Road block: Buy or lease? You can’t decide.
Best route: Buy. Leasing may be tempting, as it means a lower monthly payment, but leases are loaded with hidden costs. Many people wind up owing thousands of dollars at the end of the lease because they've driven more miles than are included in the contract.
A typical lease charges 10 to 25 cents a mile after 12,000 to 15,000 miles for each year of the lease, but you could very well exceed that amount. "Look at the odometer of your old car and figure out how many miles you really drive each year," says consumer advocate Remar Sutton, president of the Consumer Task Force for Automotive Issues (autoissues.org). "Then ask for a lease that includes that mileage." If the dealer won't provide that, go elsewhere.
The leasing company can also hold you responsible for vehicle damage. And "the contracts can be very vague about what sort of damage the company can charge you for," Sutton says. The company is most likely to start finding problems if the customer isn't trading in the lease for another one. "And the contracts severely limit your legal recourse if you're getting scammed," he says. Your best defense is to lease from a well-known company, regularly maintain the vehicle and keep records, and have any dents repaired and the car detailed before you return it.
Road block: You’re afraid the seller is going to take you for a ride.
Best route: Get informed.
- If you're buying new, look up the car you want at a car-comparison website, like edmunds.com. Follow the instructions to a page showing the invoice price, which is what the dealer pays for the car. Be sure to click on the "incentives" link to check on any price breaks the manufacturer might give to the dealer. That way, you'll have a better idea of what the dealer really paid. At the dealership, you'll want to negotiate up from the price the dealer paid, rather than down from the sticker price.
- Shop around for a car loan from local banks, national lenders (find one at bankrate.com), and credit unions, many of which are open to anyone (find one at the Credit Union National Association website, cuna.org). If the dealership offers a better rate, take it. "But having other financing in your back pocket prevents you from getting stuck with a high-rate dealer loan," Sutton says.
- Look up the estimated wholesale value of your trade-in at the Kelley Blue Book website (kbb.com), or shop it around at used-car lots.
- Buying a used car? You can find out a possible purchase price at kbb.com, but you'll need to enter details, including the car's condition. So first ask a mechanic to run a full diagnostic on the vehicle (cost: $80 to $140).
- Finally, if you're buying from a new- or used-car dealer, "show up five minutes before closing time, at the end of a month, preferably when the weather is rotten," says Sutton. Dealers have monthly quotas to fill, and you may get the benefit of a slow sales day and a seller who wants to go home.