually pay off. When the salesperson at the dealership begins telling you you can drive out of there with your new car, then prepare yourself for the good-cop, bad-cop routine. If the demands start becoming unreasonable, all you have to do is walk away. You should NEVER allow yourself to be taken advantage of in any way, your being a new immigrant and foreigner to boot notwithstanding.
Here in upstate New York, we have found the Honda dealerships to be one of the few dealers to shun the good-cop, bad-cop routine. It didn't matter where the Honda dealership was located, they just don't do that. May I add to that the fact that Civics and Hondas have the highest resale values in their respective car categories that it really made sense for us to buy a Honda (two, as it later turned out). I particularly patronize Rensselaer Honda where the maintenance personnel are some of the best I have dealt with so far.
5. Gas vs. hybrid. Gas prices are never going to get cheaper. This serves as incentive to some car buyers to buy a hybrid. Again, do your research. If you live in an area where you will be doing a lot of highway driving, a hybrid car won't make much difference in fuel costs from that of a regular vehicle. This is because a hybrid car actually becomes more economical in city driving where the car stops frequently, conserving energy when you brake, and transfering that energy into reserve power in its battery pack. Additionally, it seems that in areas where there is winter, having a hybrid doesn't help much because then the battery pack expends itself by providing heat to the car interior. If you are a keen driver like myself and delight in a smooth and immediate acceleration from a stoplight, then a hybrid might disappoint you as they usually are slow starters coming off a light, especially when some part of the engine had turned off to conserve braking energy. Finally, the cost of a hybrid is usually more prohibitive by several thousands of dollars than a regular gas-fueled car. This means higher loan rates for you and gas savings that will only be realized after several years of driving the car (if it doesn't break down before that time).
Additionally, hybrids are relatively new. To date, there aren't enough auto repair shops with mechanics trained for the repair and maintenance of hybrids in the next 5-10 years, except the car dealers. Spare parts like new batteries may cost higher and incur recycling costs when they finally run down in 10 years. How badly they break down or get run down with age still remains to be seen, as well as their resale values. My advice is to do a lot of research before deciding to buy a hybrid. I suggest you read the good article MSN Autos has on gas vs. diesel vs. hybrid cars.
This is my own two cents about the whole car-buying process. I'm sure other books and websites offer more information that will educate you so you don't get fooled into deals you don't want. However, in my experience, the stuff above were most helpful to us when we bought our first car while starting a credit history from scratch.
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