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Many consumers overspend on
motor vehicle purchases and
related financing, making it
that much more difficult to save and
build wealth.
On average, American families spend
more than $7,000 a year on motor vehicle
costs. A significant number of families
spend well into five digits each year.
To help families cut those costs,
America Saves has developed a new
brochure, America Saves on Car
Purchases. The brochure is available
for free from local Saves campaigns and,
with a self-addressed, stamped envelope,
from the national office. (See the box on
page three for the America Saves
address.) The brochure can also be
found on the America Saves website.
The brochure addresses the four key
issues related to car purchases whether
to buy, what to buy, how to buy, and how
to finance. It explains how to save for a
larger down payment and includes an
America Saves enrollment form.
WHETHER TO BUY
Before you buy a car, especially a
second vehicle, consider whether you
have other alternatives. Particularly in
cities, these alternatives could include
mass transit, cabs, and rental cars, or a
combination of the three.
If you want or need always to have a
car available, leasing can be an alternative
to buying. Remember, though, that
at the end of the lease period, you wont
own the car. If you buy the car at that
point, the lease and purchase costs
together may be more than it would
have cost simply to purchase the car at
the outset.
WHAT TO BUY
Cars vary widely in cost. The exact
cost depends on factors such as the type
of car; its age, mileage, and condition;
how you finance, insure, and service it;
and how many cars you own and how
far you drive them.
First, think about the types of models
that meet your needs and are affordable.
Then search the Internet and publications
such as Consumer Reports for
information about the features, performance,
durability, and costs of the models
that interest you. Finally, look over and
test drive any of these models.
In deciding whether to purchase a
new or used car, make certain to estimate
the difference in total costs. In addition to the purchase price,
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total cost
includes depreciation, gas mileage,
insurance premiums, finance charges,
and likely costs of maintenance. New
cars almost always are more reliable
than used cars, and they have better
warranties, but they lose 20 to 40 percent
of their value the minute you drive
them off the lot.
HOW TO BUY
At car dealers, the price of the cars
and their optional features are almost
always negotiable. Before negotiating,
learn the manufacturers wholesale price
to the dealer, which will be somewhat
less than the sticker price.
It is a good idea to negotiate price
over the phone. If the dealer wont talk
price with you on the phone, call another
dealer.
If you are uncomfortable negotiating,
consider seeking the assistance of a
car buying service. One nonprofit group
offers a popular service, CarBargains, in
which several dealers bid for your sale.
Purchasing a used car has special
risks, because you often cannot be certain
of the condition of the car. Check
the Bluebook price to learn what used
cars in a certain condition usually sell
for. Try to find a mechanic who is willing
to check the car out before you purchase
it.
HOW TO FINANCE
After deciding the amount to be borrowed
and the number of monthly payments,
shop around using the Internet or
Yellow Pages for the least expensive loans.
Saving even half a percentage point on
your interest rate can result in significant
savings over the life of the loan.
Be sure to call your bank or credit
union for a rate quote before you talk to
a dealer about financing. The dealer
may quote you a rate that is higher than
you should be able to get based on your
credit risk (the buy rate). If the dealer
quotes a rate that is above that quoted
by your bank or credit union, inform
the dealer of the lower rate and ask the
dealer to match it.
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