Quick Car Buying Guide

How much is your new car budget?
Before you embark on searching for a new car to buy, you need to plan and work out a favorable budget. Determine how much you can comfortably spend on the new car. How much is your monthly disposable income after meeting all your expenses and costs? Do you have enough money to pay cash for the new car? If you choose the auto financing option, how much car loan amount can you afford? What is your most comfortable repayment installment and loan term? If you are not a first time buyer, will you be trading in your old car? How much is it's value? Have it's trade-in value estimated at NADAguides.com. Use any online loan calculator to help you estimate the loan amount eligibility.
Once you have answered all these questions, you can begin a vehicle search.

Where to buy your car? 
The options are almost limitless. You can buy from an individual, a street corner, auto mart, scrapping yard, an independent salesman or an authorized car dealership affiliated to a manufacturer. Where you buy your car will in part be influenced by the financing option of choice, purpose of the car and your budget. Used cars are in general much cheaper to buy than brand new cars but may not necessarily be cheaper to maintain.

Which vehicle to buy?
This is another crucial step to consider if you are to buy a car. Decide on the car manufacturer, type(SUV, Truck, sedan, etc) and model basing on historical performance, affordability and your intended use.  From experience, every car manufacturer has a vehicle model that offers superior performance than those from competition for a given application. For instance, I find the Actros Trucks from Mercedes far superior in terms of performance. Decide basing your intended car use on the model most suitable for you. Visit car review sites to get a good insight. whether you want to buy it used or brand new.

Buying a used car
If you choose to buy a used car, there are a few things you might need to know about used cars; 

• The purchase price is usually much lower
• Characterized by Lower depreciation
• Registration and license fees are comparatively lower because of lower valuation of the car.
• Insurance premiums are also lower due to lower car valuation
• Manufacturer's warranty may not apply for a used vehicle
• Potentially higher maintenance costs like high fuel consumption, breakdowns, etc.
• Higher interest rates may be charged on your auto loan or lease.
• A likelihood of reduced reliability

Used cards are in three categories;  
- Pre-owned cars can be found in any condition and model in the dealer's lot or private owner. They are characterized by higher mileage and lower purchase price. 
- Program cars are ex- lease or rental cars normally not more than a year of operational use. They are cars bought by the dealer or cars returned by the consumers for disposal.
- Demonstrator cars are used by dealership employees. They normally have low mileage and extended manufacturer warranty.

As a last note, in order to get value for money on a used it is recommended to;

- Get an independent mechanic to do extensive checks on the the car
- Query the VIN with AutoCheck or CarFax for  historical information.
- Ask for a maintenance records if available.
- Drive test car under varied road conditions to assess its handling ability.

Buying a new car
If you are buying a new car, you need to know the base MSRP (the price of the vehicle without any add-ons) and the individual add-on package prices through price research. Visit different dealerships and compare prices or use the internet for your research.

Vehicle search

• Visit dealerships to test drive and compare prices
• Read vehicle reviews on the internet and magazines to get a clear picture of the specifications of the car you want to buy.
• You can also seek an expert or your peer's opinion about a particular car you want to buy. You might be surprised how useful this might be.

 You can refer to some useful online resources such as; 

1. MotorTrend magazine
2. Automobile magazine
3. Car and Driver.com
4. Edmunds.com 
5. CarReview.com

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Auto Dealer Options

Dealerships give several options to buyers to make more money and among them include finance, vehicle and security protection.  

• Finance Protection
  

Finance protection covers Life insurance, Disability Insurance and Extended Protection warranties.

a) Life insurance protects your family from the financial risks due to an untimely death. Should you die before the financial obligation on your vehicle is fully re-paid, your family does not pay out the loan. Life Insurance Protection covers the entire term of your loan.

b) Disability insurance is designed to protect you from financial risks of an interruption in your ability to earn an income. It is a 24 hour accident and sickness insurance that makes your payments for an extended period should you become injured or fall sick and unable to earn an income.

c) Extended Protection Plan is similar to vehicle compressive insurance. It protects you from unexpected breakdowns and unforeseen costly repairs.

• Vehicle Protection
  

a) Leather and Vinyl Protection

The sun's harmful ultraviolet rays cause fading, cracking, and discoloration of your vehicle's leather and vinyl interior. Leather and Vinyl Protection involves using penetrating conditioners to create a barrier that locks in the essential oils and pigments, and provides ultraviolet sunscreen while still allowing the leather to "breathe". This in turn prevents aging of your vehicle's interior leather and vinyl.

b) Fabric Protection

Spills and everyday mishaps are almost unavoidable, many leaving permanent stains on your new vehicle's seats and floor. Fabric Protection is an invisible barrier that ensures easy clean-up of spills to avoid permanent staining. Penetrating each fiber to repel moisture and dirt, while the treated fabric remains perforated.

c) Paint Sealant

The sun's powerful ultraviolet rays cause your car paint to fade. The clear coat finish on your vehicle's painted surface is uneven. These peaks and valleys trap dirt, salt, pollutants and moisture which dull the finish, ruin the look of your vehicle, and affect its resale value. Paint Protection bonds to the surface completely sealing the paint. It creates a smooth, durable finish that protects your vehicle against a harsh environment. This long-lasting sealant protects and enhances your vehicle's clear coat with no need for waxing or reapplication.

d) Undercoat Protection

Disturbing road noise and vibrations can make a long road trip even longer and more tiring. Undercoat Protection is specially formulated for exposed high impact areas. This pliable product will not crack, peel, or chip. It seals out moisture and protects your under-carriage components from road debris. It also provides insulation from extreme temperatures and reduces disturbing road noise, offering you're a quieter more enjoyable ride.

e) Tire and Rim Protection

This includes flat tire repair, replacing irreparable tires or rims if damaged and won't hold air, all related taxes & levies, no deductible, mounting, balancing, installation plus covers original or replacement tires.

f) Rust Spray

Rust not only ruins the appearance and value of your vehicle, it shortens its life and structural integrity. Today's vehicles have many hard to reach places where moisture can collect causing rust formation. Platinum Shield Rust Inhibitor Spray Protection Seals your vehicle's inner body metal surfaces and stops rust perforation from the inside out.

g) Corrosion Control Module

Corrosion Control Module is the ultimate solution in the fight against rust. A pulse amplifier microprocessor generates a repetitive pulse surface current, distributed to all grounded body panels thereby, protecting other areas such as the roof and inseams that conventional products cannot reach.

The Corrosion Control Module draws a small amount of DC energy from the vehicle's battery and directs it through a microprocessor, which converts this energy into an AC current.

Through patented state of the art technology built into the Corrosion Control Module, a pulse amplifier (another microprocessor) generates a repetitive "pulse" surface current, which is distributed on to conducting (grounded) body panels of the vehicle (travels on the surface of the metal) to help inhibit the corrosion process (slows down the oxidation process).

Being energy efficient, the Corrosion Control Module is built with "Smart Circuit" technology to insure that when the battery voltage is low, you are not put into a "no start" situation.

The Module is mounted in the engine compartment of the vehicle with a Velcro pad and is powered by the existing 12 volt car battery. Actual size of the module is 8 cm x 5.5 cm x 2.2 cm. Grounded body panel to create surface flow. Externally fused to protect the unit from power surges, the Corrosion Control Module has been tested to exacting standards by world-renowned certified testing laboratories.

h) Maintenance Kit

The Maintenance Kit will noticeably extend the life of your vehicle's appearance when properly maintained. It includes; a Paint Cleaner, Car Wash Concentrate,  Premium Leather Conditioner,  Spot Remover,  Chamois and  Applicator Sponge.

• Security Protection
  

a) Vehicle Identification Code

A non-removable, police traceable identification code is permanently etched on all the major glass of your vehicle or imprinted onto selected body panels of your vehicle. The identification code is registered into a national database that is cross-referenced to the manufacturer's Vehicle Identification Number (VIN), the selling dealership, and the vehicle's owner.

b) Warning Decal

Visible warning decals on the driver and front passenger windows identify the vehicle as being registered with a national theft prevention company. These decals warn thieves that the vehicle's key components are marked.

c) Theft Recovery

Security Protection also aids in recovering stolen vehicles and assists you with related expenses. The Platinum Security Protection system discourages thieves from stealing marked vehicles.

d) The Nitrogen Tire Inflation Safety Program

e)Paint Protection

Paint protection film to help prevent damage such as rock chips, bad weather and salted roadways to your vehicle and headlights. The protection is virtually invisible to the naked-eye, allowing the manufacturers aesthetics to shine through.

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Bank Auto Loans

Among the myriad of consumer loan products that banks offer is a car loan. Depending on your bank, it can be called auto loan, vehicle loan or car loan. Almost any will be willing to extend to you a car loan for as long as you are credit worthy and have some proof of a regular income. Some banks however, have stringent regulations for anyone applying to get a car loan. These regulations are aimed at reducing bank risk as well as protecting the consumer.

The approval process for an auto loan is quick and easy if you have an established relationship with the bank. If you are a new customer, it might take longer than two business days. Do not feel restricted to approach other banks for a car loan other than your current bank. 'Shop' around for the best auto loan product. 

Pre-qualification conditions for an auto loan 

• Good credit score

Your credit score is very critical if you are to access any bank loan products. It is the main pre-qualification condition. Your credit score can only be verified if a credit report is run! Note that unnecessary querying for this report affects your point score of your credit rating status.  Fortunately, there are other ways you can know if you have any outstanding loan obligation without affecting your credit rating. Most banks have this option is available for free for you to use. Make use of it!

•   Outstanding loan obligation

If you have any outstanding loan obligation, it will be considered during the approval process. The bank looks at your historical repayment data to determine if you can handle a larger loan obligation. Early repayments as well as timely regular repayments on the existing loan is a plus. If you have a history of default, it's very likely your application will be declined! Nevertheless, it's better to try!

On the other hand, if your outstanding loan obligation is quite big, the bank will decide how much of the requested amount it's willing to release to you or decline your loan application.

• Evidence employment

If you have a job, you will have to give a copy of your employment contract to the bank as evidence and proof that you can ably repay the car loan. Some banks might in addition ask for a bank statement of your salary processing account. Although most banks give unsecured car loans, it might be limited to a preset figure. However, you are required to provide an endorsed guarantor agreement for the entire term of loan from your employer. If the sum of the car loan requested, exceeds the bank's preset maximum amount, it may request some form of collateral in addition to the guarantor's agreement.

•  Minimum account activity period

This is not a universal requirement. If you are a new customer seeking a car loan or a loan of any kind. The bank might require you to open up an account with them and transact with it for a limited period before you can be approved for your car loan. This is done for customers who do not have any historical credit information.

• Evidence of income and assets

If you are not employed, the bank might ask for evidence of your source of income and tittles of your assets. If you run a business be ready to provide audited books of accounts. These may not necessarily be used as collateral but a basis for determining your income to debt ratio (DTI) or credit worthiness! In turn the DTI information is used to determine the amount of car loan you qualify for.

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Dealer Financing

When you approach the dealership for financing, the first thing your business manager does is to run your credit report and sends your credit information to the lenders they deal with. The business manager then takes the lowest approved interest rate and tops it up with dealership's profit on the financing. There is no law saying the dealer has to show that profit to you. This is why you have to do loan and price research and have a benchmark for negotiations! Be equipped with some business lingo that might be used to take advantage of you.

• Zero percent APR (Annual Percentage Rate)
  

Also known as zero percent interest. To good to be true, isn't it? Not everyone can get 0% APR, because it applies to those with a good credit score to ramp up sales on select models. The chances are high that model for which it applies is not the car you want. Very often 0 % APR is applies to short-term loans (not exceeding 3 years) only.

• Consumer rebates
  

The manufacturer gives rebates to consumers directly on certain models, so this shouldn't come up during price negotiation with the salesperson. It is not part of the dealer's package.

• Simple interest
  

Also called "flat rate interest," simple interest is calculated only on the total amount of the loan by multiplying the principal balance by the rate of interest by the term of the loan. This number is then divided by the number of months of the loan for the amount of interest paid each month. This is the best option for you and should bargain for this.

• Compound interest
  

Compound interest requires you to pay more interest at the beginning of the loan period than at the end. The longer the term of the loan the more interest you will pay. This is only good for short-term loans.

• Base M.S.R.P.
  

A short form for Base Manufacturer's Suggested Retail Price. This is the manufacturer recommended retail for a particular model as delivered from the factory. It does not include items the dealer has added such as security systems, Vehicle Identification Number etching, etc.

• Base M.S.R.P. plus Options

This price includes the Base M.S.R.P. plus all options added at the dealership. The options range might include, finance protection, Vehicle protection and  Security protection. The sales person will always try to sell you these options because that's where they make the most money. Only accept what you can afford and in your view is necessary. Don't stretch your pocket too much!

­While negotiating for a financing deal with the business manager, you should bargain on the chargeable Interest rate, duration of the loan, down payment, rebates, and monthly payments. Ask about early repayment penalties and nature of interest(should stay the same for the loan duration). If you can't get a good deal, walk away! You can always get it elsewhere, but don't compromise too much for the sake of completing the deal. If you do, you will be exerting a strain on your finances.

Once you have agreed on these, verify your contract terms and only sign if satisfied with all the numbers and filled out correctly.

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Auto Financing

Buying a new car always comes with a bit of excitement and it's always a hastily concluded process especially for a first time buyer. The level of excitement to drive home in a new car often times does not give you room to look for the best car for your money.  You might need to slow down a bit and take a deep breath.  A decision to get a new car should not come as a result of seeing a TV commercial or seeing a cool car at a dealership showroom. Consider your expected use, work out your budget, which type car fits your budget and then how to finance that particular car. Do some research from the manufacturers websites, visit car dealerships to scout for favorable car prices to help you make an informed decision. Take your time to gather as much information as possible and determine the most favorable price and for which car. Once you have decided which car fits your budget, choose the financing model.
There are several ways  of paying for your new car. Each has its pros and cons. You just have to figure out the best possible option for you based on your current financial position. You could choose to;

• Pay cash from your savings for the new vehicle
  

Not a bad idea at all, isn't it? As great as it might sound, it is not always your best option especially if you are going to deplete your savings account buying the new car. You might also prefer to use your savings to start up a profitable business to eventually pay off your car loan. 
On one hand, if you have a bad credit history, you might choose the cash option to avoid paying a huge interest on the loan and damaging your credit rating even further.

• Auto leasing
  

In auto leasing, you use a motor vehicle for a fixed period usually in years at an agreed amount of money for the length of the lease. The period is normally 1-4 years and once the lease expires you return the car to the dealer for disposal. So literally, you can drive a new car every few years! Lease payments are usually much lower and the qualification process is easier than obtaining a car loan. The car lease agreement though comes with certain conditions; maximum allowable mileage per year(usually 10,000 miles), allowable wear and tear, early lease termination fee, etc. Beware penalty fees may apply if you violate the lease agreement. Work out what is best for you basing on the projected use and if possible negotiate for a higher mileage for a slightly higher lease payment if necessary to avoid penalties. You can also opt in for a lease with maintenance; excluding fuel and insurance to save yourself the headache of breakdowns and regular maintenance. Newer vehicles, however, require less maintenance. So it is not worthwhile paying extra unless you make frequent long trips. This option is good for businesses and large companies.

• Auto loan
  

You can get a direct car loan from a financial institution or individual, namely; a bank, credit union, online lending institutions, a relative or indirectly from a car dealership which deals with financial institutions on your behalf. 
If you have decided to finance your car by loan and not pay cash, then you need to do some research to get the best financing deal. It is best to begin with your bankers since you already have an established relationship with them. Your banker will often give you a competitive rate, tell you if you're paying too much for a car, give free life or disability insurance with loans; and the loans are usually simple interest loans (whose interest is evenly spread throughout the term of the loan).

If you own a home, you can free up tied up equity to finance a new car. This is however risky since you could lose your home if you default because a financing bank or individual retains a lien to the home until the debt is fully repaid.

Car dealerships often give a fast, convenient and competitive option. Be ready for a big sales push on add-ons; loans are often compound interest loans (You pay more interest in the beginning of the loan than towards the end). It works against you if the loan servicing period is longer. Always negotiate for a good interest rate rather than a small repayment installment. If you negotiate for a small repayment installment, the your business manager instead extends the term of the loan in which you pay more for the car.

If you can get a loan from a friend or relative, so much the better, because this option offers very flexible terms and payment period. It is not always possible though to get very big sums this way. In any case, care not to jeopardize your relationship with them. Be truthful and pay off your obligation to them.

I do not recommend financing through online lending institutions because there are more scams than legitimate ones. So beware! Be very cautious if you choose this option! Only deal with them if you know them well!

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